Statistical Snapshot: Gentrification / Seattle is #2!

A storefront in the Ballard, one of the visibly-fastest-growing neighborhoods in Seattle. Photo via Creative Commons / Jay Cox.

Boston and Seattle are the two US cities that have gentrified the most between 2000-2007, according to research by the Federal Reserve Bank of Cleveland. I stumbled on this article relating gentrification to financial health, and it occurred to me that although gentrification is on everyone’s mind in Seattle these days, I’ve never seen a clear definition or quantitative description. This study, based on census neighborhood (tract) data and American Community Surveys, considers a neighborhood gentrified if it was in the lower half of home-price distributions at the beginning (2000) and moved to the top half by the end (2007).

By this definition, 61% of neighborhoods in Boston gentrified; 55% in Seattle gentrified during the same timespan. Behind Seattle are New York (46%) and San Francisco (42%), respectively. The ranking is somewhat misleading, because it doesn’t describe the percentage of the population that was affected in these neighborhoods, or by how much. A neighborhood that jumps from the 25th to the 75th percentile of home prices in seven years has undoubtedly gentrified more dramatically than one that has moved from the 45th to 55th percentile. I haven’t seen this breakdown, but I would guess some neighborhoods in New York and San Francisco have seen sharper jumps than most in Boston or Seattle in the last decade.

Also of interest are these statistics:

Note that all these numbers are snapshots – there are so many variables in the context that they should just be used as a starting point in the conversation. However, it’s surprising that the 21% increase in rents, while significant, is a fraction of the 157.7% increase in home prices, and their associated property-tax increases.

Although gentrification has pros and cons, it’s almost always depicted as a negative thing in everyday language (I’ve never heard a developer boast that he or she is contributing to the gentrification of the neighborhood at a public design review meeting). It’s easy to invoke as the beginning of the end of a neighborhood. The gut reaction is that it kills the organically grown character of an area and it pushes low-income people out. Those people were there first; it’s socially unjust. For accounts and analysis of character-killing growth, see Matt Hern’s book, Common Ground in a Liquid City.

However, these statistics support other studies that suggest that long-time homeowners in these neighborhoods are wholly the beneficiaries of gentrification. An average 157.7% increase of ones home value over 7 years is huge. This is a positive contribution to social mobility. I once read a study that found a person has a better chance of moving from the bottom quintile to the top quintile when he or she grows up in a gentrifying neighborhood. I will have to dig that up.

The problem of gentrification to home owners is that they get hit with higher property taxes that far outpace their income increases (an increase factor of 15, from above). Until they sell their homes, their gains are unrealized. Incredibly, some cities are being proactive to curb the sting of this by allowing tax offsetting and other remedies. However, with the middle class stagnating and shrinking, one can see the problem of not being able to afford your property taxes even while your home values are skyrocketing.

This article claims renters also benefit, in part because there is a small correlation between gentrification and credit worthiness. I’m not as convinced of this, but I do see some indirect benefits (increase of amenities, status, etc.) to renters. The direct economic benefits are fewer. However, it’s encouraging to see that overall, the gentrification “premium” on renters is relatively small.

What these numbers don’t show is the affects of driving low-income people out because of rising rents. The cost of living further away from the city center is not always appreciated, but the importance of demographic diversity has been a running theme in this blog. Low-income residents might lose access to public transportation and other amenities because they can only afford to live outside the city, and this is a huge problem of gentrification. The fact that some cities are acting to prevent this is commendable. However, some could do more. For instance, by zoning gentrifying neighborhoods for higher density, cities could temper the rising cost of living if added housing units can keep up with the demand that is driving the growth in the first place.

The bottom line is that, although interesting, one should take these numbers with a grain of salt. Also, gentrification is much more complex than most people make it out to be.