Low-income Americans can benefit from gentrifying neighborhoods

The challenge of regenerating impoverished communities in a way that their existing residents benefit long has vexed policymakers. Anecdotal evidence has suggested that influxes of capital investment tend to push out the people who live there. They get replaced by residents who have more education and higher incomes. Gentrification doesn’t solve poverty so much as move it around, goes the thinking.

But a working paper published in July by the Federal Reserve Bank of Philadelphia upends the conventional wisdom that gentrification harms the residents of a neighborhood. Instead, it argues, displacement doesn’t happen nearly as often as we think. And the residents who remain in a gentrifying neighborhood often share in the benefits.

The authors, Quentin Brummet and Davin Reed, developed a national data set of longitudinal individual outcomes from the 2000 Census and the 2010-14 American Community Survey. The data set, they say, “allows us to identify original residents and to follow changes in their outcomes whether they move or stay.” 

According to Brummet and Reed, gentrification has a minimal effect on moves by less-educated renters. A typical neighborhood will see roughly 70 percent of its less-educated renters move in or out over the course of a decade; that increases by a mere 4 percent to 6 percent in a gentrifying neighborhood. But more importantly, “gentrification creates some important benefits for original resident adults and children and few observable harms.”

For adults who choose to stay in gentrifying neighborhoods, the poverty rate around them drops by 7 percent; those who choose to leave are no worse off. Sixty percent of less-educated homeowners remain in gentrifying neighborhoods. So do 30 percent of less-educated renters, and their rent typically doesn’t increase because of gentrification. The incomes of more-educated homeowners who stay increases an average of $5,000, which “suggest[s] that [they] may benefit from an influx of more-educated individuals to their neighborhood, perhaps through new local job opportunities or networks.”

Other recent research has said that moving families from high-poverty neighborhoods into ones with little poverty will improve the educational attainment and job prospects of children who move. Brummet and Reed found, however, that the children of less-educated homeowners who stay in a gentrifying neighborhood are better off than those who move. They are more likely to attend and complete college, and thus “housing policies designed to keep disadvantaged households in improving neighborhoods may achieve many of the same benefits as trying to move them to better neighborhoods.”

Brummet and Reed could not say that what they observed in the 100 largest U.S. cities happened to the same degree in all of them. But other researchers have found negative effects from gentrification in certain communities because of local factors.

According to the Philadelphia Fed’s working paper, Austin, Texas (a city where I lived before last July), had the seventh-fastest rate of gentrification among large cities. It also was the largest U.S. city to experience a real decline in the African American population during the 2000s. The African American share of Austin’s total population has continued to shrink through this decade. 

Eric Tang, associate professor at the Institute for Urban Policy Research and Analysis at the University of Texas at Austin, interviewed 100 African Americans who had moved from East Austin to suburban communities but returned on Sundays to attend church. The people with whom he talked gave a number of reasons for moving. “The vast majority of them felt that they had moved not out of choice, but because they felt compelled to move due to affordability, especially housing affordability,.” he said. Most did not benefit from moving. A majority of residents who had been pushed further to the east told him “they have less access to supermarkets, to health care centers; that they have poor transportation options. And, on the whole, their quality of life suffered.”

James Quintero, director of the Think Local Liberty project at the Texas Public Policy Foundation, amplified the housing affordability concern. “Rather than adopt strategies and policies to mitigate displacement, Austin-area governments have set about doing the exact opposite, enlarging the size and burden of local bureaucracies at great cost,” he said. Local property taxes have surged in recent years, rising by nearly 50 percent on the median Travis County homeowner just in the last five years. He also cited burdensome land-use and building regulations as key contributors to Austin’s housing affordability crisis. 

Brummet and Reed’s conclusion points to efforts to increase the housing supply in urban neighborhoods as one policy that could increase the benefits from gentrification and reduce its harms to current residents. 

An intelligent urban policy should seek to develop the local economy and to preserve neighborhoods in the central city. Its sweet spot, it turns out, might mean encouraging new investment in low-income neighborhoods while attacking tax policies and regulatory barriers that make housing unaffordable. Doing those things would make it more likely that people who live in gentrifying neighborhoods could benefit alongside the newcomers. 

David Guenthner is senior strategist for state affairs at the Mackinac Center for Public Policy, a research and educational institute based in Midland, Mich. He previously worked in several capacities at the Texas Public Policy Foundation in Austin.