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Gentrification and the resulting rent shocks are most prevalent in urban neighborhoods. Suburban markets may rise, but established suburban markets generally do not gentrify and do not rise rapidly. Rural markets do not gentrify or rise rapidly unless there is some sudden influx of people, as in North Dakota. So renters in cities are the ones most likely to be priced out of their area.
Homeowners have an inherent financial interest in supporting gentrification, which on the ground effectively equates to class warfare.
They're prevalent in neighborhoods which are out of equilibrium w respect to price and economic potential. Yes, this is predominantly urban neighborhoods, but it's not like all (or even the majority) of urban neighborhoods are going through this. If you want to talk about class warfare, the suburbs are exhibit a of this in this country. An area can't gentrify unless it was neglected in the first place. Suburbanization did that. There are all sorts of suburbs in this country that have become so expensive, that the successful children of current residents can't afford them. There isn't displacement. Just exclusion. Is that really any different? If you can't live somewhere than you can't live somewhere. On the flip side, there are many times more people who are literally stuck in a place they don't want to be in retirement. They picked the wrong inner suburb, urban area, or what was once a decent suburban neighborhood that is now a 40 year old vinyl village of split levels. They can't afford to leave because their homes didn't appreciate enough to afford them the means of getting out. So they end up dying there.
There are a lot of potentially bad outcomes here, and gentrification is a pretty small part of those.
There are all sorts of suburbs in this country that have become so expensive, that the successful children of current residents can't afford them. There isn't displacement. Just exclusion. Is that really any different?
Exactly.
Quote:
Originally Posted by freemkt
Homeowners have an inherent financial interest in supporting gentrification, which on the ground effectively equates to class warfare.
So how do you propose handling families that bought in an area when it was cheap and the best they could afford? Should they not be able to sell at market prices? The first wave of "gentrification" of a neighborhood mainly benefits middle and lower income buyers who took a chance on a neighborhood when it wasn't as desirable. I've seen this happen dozens of times in Boston, Chicago, and London. It paid for a few cousins of mine to go to college and for the retirement of many of my aunts and uncles.
While I agree that a lot more needs to be done in the US to provide affordable housing, greater social services, and better educational opportunities, fighting "gentrification" will do almost nothing to help with the very real social problems that exist in the country. Those are policy decsions that are far outside the scope of real estate values and planning decisions.
The first wave of "gentrification" of a neighborhood mainly benefits middle and lower income buyers who took a chance on a neighborhood when it wasn't as desirable. I've seen this happen dozens of times in Boston, Chicago, and London. It paid for a few cousins of mine to go to college and for the retirement of many of my aunts and uncles.
The downside is the children of those buyers will have trouble being able to afford to live, and especially buy, in the neighborhood they grew up in.
So how do you propose handling families that bought in an area when it was cheap and the best they could afford? Should they not be able to sell at market prices? The first wave of "gentrification" of a neighborhood mainly benefits middle and lower income buyers who took a chance on a neighborhood when it wasn't as desirable. I've seen this happen dozens of times in Boston, Chicago, and London. It paid for a few cousins of mine to go to college and for the retirement of many of my aunts and uncles.
.
It benefits those who bought in with a one time windfall, enabling the middle income people to move to the suburbs.
Here in Lawrenceville area of Pittsburgh, a lot of oldtimers are selling out and moving out to the suburbs, mainly Shaler with their profits.
The family I was thinking bought a home in an area where prices were about the same as a decent but not fancy suburb in the mid 80s. Today, their home must be worth at least $1.5 million. I assume his parents are going to "age in place" but I don't know.
They could now afford a house in almost any suburb, but couldn't really afford to live in a similar city neighborhood if they were buying now.
The downside is the children of those buyers will have trouble being able to afford to live, and especially buy, in the neighborhood they grew up in.
Possibly, but in almost every case I've seen the children can afford to move in and pay the taxes. If they can't afford to pay taxes on a paid up property then they aren't going to be able to afford rent (even in much less expensive communities). If there's still a mortgage on a property that's a different issue entirely, and it really isn't fully the parent's to will to the kids.
I'm borderline socialist on a lot of economic issues, but I think a lot of the concerns about "gentrification" are really larger picture problems with stagnant wages, lack of a social safety net, increasing education costs, etc. Any problems brought about by increases in property values (which I believer are overblown) are just symptoms of larger social issues, and any efforts to address them as isolated phenomena are doomed to fail.
Quote:
Originally Posted by I_Like_Spam
It benefits those who bought in with a one time windfall, enabling the middle income people to move to the suburbs.
In every case I've seen people don't sell to move to the suburbs, they sell to be closer to their children and grandchildren, who moved to the suburbs long ago. Many also do take over the house in the city after a parent has passed away. My parents did exactly that with a few houses owned by relatives in Boston, and fixed them up as rental units in the 70's and 80's. Many of my daughter's classmates in Chicago are living in the houses their grandparents grew up in (in the Bucktown neighborhood).
The family I was thinking bought a home in an area where prices were about the same as a decent but not fancy suburb in the mid 80s. Today, their home must be worth at least $1.5 million. I assume his parents are going to "age in place" but I don't know.
They could now afford a house in almost any suburb, but couldn't really afford to live in a similar city neighborhood if they were buying now.
I think what we are likely to see is an equilibrium reached over the next 20-30 years in urban areas. The rapid appreciation is largely a part of pent up demand and limited supply of quality/safe/affluent urban spaces. Once a neighborhood starts putting things together, it attracts exponentially more buyers at the old price, so we get price runs. That can't continue indefinitely because supply goes up rapidly and relative scarcity comes down. Today there is probably 6x the land area an upper middle class fam would consider raising a kid in compared to 30 years ago. I can't see the next ring of gentrification of 3 miles or so getting the same appreciation for a couple reasons:
1-it's a bit further out
2-the first 3 miles is only 1/3 the area of the next 3 miles. More to absorb=slower absorption=less dramatic changes. It also will probably limit appreciation in similar neighborhoods that have already gentrified. Why spend 800 k when you can get the same thing in a very similar neighborhood for 500k.
This also assumes we don't get a huge demand increase that far outpaces supply. I think the days of a neighborhood going from eclectic and edgy to full on boutiqued out with Marc Jacobs et al in 4 years time is pretty unlikely in the future. At least I hope so.
They're prevalent in neighborhoods which are out of equilibrium w respect to price and economic potential. Yes, this is predominantly urban neighborhoods, but it's not like all (or even the majority) of urban neighborhoods are going through this. If you want to talk about class warfare, the suburbs are exhibit a of this in this country. An area can't gentrify unless it was neglected in the first place. Suburbanization did that. There are all sorts of suburbs in this country that have become so expensive, that the successful children of current residents can't afford them. There isn't displacement. Just exclusion. Is that really any different? If you can't live somewhere than you can't live somewhere. On the flip side, there are many times more people who are literally stuck in a place they don't want to be in retirement. They picked the wrong inner suburb, urban area, or what was once a decent suburban neighborhood that is now a 40 year old vinyl village of split levels. They can't afford to leave because their homes didn't appreciate enough to afford them the means of getting out. So they end up dying there.
There are a lot of potentially bad outcomes here, and gentrification is a pretty small part of those.
There is a huge difference between getting priced out of the area in which you live, and not being able to move into an area. The concept that government should protect incumbents from being price-pushed out of their homes and neighborhoods is well established, going back at least to 1978 (Proposition 13).
So how do you propose handling families that bought in an area when it was cheap and the best they could afford? Should they not be able to sell at market prices? The first wave of "gentrification" of a neighborhood mainly benefits middle and lower income buyers who took a chance on a neighborhood when it wasn't as desirable. I've seen this happen dozens of times in Boston, Chicago, and London. It paid for a few cousins of mine to go to college and for the retirement of many of my aunts and uncles.
While I agree that a lot more needs to be done in the US to provide affordable housing, greater social services, and better educational opportunities, fighting "gentrification" will do almost nothing to help with the very real social problems that exist in the country. Those are policy decsions that are far outside the scope of real estate values and planning decisions.
Nothing stopping them from selling at market prices. How do you propose handling families vulnerable to the displacement that gentrification brings? Let them eat cake in some other neighborhood?
Nothing stopping them from selling at market prices. How do you propose handling families vulnerable to the displacement that gentrification brings? Let them eat cake in some other neighborhood?
Neighborhoods change character all of the time, both for the good or for the bad.
Here in Pittsburgh, many neighborhoods have change ethnically as well as economically. Its part of life, and part of the life of a city.
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