Gentrification is a controversial topic due to its profound impact on both the physical and social landscapes of urban areas. The term gentrification was coined by an urban sociologist Ruth Glass in the book London: Aspects of Change in 1964 [1]. It’s a process in which a poor area of a city experiences an influx of middle-class or wealthy people who renovate and rebuild homes and businesses, which often results in an increase in property values [2]. In this essay, I would like to discuss the positive and negative economic effects of gentrification and decide if gentrification is worth it.
One of the benefits of gentrification on urban communities is an increase in property values. Due to gentrification older buildings are updated, which increases the value of property. Because the demand for housing rises, the price of property rises [3]. This leads to the wealth of the house owner increasing, leading to an improvement in financial stability, Additionally, it can lead to a wealth effect, which suggests that consumers tend to spend more as the value of their assets rises [4]. This is because the consumers feel more financially secure and confident. Consumption is a component of aggregate demand, which means the aggregate demand might increase.
Another benefit of rising property values is increased tax revenue. Due to property prices rising, the property tax is increasing, increasing government revenue. This can be used to invest in other places, for example, in public services and infrastructure of the gentrified area, further improving the quality of life in the community. One example of that is the Williamsburg neighbourhood in Brooklyn, New York. Williamsburg in the early 2000s received significant gentrification [5]. The additional funds allowed to improve transportation, local schools and parks. This led to an improvement in the quality of life of the residents. Furthermore, in the long-term, if the infrastructure and education keep improving, low-income households who don’t have access to good quality education will get access. This will lead to a more skilled workforce, which even further improves the quality of life of the households, as they're able to access higher-paying jobs and can improve the productive potential of the economy, which can increase the long-run aggregate supply of the economy.
However, increased property taxes lead to a higher cost of living. Since 2009, residential property prices in Williamsburg have surged by 144% [6]. This can affect the long-term, lower-income homeowners, who might not be willing or able to continue paying and living in that area, as the rent would take up a higher proportion of their income. This can lead to the displacement of lower-income earners, with high-income earners [7]. Moreover, gentrification leads to racial inequality. In Philadelphia, it was found that poor residents who moved from historically Black gentrifying neighbourhoods had few options in the face of gentrification. They tended to move to poorer neighbourhoods that were not gentrifying within the city. These areas also had higher violent crime rates and lower school test scores and were the same places to which poor residents from non-gentrifying neighbourhoods moved.
Poor residents from other gentrifying neighbourhoods that were not historically Black, on the other hand, benefitted from gentrification. They often moved to wealthier neighbourhoods in the city and the suburbs [8]. This means not all low-income residents suffer to the same extent and that the gentrified community can lose its racial diversity and be replaced by mostly white individuals.
However, it’s important to understand that the reduction in affordable housing, results primarily not from gentrification itself, but from the persistent failure of government to produce or secure affordable housing more generally [9]. Furthermore, the extent of displacement should be considered. Some neighbourhoods have been gentrified by converting industrial lofts to residences and shops, causing only minimal displacement of existing residents. Detroit and Cleveland for example, have sufficient vacant dwellings that large influxes of higher-income residents would place a small strain on housing costs for lower-income persons [10].
Gentrification can also lead to economic revitalisation. The influx of high-income residents and investments in the neighbourhood provides a great environment for the establishment of new businesses. More businesses would lead to job creation, leading to lower unemployment in the area. This would lead to improvements in quality of life, as more people would be able to consume goods and services. Additionally, job creation can help to support low-income earners to pay of the higher property prices, which can help to sustain diversity in the community. In the long term, if more people get employment and have greater incomes and businesses are doing well, economic activity will be generated, attracting investment, which can lead to sustained economic growth.
However, new businesses set up might lead to older businesses being shut down. New businesses, usually large chains, appeal more to the new house owners than mom-and-pop shops [11]. This shift of businesses might lead to a loss of the local character of the community making it similar to every other gentrified area. Furthermore, gentrification might not lead to a large amount of job opportunities that might have a big impact. Looking at a dataset that tracks the universe of neighbourhoods in New York City for nearly a decade (2002-2011) and comparing changes in local employment across low-income neighbourhoods experiencing gentrification and those that are more stagnant or economically declining, the results suggest that gentrifying neighbourhoods on average do not experience consistent, meaningful gains in local employment, compared to other comparable low-income neighbourhoods that are not undergoing economic upgrading [12].
Gentrification can also lead to a reduction in crime rates in urban areas. Some people would argue that there would be a rise in crime rate due to gentrification, as there is an influx of relatively affluent residents could make for more attractive targets [13]. However, gentrification will generally reduce crime rates. One reason why crime rates might be reduced is the “broken window” theory. Theory suggests that mitigating overt signs of decay, ( e.g. fixing broken windows) – as generally occurs during gentrification – may deter criminal activity [14]. Additionally, due to property tax rises, municipal priorities might shift to crime-fighting, which might lead to higher police presence to deter crime [15]. Some of the new city residents installed alarm systems, better deadlocks, or barred first-floor windows. These increased personal security measures could have contributed to reducing property crimes [16]. Finally, gentrification may reduce crime because rising rents may force local criminals to relocate, while increased local economic activity may induce incumbent criminals to partake in legitimate employment [17]. Sudden change in the policy regime allows us to examine how neighbourhood change affects crime.
This can be illustrated in Figure 1, demonstrating a fall in crime rate due to gentrification in Cambridge, Massachusetts. In the years immediately following the end of rent control, crime fell significantly more in neighbourhoods that were heavily rent-controlled. By 1996, overall crime in gentrifying neighbourhoods fell by 16% more than in neighbourhoods relatively less exposed to rent control [19]. A fall in crime improves the overall quality of life for residents. People feel safer in their homes and communities, which can lead to stronger social cohesion. Furthermore, safe neighbourhoods can attract more tourism, which can contribute to economic growth. Additionally, reduced crime can lead to lower insurance costs for businesses, further incentivizing investment, which can cause the aggregate demand to increase.
Alternatively, gentrification can lead to social tension. The stark contrast between the new affluent residents and the long-standing lower-income residents can lead to feelings of resentment and alienation. This social tension can manifest in various forms, including protests, and increased crime rates in response to perceived injustices. One example of that is an anti-gentrification protest in London, where hundreds of protestors attacked the Cereal Killer Café [20]. During the protests, they broke into the shop, threw a smoke bomb and red paint, made the customers “terrified for their lives” and injured an officer. This was all because they thought that the cafe was a “symbol of gentrification” [21]. These activities create a sense of community fragmentation and decrease the quality of life for all of the residents. That’s why it’s important to support low-income residents through gentrification.
Overall gentrification has the potential to have more beneficial economic effects than harmful for urban communities. It leads to a better quality of life through better education, infrastructure, and more businesses and reduced crime rates. However, previously, low-income residents might need to move elsewhere due to house price rises, shut down of older businesses and loss of identity in the community. For gentrification to be successful, the government should support low-income residents through, for example, Inclusionary zoning, which requires developers to include a certain percentage of affordable housing units in new residential developments and creation of new affordable housing in case they decide to move. Businesses should also be supported, through grants or low-interest loans and preserve cultural heritage through designating areas as cultural or historic districts can help preserve the unique character and heritage of neighbourhoods.
Endnotes
How Ruth Glass shaped the way we approach our cities. UCL. 2015 https://www.ucl.ac.uk/urban-lab/news/2015/jan/how-ruth-glass-shaped-way-we-approach-our-cities
Gentrification definition. https://www.merriam-webster.com/dictionary/gentrification
Robert F. Smith. Gentrification Pros and Cons: A Double-Edged Sword. 2023. https://robertsmith.com/blog/gentrification-pros-and-cons/#16-pros-of-gentrification
Investopedia. The Wealth Effect: Definition and Examples. 2021 https://www.investopedia.com/terms/w/wealtheffect.asp
Gentrification in Williamsburg. 2018 https://eportfolios.macaulay.cuny.edu/genyc/williamsburg/
Greenpoint/Williamsburg neighborhood profile. 2024
Robert F. Smith. Gentrification Pros and Cons: A Double-Edged Sword. 2023. https://robertsmith.com/blog/gentrification-pros-and-cons/#16-pros-of-gentrification
Jackelyn Hwang and Lei Ding. How gentrification reproduces racial inequality. 2021
http://www.wipsociology.org/2021/05/20/how-gentrification-reproduces-racial-inequality/
Byrne, J. P. Two Cheers for Gentrification. Howard Law Journal. 405-432. 2003. https://core.ac.uk/download/pdf/70374691.pdf
Byrne, J. P. Two Cheers for Gentrification. Howard Law Journal. 405-432. 2003. https://core.ac.uk/download/pdf/70374691.pdf
Robert F. Smith. Gentrification Pros and Cons: A Double-Edged Sword. 2023. https://robertsmith.com/blog/gentrification-pros-and-cons/#16-pros-of-gentrification
Rachel Meltzer, Pooya Ghorbani. Does Gentrification Increase Employment Opportunities in Low-Income Neighborhoods? 2015. https://www.stlouisfed.org/-/media/project/frbstl/stlouisfed/files/pdfs/community%20development/econ%20mobility/sessions/meltzerpaper508.pdf
Christopher Palmer, Parag Pathak, David Autor. Does gentrification reduce crime? 2017. https://cepr.org/voxeu/columns/does-gentrification-reduce-crime
Wilson, J Q and G L Kelling (1982), “Broken Windows,” The Atlantic Monthly, March: 29–38.
Christopher Palmer, Parag Pathak, David Autor. Does gentrification reduce crime? 2017. https://cepr.org/voxeu/columns/does-gentrification-reduce-crime
Rebecca Linke. Gentrification triggered 16 percent drop in city crime. 2017
Christopher Palmer, Parag Pathak, David Autor. Does gentrification reduce crime? 2017. https://cepr.org/voxeu/columns/does-gentrification-reduce-crime
Christopher Palmer, Parag Pathak, David Autor. Does gentrification reduce crime? 2017. https://cepr.org/voxeu/columns/does-gentrification-reduce-crime
Christopher Palmer, Parag Pathak, David Autor. Does gentrification reduce crime? 2017. https://cepr.org/voxeu/columns/does-gentrification-reduce-crime
London Assembly. Anti-gentrification protests. 2015 https://www.london.gov.uk/who-we-are/what-london-assembly-does/questions-mayor/find-an-answer/anti-gentrification-protests?__cf_chl_tk=_RaHrg_ubWFKh4jpRIZrpbwSAX3VGZvS9kwjfExIMpI-1722362990-0.0.1.1-7572
The Guardian. Shoreditch Cereal Killer Cafe targeted in anti-gentrification protests. 2015. https://www.theguardian.com/uk-news/2015/sep/27/shoreditch-cereal-cafe-targeted-by-anti-gentrification-protesters
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