Tuesday, December 6, 2016

Economics of Gentrification

"Gentrification" arises when a neighborhood in a city that has in the past offered relatively low-cost housing to relatively low-income people experiences the entry of a wave of higher-income buyers. The new entrants often buy the older housing stock and rebuild or refurbish it, pushing up housing prices in the rest of the neighborhood. On one side, this process offers lower-income people who own their homes a chance for a financial windfall, and can also offer benefits to the neighborhood like improved local job opportunities, shopping options, and public safety. On the other side, gentrification also disrupts existing neighborhoods and can displace low-income residents, some of whom may have been living in the neighborhood for a long time.

Cityscape, which is published three times each year by the U.S. Department of Housing and Urban Development,  has published a 10-paper symposium with various perspectives on gentrification in its most recent issue. Ingrid Gould Ellen and Lei Ding,  the editors of the symposium, offer a short overview essay called "Advancing Our Understandingof Gentrification," which includes some evidence that gentrification did indeed become more common from 2000-2010.

They divide cities into US Census "tracts," which are areas that typically have about 4,000 people, give or take a couple of thousand. They focus on low-income tracts, defined as those tracts where the average income is below the 40th percentile for the city as a whole at the start of the decade.  They then look at what proportion of those tracts have seen large gains in the share of the population that is college-educated, the share of the population that is white, or substantially higher-than-average gain in rents. The figures show the share of low-income tracts that have seen larger-than-average gains the share of college-educated residents, in the share of the population in the tract that is white, and in rents.

Gentrification is part of the ebb and flow of urban life, but all of its effects--for better or worse--seem to have been more powerful in recent years.  Indeed, a writer in the 1980s referred to the gentrification of cities during that time as “Islands of Renewal in Seas of Decay.” Something more powerful and sweeping is happening now.

A number of the causes seem to trace back to a revival of interest of higher-income people in living in central city and downtown neighborhoods. Jackelyn Hwang and Jeffrey Lin describe some of the patterns in in "What Have We Learned About the Causes of Recent Gentrification?":
In sum, since 2000, U.S. cities have seen greater increases in the SES [socioeconomic status] index and other measures in downtown neighborhoods and an expansion of SES index increases to more cities and neighborhoods. Compositional shifts toward White, prime-age, and college-educated households—not population growth—are more characteristic of recent changes. Although lower-skilled or lower-education jobs continue to suburbanize, jobs employing college-educated workers have stopped declining or have even increased in traditional downtowns. Downtown safety and amenity values appear to have increased. A sizable number of downtown neighborhoods in big cities, however, have not seen increases in our SES index at all, and a number of peripheral neighborhoods in smaller metropolitan areas have seen dramatic changes. Despite improving fortunes, the average downtown neighborhood is of lower status compared with its metropolitan area as a whole. Moreover, gentrifying neighborhoods exhibit a strong spatial dependence on historical patterns of income, and, on average, downtown revival has still improved the SES of only those neighborhoods within relatively short distances of U.S. city centers (but more so in big cities). Finally, changes in neighborhoods with middle-SES indexes are similar in big-city downtowns compared with small cities or peripheral areas, but neighborhoods with high-SES indexes in big cities have shown remarkable persistence since 1960.
A number of the papers that follow look at specific dimensions of urbanization in neighborhoods in particular cities, like effects on local jobs, local business, the financial health of long-term residents in gentrifying neighborhoods, and a potential role for subsidized or public housing. Derek Hyra offered a compact summary of consequences of gentrification (citations omitted here):
"Perhaps the most controversial gentrification topic is its residential displacement consequences. There is near empirical consensus, however, that mobility rates among low-income people are equivalent in gentrifying versus more stable low-income neighborhoods. This fact should not be interpreted as evidence gentrification is unrelated to a shrinking supply of affordable housing units (which it often is), but rather that low-income people tend to move at a high rate from all neighborhood types. 
"Although understanding the relationship between gentrification and residential displacement is critical, other important gentrification consequences exist. Gentrification, in some places, is associated with political and cultural displacement. Some gentrifying areas once dominated by low-income minorities demonstrate an association between the movement of upper-income people and a loss of minority political representation. Remember, it was presumed upper-income people moving to low-income neighborhoods would bolster civic society, and it appears, in some circumstances, it has. Often, however, newcomers take over political institutions and advocate for amenities and services that fit their definition of community improvement. This process of political displacement can be linked with cultural displacement, a change in the neighborhood norms, preferences, and service amenities. In certain respects changing norms may be positive in terms of counteracting norms of violence or a lack of health-producing amenities and activities, but do the new norms and incoming amenities in gentrifying neighborhoods sufficiently cater to the preferences of low-income people or do they predominately represent newcomers’ tastes and preferences? 
"Through my gentrification research, I have witnessed how political and cultural displacement breeds intense social tensions, limits meaningful social interactions between longtime residents and newcomers, and results in microlevel segregation. Without ample social interactions across race and class, the promise of mixed-income living environment benefits for the poor seems unlikely. ... [I]t is clear that we must look beyond residential and small business displacement impacts to understand how to effectively facilitate community conditions in economically transitioning neighborhoods to better support social cohesion and interaction among traditionally segregated populations."
I was also interested in the arguments by Lance Freeman that gentrification has not just grown in size, but also changed in form.  As one example, Freeman points out:
"This latest wave of wave of gentrification may also be qualitatively different inasmuch as the 1970s-to-1980s gentrification was much more closely tied to the physical renovation of dilapidated housing. Indeed, news media in the late 1960s and 1970s often described young, White professionals who moved into poor inner-city neighborhoods as “brownstoners,” because this movement almost always involved the renovation of older brownstones. ...  The recent wave of gentrification, however, may be less attached to renovating older dilapidated housing. ... It may be that after nearly a half century of gentrification there are few old distinctive houses in urban areas to be had for a steal. If this latest wave of gentrification has indeed uncoupled housing renovation from upper class movement into the inner city, this change may have implications for our understanding of gentrification. For example, the type of person drawn to renovating and restoring old, distinctive housing may be different from someone who wants to live in a high-rise condominium with concierge service and proximity to his or her office job." 
Freeman also introduced me to a bit of intellectual history and etymology: "The term gentrification was initially coined a half-century ago by the British sociologist Ruth Glass. She wrote, “One by one, many of the working class quarters have been invaded by the middle class—upper and lower.... Once this process of ‘gentrification’ starts in a district it goes on rapidly until all or most of the working class occupiers are displaced and the whole social character of the district is changed” (Glass, 1964: xvii)."