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( un,�nrh��n,i� c .Vciehb��wl�uuJ Stu:licc ('harartcniinc Dcrlinc These figures, based on the average costs to purchase and renovate 22 older two- and three-bedroom units in Winnipeg's inner city, clearly demonstrate that the cost of purchasing and renovating units to an acceptable standard far exceeds the price one could expect to get on the market. In fact, the total costs of purchase and renovation exceeds the market value by approximately 90%. When such a significant gap exists between costs and market it discourages private investment as investors appreciate they cannot expect to re-capture their costs or make a profit should they have to sell. It also illustrates that significant public subsidies are required to stimulate any activity in such neighbourhoods. The market gap problem reveals the self-reinforcing nature of the decline and disinvestment process: the development of one symptom often leads to the emergence or aggravation of other symptoms, thus exacerbating neighbourhood distress. The market gap problem also shows why the private sector cannot, on its own, reverse disinvestment once it reaches an advanced stage (ibid.). Neighbourhood decline is marked by the undermined confidence of business entrepreneurs and investors. The sense of insecurity inherent in these areas constitutes a major disincentive to all economic actors. Kamal-Chaoui (2001) refers to recent economic theory, which emphasises the influence of "confidence" (of enterprises, households eta) on growth. The concept of a"feel-good factor" that describes this individual and collective confidence has become centrally important in economic development initiatives. For example, the sense of general economic insecurity in areas of urban decline is thought to encourage precautionary saving and depress consumption in neighbouring areas (ibid.). The problem of lack of innovation and entrepreneurial ability should also be mentioned. In declining urban areas business creation is not seen as the way to succeed, largely because it seems such a distant and unattainable goaL In some areas, entrepreneurial residents are Iikely to be more attracted by illegal activities. Regardiess the soundness of their project or business, discrimination and redlining on credit markets by banks often means that projects never get any further than the planning stage (ibid.). 3.4. Changing Land Uses The inner-city areas are often the sites of under-utilised commercial space, which are inexpensive to lease and therefore become a magnet for businesses serving the underprivileged. Among these are pay-day loan and cheque-cashing oudets, pawnshops, temporary labour centres, low-priced saloons, sex shops, massage parlours and others. � ,..� 23