Gentrification Explained - How It Happens
This topic is going to be a sensitive one as it can hit home for some people. Gentrification define in Wikipedia is "is a process of renovation and revival of deteriorated urban neighborhoods by means of influx of more affluent residents, which results in increased property values and the displacing of lower-income families and small businesses." This is something that every investor has heard of and possibly seen. The reason this happens is because investors come in and find pockets of a city that they believe have the ability to be the next hot area. They are able to acquire properties for a very low rate and then flip them or develop them at a very high rate. This is very dangerous investing as you can make a lot of money or lose a lot of money. From a paper standpoint it sounds easy to see how it works, but the underlying problem ends up being the people in the houses. The people in the properties end up being forced to relocate because as the developers increase the values of the properties, they also increase the rents in the area. As the rents go up, the current residents have to move somewhere else. When a heavy amount of gentrification is happening in an area, the people will move to another location and usually bring the value of those properties down. This whole process is a way to shift housing prices and poverty/affluence around the city. If you speak with investors that have been around a long time, they will tell you about areas of the city that were once very "rough" and are now beautiful. They can also tell you about the reverse.
Ian Walsh
215.839.3271
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