Studies on gentrification

[Austin Wolff]

At the risk of being socially shunned, I wanted to write a piece helping people identify up and coming neighborhoods, which may be good places for new investors to get their foot in the door in an evermore expensive housing market.

A post on gentrification can’t be written without addressing some of the most popular arguments for or against it in today’s discourse. I am by no means an expert on the topic, nor am I in any group that is adversely affected by gentrification. 

In the spirit of demography, there are plenty of resources for research on the effects of neighborhood revitalization, such as this list on the pros and cons, this study on racial disparities across different gentrifying neighborhoods, and this article on how gentrification can be seen as a visible reaction to neglected neighborhoods finally receiving the investment other neighborhoods have gotten all along (see the images below).

With this disclaimer out of the way, I’d like to bring the focus back to how mom-and-pop investors can identify up-and-coming neighborhoods to invest in, which usually involves purchasing a property that has been neglected in its upkeep, and add value to it (and the surrounding neighborhood) by repairing its deterioration and making the property livable and comfortable for its residents.

What Up-and-Coming Neighborhoods Have In Common

Luckily, a lot of research has already been conducted on this topic. A 2018 paper published by Harvard Business School using Yelp, Zillow, and Census data has mathematically shown something we all inherently know: The number of new Starbucks, grocery stores, cafes, bars, and restaurants do have an impact on house prices or the number of college-educated people living in an area (correlation and impact vary by city and variable).

The converse also appears to be true. According to the study, ‘These results seem compatible with the literature on “food deserts” that documents how poorer people live in areas with fewer options for healthy food.’

To help with identification, here's a list of all new Starbucks that have opened.

Another indicator is the increase in median wages in an area where median rents are at-or-below the median rent for the entire city. This can be found with some elbow grease digging into the U.S. Census data at the census tract level. If anyone wants that kind of deep analysis please let me know; it will take a bit of time and there needs to be enough demand to be worth it.

Anyway, that's pretty much all I have to contribute to the gentrification discussion.