How to Know If Your Neighborhood Is Being Gentrified

 
 
Using modern digital tools, Michael Luca and colleagues hope to give urban planners a look into gentrification as it is happening.
 
 
by Dina Gerdeman
The High Line redevelopment in winter, New York City. sx70

A new study of gentrification shows that the addition of a coffee shop or restaurant in your neighborhood could be an early indicator that housing prices are about to spike.

The research also casts some doubt on the often-expressed belief that gentrification can ruin neighborhoods by forcing out existing businesses that serve the needs of the locals.

“We found that changes in the local economy—such as a new coffee shop opening—can predict gentrification,” says Harvard Business School's Michael Luca, Lee J. Styslinger III Associate Professor of Business Administration, who coauthored the study. “Our results also suggest that a range of local businesses actually expand during periods of gentrification.”

The findings are included in the new paper Nowcasting Gentrification: Using Yelp Data to Quantify Neighborhood Change, written by Luca, Harvard University Economics Professor Edward L. Glaeser, and HBS doctoral student Hyunjin Kim.

The researchers combined data from US Census reports, the Federal Housing Finance Agency, Google Street View, and Yelp to explore gentrification in New York, Boston, Chicago, Los Angeles, and San Francisco.

Among the findings:

  • The opening of a Starbucks—and cafes more generally—is a leading indicator of gentrification, and is associated with an increase in local housing prices of .5 percent.
  • Gentrifying neighborhoods tend to spawn a growing number of grocery stores, cafes, restaurants, and bars. But there is a chicken-and-egg question of what ignites that development.
  • Although it’s possible some existing shops could be squeezed out by the influx (the report didn’t specifically study that question), the overall trend is that the number of businesses in that area will expand.
  • Yelp measures of local business activity, such as prices and user ratings, provide a new way of studying the economy. This data can provide indicators that gentrification is occurring, forecast an increase in housing prices, and shed new light on the evolution of the local economy at the neighborhood level in close to real time.

Although the study helps identify where gentrification is occurring, it’s unclear what’s causing what. “It could be that people see a Starbucks coming in and say, ‘This is a neighborhood we should move into,’” says Glaeser, an urban economist and author of the book “Triumph of the City.” “But we think it is more likely that Starbucks has insight into neighborhoods that are going to be expanding.”

Either way, a new Starbucks is a predictor of rising housing prices. “If you want to know if a neighborhood is going to be booming in terms of housing prices, the hip new coffee shop may be a harbinger of things to come,” says Luca.

The study didn’t specifically track the fate of existing shops or services after new businesses started opening in the area, so it’s possible the occasional shop might be crowded out by gentrification. Nevertheless, Kim says, “Demographic changes that are widely seen as measures of gentrification are accompanied by growth in the number of businesses in every category we examined.”

Creating better public policy

Gentrification has swept through some of America’s largest cities, including San Francisco, Manhattan, and New Orleans. With it comes familiar arguments both for and against.

Private developers and other supporters argue that new restaurants and retail shops, high-rise housing, and other spruce-ups revitalize communities by attracting outside investment and luring new residents. Critics counter that the improvements come with downsides, starting with the loss of affordable housing and the tearing apart of established communities. The escalation in housing prices often forces the poorest residents to move out, making way for new occupants who are richer—and whiter.

These social pressures often put city planners in the uncomfortable spot of trying to maintain the tricky balance of bolstering economic development without completely killing cultural diversity. Glaeser, Kim, and Luca believe their novel approach, which mashes up data from online platforms with more traditional data sets, can drive better public policy by providing a real-time glimpse of changing neighborhoods, allowing policymakers to “forecast” where gentrification might be occurring and measure its effects.

The team has worked closely with cities to explore gentrification, meeting with politicians, policymakers, and chief data officers to discuss their research findings.

The researchers are excited about one particular data source: the online platform Yelp, which runs business listings and reviews written by customers. Unlike traditional Census data, which can take years to develop, Yelp provides a real-time look inside the local economy to see what types of businesses are growing and how a neighborhood is changing.

“You can get Yelp data much more quickly, and the data is more granular,” says Luca. “Yelp will give you a better snapshot of a neighborhood and fill in blanks that Census data doesn’t capture.”

To measure business changes, the researchers studied Yelp data between 2007 and 2016. In addition to finding the boost in housing prices with a Starbucks entering a neighborhood, they also found that the growth in the number of Starbucks reviews is even more predictive of neighborhood change: With every 10 extra reviews a business received, housing prices in that ZIP code increased by 1.4 percent.

More college-educated residents = more food options

To compare housing prices with other markers of gentrification, the researchers turned to the Federal Housing Finance Agency in New York City between 2012 and 2016. They studied three demographic measures of neighborhood change: percent of residents with a college degree; percent of residents between 25 and 34 years old; and percent of residents who were white.

Changes in the business landscape were particularly associated with the number of college-educated residents, and less so with the age of residents and racial composition of a neighborhood.

Growth in grocery stores, bars, restaurants, and cafes—especially the pricier places—were good predictors of an uptick in the number of college-educated residents within a particular area.

The opposite also appears true, though—that neighborhoods with less educated, lower-income residents have fewer grocery store and restaurant choices nearby. “These results seem compatible with the literature on ‘food deserts’ that documents how poorer people live in areas with fewer options for healthy food,” the paper says.

The team also examined how local business activity varied with changes in a StreetScore rating, a computer-generated, crowdsourced measure of how people perceive the safety of a street scene captured in Google Street View images. The data, captured from 2007 to 2014, allowed researchers to track the overall physical quality of a neighborhood. Increases in the number of Starbucks and other cafes, vegetarian restaurants, and bars equated with higher StreetScores.

“You have better paint on buildings and better landscaping. It all makes a difference in the StreetScore,” Glaeser says. “And a change in StreetScore is one of the first indications of a neighborhood change.”

In studying several cities, the researchers found many of the same patterns—florists, groceries, and bars seemed to go hand in hand with gentrification. And in New York, the number of laundromats was also related to gentrification.

Luca says online platforms provide an exciting opportunity for planners and policymakers to tap into useful data that could inform both commercial development and residential housing decisions.

“There’s a real opportunity in all of this,” he says. “Online platforms can help businesses, consumers, and policymakers turn this real-time data into actionable insights.”

Related Reading:

Researchers Use Google Street View to See the Future of Cities
The Battle for San Francisco
Who is Responsible for the Future of Cities?

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About the Author

Dina Gerdeman is a senior writer for Harvard Business School Working Knowledge

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