GET MOVING: A SERIES ON GENTRIFICATION

In a recent article, CityLab’s reporter, Kriston Capps pondered, “What if the conventional wisdom about gentrification is kind of wrong?” She was responding to a recent study that has challenged much of what many considered facts about neighborhood change and gentrification.

In a two-week series, we will discuss low-income neighborhood dynamics and new research asking the question, “Is gentrification helpful or harmful?” It has been commonly accepted that when families with higher levels of education or economic stability move into a low-income neighborhood, they are forcing poorer, original residents out and increasing rent. 

However, a recent study from the Federal Reserve Bank of Philadelphia and the U.S. Census Bureau is encouraging communities to rethink these notions. Why? The research results don’t match the conventional wisdom. When cities are excessively fearful of gentrification, they may be leaving vulnerable populations worse off. Today’s post focuses on the fears surrounding gentrification and what the research has to say about it. Should we really be afraid of gentrification?

PART 1 - MOVING IN DOESN’T MEAN MOVING OUT:

Definition & Displacement

First, it is important to define gentrification (as it is described by Quentin Brummet and Davin Reed, the authors of the study). For some people, gentrification informally means the number of brunch spots, farmers markets, or flipped-houses, but the Brummet-Reed study defines gentrification as “an increase in college-educated individuals’ demand for housing in initially low-income, central city neighborhoods.”

Even while reading the definition, one might assume displacement could be a problem. When communities are concerned about revitalizing areas, their greatest concern is often whether original residents will be displaced due to the higher demand for housing. For people to move into a low-income neighborhood, wouldn’t that mean that the people who already live there would need to leave? Brummet and Davin would probably respond, “Not really.” 

Low-income neighborhoods are more dynamic than most realize. As CityLab describes it, “Migration among renters is high whether a neighborhood becomes fancy or not.” The study found that 68% of less-educated renters and 79% of more-educated renters move over the course of a decade. The fact is there is a lot of transience in low-income communities. It’s also important to consider how much real estate in the communities is vacant before gentrification. When a developer builds mixed-income housing where an empty warehouse once stood, no one needs to move out.

Although, at first glance, gentrification looks like it would require significant displacement, this study shows that’s not the case. Compared to baseline neighborhood changes, out-migration only modestly increases with gentrification. The study also found that, as they tracked out-migration, those who move away from their original neighborhood are not made observably worse off. The paper explained, 

For all types of individuals, movers from gentrifying neighborhoods do not experience worse changes in observable outcomes than movers from nongentrifying neighborhoods… That is, they are not more likely to end up in a higher-poverty neighborhood, to become unemployed, or to commute farther than individuals moving from nongentrifying neighborhoods.

Increasing Rent & Property Taxes

The second most common concern about gentrifying neighborhoods is rising rent. What happens to the original residents who chose to stay, but then who are surrounded by nicer amenities and property that is in higher demand? Will they eventually be priced out of their own neighborhood and then displaced?

Maybe the most fascinating finding of the study is the research on rent. According to the researchers, “[S]omewhat surprisingly, gentrification has no effect on reported monthly rents paid by original resident less-educated renters.” Apparently, highly-educated new arrivers bid up the rent of higher-end properties, but they are not particularly interested in moving into preexisting rental units. Rents for high-end properties rise, but the rents for lower-end properties do not increase very much, even though the neighborhood amenities are getting better for everyone. Housing economists actually have a name for this - “market segmentation.”  

At this point, the study has shown gentrification does less harm than most people imagine. Still, another concern might be, “What about the original homeowners and their property taxes?” When discussing gentrification, some fear rising property taxes will drive out low-income homeowners. And it’s true, as an area grows and properties become more valuable, property taxes often rise. (Taxes don’t have to rise, but local governments usually like to spend the extra revenue, instead of cutting the tax rate.) But rising property taxes are a negative effect connected to a positive effect. Property taxes only increase because the home values have increased, ultimately meaning that the homeowners’ investment is gaining value. 

Higher property taxes also mean a stronger tax base for maintaining a healthy community (street lights, drivable roads, good schools, etc.).  Still, it is understandable that original residents, disinterested in selling their homes, might view a rise in property taxes as merely less cash in their pockets each month. 

Of course, it’s important to ask two more questions: “What are the benefits of gentrification? And do they outweigh the cost of higher property taxes?” Glad you asked. This new research does not just debunk gentrification myths. It also highlights direct positive effects of neighborhood change. Join us next week for our post, “Moving neighborhoods forward without leaving neighbors behind.”

Jump to Part 2: Moving Forwards Means Moving Up!