The new Philadelphia Fed study of gentrification is the best evidence yet that gentrification creates opportunity and promotes integration

To many “gentrification” is intrinsically negative. When wealthier, whiter people move into the neighborhood, it must necessarily mean that lower income people of color are either driven away (to even worse neighborhoods) or suffer from higher rents and loss of community if they stay.

A new study from Quentin Brummet of the University of Chicago and  and Davin Reed of the Philadelphia Federal Reserve Bank, is the best evidence yet that this view of gentrification is fundamentally wrong.  Gentrification creates substantial benefits for long time residents of low income neighborhoods, and causes little displacement. The study shows:

• There are very small differences in out-migration rates between gentrifying neighborhoods and otherwise similar neighborhoods that don’t gentrify. Over ten years, we would expect about 60 percent of less educated renters to move out of non-gentrifying low income neighborhoods, compared to about 66 percent of less educated renters in gentrifying neighborhoods.
• Those who leave gentrifying neighborhoods do not end up moving to destination neighborhoods that are measurably worse than the destination neighborhoods of households moving out of poor but not gentrifying neighborhoods
• The demographic composition of gentrifying neighborhoods, post-gentrification, remains highly mixed, with many less educated renters and homeowners
• Less educated renters that remain in gentrifying neighborhood don’t see significant increases in rents:  There’s no appreciable difference in rent increases between less educated living in gentrifying and non-gentrifying neighborhoods
• Demographic changes in gentrifying neighborhoods are those that are generally associated with better outcomes for low income children growing up in these neighborhoods.
• Poor neighborhoods that don’t gentrify, don’t state the same, they decline:  non-gentrifying neighborhoods lose population and experience declining incomes.
• Many existing studies of gentrifying neighborhoods that don’t account for high levels of migration even in non-gentrifying neighborhoods, that don’t disaggregate effects by socioeconomic status, and that rely primarily on median rent statistics can produce misleading pictures of neighborhood change.

The Brummet and Reed study focuses on the 100 largest US metro areas, and measures change key neighborhood characteristics between 2000 and 2010-14, using Census data. An important innovation of their work is linking data for individuals across the two time periods, to measure in detail what happened to a neighborhood’s original residents. The study uses a definition based on changes in the relative educational attainment of adults in Census tracts; gentrifying neighborhoods are the low income census tracts in central cities of the nation’s 100 largest metro areas that recorded the highest rates of increase in adult educational attainment over the past decade or so.  They use educational attainment as their key metric for sorting households by socioeconomic status, comparing results for more-educated (college and higher) and less educated households.

Displacement is negligible

The most common critique of gentrification is the notion that it forces long-term residents, especially low income renters, out of the neighborhood. Brummet and Reed stratify households by education level (which is a good proxy for income levels).  They find that gentrification has a very small impact on the tendency of less educated renter households to move away from the neighborhood.  Over a ten-year period, about 60 percent of less educated renters moved out of their neighborhood, regardless of whether it gentrified.  The author’s estimate that for gentrifying neighborhoods, for less educated renter households, the rate is about 6 percentage points higher (66 percent vs 60 percent) over the period of a decade.

Another common concern about those who migrate out of gentrifying neighborhoods is that somehow they are forced to live in locations that are measurably worse than the gentrifying neighborhood they left. Brummet and Reed compare the characteristics of the destination neighborhoods of those who left gentrifying and non-gentrifying tracts, and found no significant differences:

. . . for all types of individuals, movers from gentrifying neighborhoods do not experience worse changes in observable outcomes than movers from non-gentrifying neighborhoods. That is, they are not more likely to end up in a higher poverty neighborhood, to become unemployed, or to commute farther than individuals moving from non-gentrifying neighborhoods

To the extent that there is demographic change in gentrifying neighborhoods, it is a product of the different characteristics of people who move in to a neighborhood, and not due to an increase in the number of people who move out.

Exposure to poverty declines

The benefit of gentrification is that these more mixed income neighborhoods lower the exposure to poverty for all residents.  Brummet and Reed estimate the average poverty rate of neighborhoods that gentrified declined by 3 percentage points.  As a wide body of research has shown, the poverty rate of one’s neighborhoods tends to aggravate all of the negative effects of poverty, so reductions in poverty improve living conditions and opportunity for residents who remain. The key question is whether many long-term residents of these neighborhoods are able to remain and enjoy these benefits.

The archetypal description of gentrification, from Ruth Glass, who coined the term in the 1960s, is that persons from an upper class totally replace the original lower class residents of a neighborhood. Brummet and Reed show that even in the most gentrified neighborhoods, the amount of demographic change over a decade and a half is relatively small, and gentrified neighborhoods have a high degree of income diversity, with 30 to 60 percent of long term residents remaining, post-gentrification (about the same amount as in non-gentrifying neighobrhoods).  They conclude:

. . . less-educated renters and less-educated homeowners each make up close to 25 percent of the population in gentrifiable neighborhoods, and 30 percent and 60 percent, respectively, stay even in gentrifying neighborhoods. Thus, the benefits experienced by these groups are quantitatively large . . .

Rents for less educated are unaffected by gentrification

After displacement, perhaps the second most commonly cited harm of gentrification is the notion that long term residents are forced to pay higher rents. Brummet and Reed look at the actual levels of rents paid by less educated residents both pre- and post-gentrification.  Contrary to the received wisdom on the topic, they find that rents did not increase for less-educated long-term residents:

. . . somewhat surprisingly, gentrification has no effect on reported monthly rents paid by original resident less-educated renters.

The reason likely has to do with the variation in rental unit size and quality within gentrified neighborhoods.  If many housing units remain smaller, with fewer amenities, less favorably located, they may rent for lesser amounts.  It’s fully possible for median rents to increase in a neighborhood, and for the rents for some other segment of less desirable housing to not increase, or not increase as much. As we’ve noted at City Observatory, it may be more appropriate to look at the 25th percentile of rents to judge affordability for lower income households.  As Brummet and Reed conclude:

These results caution against using simple neighborhood median rents when studying gentrification, as is almost always done. Changes in median rents can miss important segmentation and heterogeneity, leading to incorrect conclusions about how the housing costs paid by different types of households are actually affected.

The dynamics of neighborhood change

Implicitly, much of the discussion of gentrification takes a highly static view of neighborhoods.  It assumes, that somehow, in the absence of gentrification, and neighborhood will somehow stay just as it is.  As Brummet and Reed show, all neighborhoods, including both gentrifying and non-gentrifying lower income neighborhoods, experience substantial turnover in population over the course of a decade or so.

Neighborhoods are always changing, and the low income neighborhoods that don’t gentrify don’t somehow stay the same:  they lose population, and experience declines in income.  The average low income neighborhood that didn’t gentrify between 2000 and 2012 lost 8 percent of its population, and saw a decline in average incomes of 21 percent (Tables 4 and A5). Also:  change in gentrifying neighborhoods is not a zero sum game, with each new resident replacing, one-for-one, a previous resident:  Gentrifying neighborhoods saw their total population increase 21 percent.  These results parallel closely the findings from City Observatory’s own Lost in Place study of neighborhood change from 1970 to 2010 that showed that high poverty neighborhoods that didn’t gentrify lost 40 percent of their population over four decades, while gentrifying neighborhoods recorded increases in population.  This underscores why adding new housing in gentrifying neighborhoods can be an important ingredient in assuring they remain diverse and equitable.

Are these results really surprising?

While the Detroit Free Press labeled these results “surprising”, — “Study reveals surprising results about Detroit gentrification,” — they actually fit the pattern of a growing body of careful studies of neighborhood change.  Martin and Beck found that there was almost no difference in out-migration between gentrifying and non-gentrifying poor neighborhoods.  Ingrid Gould Ellen and her colleagues, using data on kids born to families receiving Medicaid benefits showed virtually no displacement due to gentrification, and also showed that residents who moved generally relocated to similar neighborhoods. Lance Freeman‘s work has shown that displacement rare, Jacob Vigdor has shown that long-time residents are somewhat more likely to stay in gentrifying neighborhoods than non-gentrifying ones.

There’s a decided “man-bites-dog” character to media reporting on this paper.  The Detroit Free Press summarizes the findings as “challenging the notion than gentrification is as harmful as many believe.” The Philadelphia Inquirer headlined its story, “Effects of gentrification on long time residents are not as negative as typically perceived, Philly Fed study says.” CityLab talks about the “Hidden Winners” from gentrification; apparently, gentrification is so widely known to be A BAD THING, that it’s counter-intuitive to think that existing residents might benefit. For example, Kriston Capps of CityLab writes:

Often it goes without saying that the drawbacks of neighborhood change—above all the displacement of existing lower-income residents, but also increases in rents and upticks in cultural conflicts—greatly outweigh any benefits.

It is probably too much to ask, but what the data show, is that for many residents and neighborhoods, gentrification is a good thing.  It raises property values for long-time homeowners, increasing their wealth. It doesn’t appear to be associated with rent increases for less educated renters who remain. Poverty rates decline, and objective changes in neighborhood characteristics–notably greater income mixing–are associated with higher levels of inter-generational mobility for kids growing up in such neighborhoods.  In addition, the data show that poor neighborhoods that don’t gentrify steadily deteriorate on these measures. Implicit in much of the popular discussion and press coverage of gentrification is the assumption that neighborhoods that don’t gentrify will stay the same–but they don’t.  Things get worse.  That’s the relevant story for many places, and its simply not reported.

Methodology and definitions

What makes this study special is that it tracks residents over time as they move in and out of different neighborhoods. The bugbear of most displacement studies is that they rely on comparing one-time snapshots of neighborhood composition, and don’t track individuals.  There’s also an implicit assumption in much work in the field that any time someone moves out of a neighborhood that’s evidence of displacement.  But as Brummet and Reed painstakingly illustrate, population dynamics in urban neighborhoods are far more dynamic that usually thought. As we’ve noted at City Observatory, the average tenure for renters in the US is less than two years. With their longitudinal tracking of individual households, Brummet and Reed estimate that about three-fifths to three -quarters of all renters and a third to forty percent percent of all homeowners will move away from their low income neighborhood over a-ten year period (Table 1). Failing to control for this background of steady change biases many gentrification studies.

Brummet and Reed use confidential and anonymized census data from 2000 and the 2014 American Community Survey to track the residential location of individuals over time. This connected, longitudinal data series is a gold standard of measuring neighborhood change. Snapshot comparison studies can’t tell whether a decline in the number of households with incomes below the poverty line is due to such households enjoying higher incomes, are is due to lower income households moving out of the neighborhood.

One critical ingredient in any study of neighborhood change is the definition of gentrification. Brummet and Reed develop two measures:  one is a continuous measure of demographic change that examines the degree to which a neighborhood gentrifies, the second is a more commonly used-binary measure that divides all lower income, central city neighborhoods into two categories, gentrifying and non-gentrifying, based on whether they are in the top 10 percent of such neighborhoods nationally on this index.

Policy Implications: Leverage gentrification for good

Change of all kinds is hard, and for residents of low income communities, there’s a long and sad history of most changes, many of them promised to make things better, only making things worse.  So its little surprise that their should be skepticism about gentrification.  But unfortunately, the knee-jerk reaction to the perception of negative effects from gentrification has generally been a series of policies that promise to only make the problem worse:  rent control, NIMBY development restrictions, and inclusionary housing requirements. As Brummet and Reed write:

. . . concern that gentrification displaces or otherwise harms original neighborhood residents has featured prominently in the rise of urban NIMBYism and the return of rent control as a major policy option.

The fact that gentrification is mostly benign, and in many respects beneficial to long-term residents should change the policy calculus.  Rather than blocking growth and development in gentrifying neighborhoods, cities should recognize that gentrification creates benefits and also leverage this investment to provide more opportunities for less-well off households to live in great urban neighborhoods  

This could provide new options for policies designed to increase children’s exposure to high-opportunity neighborhoods, for example by targeting subsidies to help them stay in neighborhoods that are improving around them.  . . . Accommodating rising demand for central urban neighborhoods, such as through building more housing, could maximize the integrative benefits we find, minimize the out-migration effects we find, minimize gentrification pressures in nearby neighborhoods, and minimize

As we’ve argued at City Observatory, using tax increment financing to subsidize affordable housing in neighborhoods experiencing rapid change.  Tapping the property appreciation in gentrifying neighborhoods leverages increased wealth to assure that a neighborhood is inclusive.

This study is perhaps the best evidence we have yet of the nature and extent of gentrification in US cities.  It should dispel many of the widely repeated myths and misunderstandings about neighborhood change.  If we better understand the dynamics of urban neighborhoods, we’ll view gentrification not as a scourge, but as an opportunity to use the growing demand for urban living to build cities that are more diverse and inclusive.

Quentin Brummet and Davin Reed, The Effects of Gentrification on the Well-Being and Opportunity of Original Resident Adults and Children, Philadelphia Federal Reserve Bank Working Paper 19-30, , July 2019.