Gentrification Has Virtually No Effect on Homeowners

Tuesday, January 24, 2017
Richard Florida
CityLab

Gentrification is the hottest of hot-button urban issues. Many activists and critics see it as essentially a process by which more affluent and educated white newcomers displace poorer, working-class black residents. But those who have studied the subject closely, like Columbia University urban planner Lance Freeman, believe that the issue of displacement is more myth than reality. In fact, Freeman’s detailed empirical research has found that the probability of a family being displaced by gentrification in New York City was a mere 1.3 percent.

Now a recent study by Isaac William Martin and Kevin Beck in Urban Affairs Review helps deepen our understanding of the issue of displacement. It’s the first study I’ve come across that separates out the effects of gentrification on renters versus homeowners. Previous research, including Freeman’s landmark research, grouped renters and owners together.

The study essentially uses data on residential moves from the U.S. Census Panel Study of Income Dynamics (PSID) to track the differential effects of gentrification on renters versus homeowners over the three-decade period from 1980 to 2010. “Gentrifying neighborhoods” are defined as tracts where average housing prices increased and where the increase in the share of college-educated adults exceeded the increase for the county. “Potentially gentrifying neighborhoods” are those where median incomes are lower than the county average and the housing is older than average.

To get at displacement—where residents move out of a neighborhood due to increased housing prices, the study also distinguishes between voluntary and involuntary moves. It uses PSID data to identify involuntary moves as those where residents moved in response to outside events such as eviction or divorce. In addition, the study looks at the effects of property taxes—namely increased property taxes in gentrifying neighborhoods—on displacement.

The study generates three big takeaways which update and extend our understanding of gentrification and displacement.

Renters are nearly two times more likely to be displaced by gentrification than homeowners

Controlling for other factors, renters face a 2.6 percent greater probability of being displaced in a gentrifying neighborhood compared to 1.3 percent overall. While this may seem small, it’s greater than the difference between residents of subsidized and unsubsidized units and about the same as the difference between a married renter and one who is divorced.

As the study notes: “If we think that divorce or the loss of a rental subsidy makes a substantial difference for the likelihood of an involuntary move, then we may say the same of gentrification.”

Gentrification has virtually no effect on homeowners’ moves

Why does gentrification have essentially no discernible effect on homeowners moving out of the neighborhood? Owners have more money and more equity in their homes. Their costs are locked in and do not rise like rents do. Homeowners also tend to be older and more attached to the neighborhoods they live in. Factors like jobs, schools, and community institutions keep them in the neighborhood in addition to their economic interests.

The mechanisms of gentrification have different effects on long-term renters and homeowners. For renters, gentrification might mean rising rent or an increased threat of eviction. For homeowners, it might mean a chance to sell a home for unexpected windfall. Both processes induce residential moves that previous studies have lumped together.

Property taxes do not increase displacement

Third, there is limited evidence that property taxes can displace homeowners. This occurs only among homeowners where property taxes eat up an extraordinarily high fraction of their incomes. The effect of property taxes is essentially the same in gentrifying and non-gentrifying neighborhoods. Furthermore, they find no evidence that state-level property tax policy has any effect on homeowners being displaced from gentrifying neighborhoods at all.

The big takeaway is that gentrification has a much bigger effect and poses far bigger risks for renters, who tend to have lower incomes, are subject to rising rents, and can be evicted from their apartments. For many today, the solution to today’s urban housing affordability problem is to deregulate land use and build more housing. But this is likely to help more advantaged homeowners, who already benefit from the substantial subsidy that comes from their ability to deduct the interest paid on their mortgages. It’s time for housing policy to focus on lower-income renters who face the highest housing burdens—and the biggest risk of being displaced by gentrification.

FAIR USE NOTICE. Tenants Together is not the author of this article and the posting of this document does not imply any endorsement of the content by Tenants Together. This document may contain copyrighted material the use of which may not have been specifically authorized by the copyright owner. Tenants Together is making this article available on our website in an effort to advance the understanding of tenant rights issues in California. We believe that this constitutes a 'fair use' of any such copyrighted material as provided for in section 107 of the U.S. Copyright Law. If you wish to use this copyrighted material for purposes of your own that go beyond 'fair use,' you must obtain permission from the copyright owner.

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