The stubborn myths of rent and gentrification
The law of supply and demand also applies to housing
My neighborhood has many murals, the latest of which is painted on the side of a BBQ joint rumored to be slated for demolition and replacement, probably by a four-story, mixed-use building with retail on the bottom and apartments on top. You know the type. Most of the mural is text, and it reads: "Development without displacement."
Given the mood, politics, and history of the area — half a century ago, the flourishing black neighborhood a couple blocks south was gashed down the middle by federal highway construction — I'm certain the mural should be read as a demand and that its location is an act of defiance. New construction here is by default approached through the standard narrative of gentrification: Adding market-rate housing is expected to drive up housing costs throughout the neighborhood, pricing longtime residents out of their homes.
But what if that stubborn narrative isn't true? There's a growing pile of compelling evidence that the gentrification story as we know it is wrong.
"A luxury apartment rises in a poor neighborhood," began the headline of a New York Times report published Friday. "What happens next?" Housing access activists often predict nearby rents will be driven up by the building's higher rates, but a trio of recent studies the Times cites show the opposite is more frequently true.
Researchers with the Upjohn Institute, for example, looked at "new buildings of at least 50 units constructed in lower-income, central-city neighborhoods" in 11 metros across the country. They found such apartment complexes produced a 5 to 7 percent rent reduction in adjacent housing compared to what it would have been had the new building never been built. (Note this doesn't necessarily mean rent declines; rather, it increases more slowly than it would have without the boost to housing supply.)
The reason more housing, even comparatively expensive housing, can slow the rent growth rate is basic supply and demand: Generally speaking, when supply increases, prices fall. In high-demand neighborhoods, expanding supply gives landlords more competition and constrains their ability to raise the rent. Many higher-income tenants will also stop competing with their lower-income neighbors for more affordable housing and move into the new, fancier building instead.
What about displacement? Here too there are indications the usual story is inaccurate.
A 2019 study from NYU published by the National Bureau of Economic Research used Medicaid data to track the housing movements of low-income children in New York City over the course of seven years. The data showed "no evidence of elevated rates of mobility for kids who are born into gentrifying neighborhoods" as compared to neighborhoods with persistent poverty, Ingrid Gould Ellen, an NYU professor of urban policy and planning, told City Lab. To be sure, the children moved around a lot — low-income families in costly cities are often transient — but their movement didn't correlate to the gentrification of their neighborhoods.
Another paper, informed by Census micro-data and published around the same time by the Federal Reserve Bank of Philadelphia, likewise found gentrification had negligible effects on neighborhood out-migration; that those who do move "are not made observably worse off;" that those who stay benefit from neighborhood changes; and that increasing housing supply could reduce what displacement does occur and "promote long-term affordability." Crucially, the report also found neighborhoods never remain static: Low-income areas which don't have an influx of higher-income residents aren't preserved in amber. They decline, and decline produces displacement.
Other research offers similar results: Years of studies of New York City's lower-income neighborhoods by Columbia University's Lance Freeman repeatedly found out-migration was less likely in areas that gentrified than in those that didn't. A 2002 report from Duke University showed the same thing, also noting "gentrification might decrease the urban concentration of poverty, ameliorating the ills associated with it."
Almost all the studies I've cited focused on unusually high-density, expensive cities. That matters, because even if the well-worn gentrification narrative were true of New York — and, again, the data suggest it isn't — it doesn't follow that it would be true of Cleveland or Minneapolis or Colorado Springs.
In the Rust Belt particularly, gentrification alarm fed by stories from the coasts is "steadily growing in metropolitan areas and housing markets where it should be the least of our urban policy concerns," argues Jason Segedy, the director of planning and urban development for Akron, Ohio. "For 50 years now, people, jobs, and economic opportunities have steadily left our cities for the suburbs," he continues. "Yet, even the earliest signs of neighborhood revitalization, and nascent attempts at building new housing and opening small businesses in these cities, are frequently opposed by people who are convinced that they are acting in the name of social justice."
Their intentions are good, but the results can be tragic. This is not to say all the effects of gentrification are positive, quantifiable, or both; intangible changes to community life and neighborhood feel aren't measured in Medicaid or Census numbers. Nor is it that displacement by gentrification has never happened (cities like San Francisco where severe zoning restrictions artificially hike housing costs are vulnerable), or that new housing construction always works to benefit prior residents. In my neighborhood, I fervently hope the BBQ joint will be saved and the Wendy's across the intersection, drowning in extra parking lot, will be replaced instead.
But it is to say the possibility of some higher-income people moving into new apartments and opening coffee shops is simply not the big threat in deteriorating Midwest neighborhoods where a whole house can go for the price of a month's rent for an Upper East Side two-bedroom. Nationwide, as a 2014 City Observatory analysis showed, it's "far, far more common that once-poor neighborhoods stay that way over time — or, worse, that they grow poorer" than that they experience significant new investment and the higher-income arrivals who may follow it.
"The overwhelmingly majority of [the] urban neighborhoods that were poor in 1970 have not seen new condo construction, or population growth or socioeonomic change in the years since then," summarized The Washington Post's Emily Badger. "They have seen, rather, persistent poverty, and the lingering disadvantages that come with it."
That's what makes the reflexive suspicion of new investment in neighborhoods like mine, where within the last decade habitable houses regularly sold for $40,000 or less, so discouraging. When the New York Times report I discussed above was posted to my neighborhood Facebook group, commenters universally dismissed its conclusions, joking that it must be from The Onion.
But development without displacement, as our mural demands, is more than possible, and our neighborhood doesn't benefit from buying into housing myths. We can have our BBQ spot and new apartments, too.
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