What happens when a neighborhood suddenly fills up with new college-educated residents? When it comes to housing costs, a new study finds that gentrification doesn’t have any effect on homeowners. The people who suffer when prices rise in a neighborhood are renters, who are twice as likely to be displaced when a neighborhood gentrifies.
The study, published in the Urban Affairs Review by William Martin and Kevin Beck, is interesting in that it separates the effects of gentrification on both renters and homeowners. Gentrifying neighborhoods are those where average house prices have increased, and the concentration of college-educated adults is higher than the national average. Using data from property tax increases, income, and tract-level gentrification, the authors teased out the effects of gentrification on residents.
What they found is that homeowners aren’t affected by gentrification very much at all. More specifically, limiting the increase of residential property taxes to mitigate the effects of gentrification has no effect. Homeowners move out at the same rate they would in regular, non-gentrifying neighborhoods. Renters, on the other hand, are twice as likely to move as a renter in a normal neighborhood. So why is this?
The difference has to do with the way rising prices affect the different groups, and how rooted those groups are in their homes. The primary pressure for homeowners is that the value of their property increases, tempting them to sell and make a profit. Renters, on the other hand, face increasing rents, making it more expensive to stay put, which is why 2.6% more of them report moving involuntarily. That doesn’t sound much, but it’s double the regular rate, and, write the authors, “is greater than the difference between residents of subsidized and unsubsidized units, and similar to the difference between a married renter and one who is divorced.”
And renters are less likely to be rooted in their neighborhoods. “Compared with the average renter, the average homeowner [in the study] is older, has lived for a longer time in his or her current residence,” says the report, “and is more likely to have a spouse and children–who may, in turn, have attachments of their own to jobs, schools, or community institutions in the neighborhood.”
Further, a homeowner may see the value of their home increase and decide to stay put, letting it appreciate yet more.
Martin and Beck set out to explore the effects of property tax on homeowners in gentrified neighborhoods, and found that they really don’t have any useful effect. It would seem, then, that rent control would be a more useful way to protect a majority of residents. Not only would it stop landlords taking advantage of their tenants with steep price hikes, but it may, in the long terms, build a better, closer community by keeping renters around for long enough to develop some roots.