Four Forces Watch: Gentrification

Luke Juday and others report,

  • Since 1990, downtowns and central neighborhoods in cities across the country have attracted significantly more educated and higher-income residents.
  • Young adults (22-34 years old) have increased as a proportion of residents in the center of nearly every city in the country, while falling as a proportion across all other areas.
  • Older residents (ages 60 and up) form a smaller proportion of the inner-city population than they did in 1990.
  • In most cities, a decrease in income and education levels from 1990 to 2012 is evident several miles outside the core. How far outside depends on the city, with the sharpest drop being anywhere from 4 to 15 miles from the center.
  • Households below the federal poverty line are migrating outwards from city centers. The poverty rate has increased significantly several miles outside the core in many cities.

Pointer from WaPo.

This is gentrification. I view it as largely resulting from the New Commanding Heights. Universities and hospitals locate in cities, providing employment opportunities for affluent professionals. At the margin, this drives some poor people out of cities and into close-in suburbs. Meanwhile, close-in suburbs are affected by the decline in employment opportunities for low-skilled workers, which comes in part from factor-price equalization and Moore’s Law.

7 thoughts on “Four Forces Watch: Gentrification

  1. I think viewing this trend in entirely employment terms is a bit too narrow. I would add a couple of factors that I think are playing fairly large roles in driving or sustaining this trend:

    1. Higher density neighborhoods can sustain more niche businesses than the less dense suburbs, which results in more and better eating, entertainment and social options. This is a big draw for young, childless professionals.

    2. Network effects. A big pool of young, educated professionals attracts other young professionals, both for social and romantic opportunities. Assortative mating strategies are more likely to pay off in these types of environments, and they become more likely to pay off, the bigger the pool becomes.

    3. Environmental concerns. A lot of young people really have taken the carbon footprint talk to heart and choose dense, walkable neighborhoods where they don’t need to take a ten minute car ride to get a decent meal. Cars are sort of gauche. Plane rides to the Eurasian landmass and especially Africa are where it’s okay to indulge.

    4. Mothers Against Drunk Driving. Similar to #3, groups like MADD really have gotten through to young people. “I can walk to the bars in ____” is a phrase you’ll hear a lot when your recent college grads are explaining why they’ve chosen to move to a particular neighborhood.

    • Some have tried to push back against your point about young people and cars, saying its mostly about economics, i.e. they can’t afford it. They’re not actually very eco-consious. I’m not sure what to think other than to say it’s a mix of things. But to the extent that progressive notions about the environment have shifted young peoples’ values toward cheaper living, we can be thankful this happened right when their economic prospects were becoming so awful, can’t we?

      • For what it is worth, I loathe environmentalism, and enjoy car driving, but ever since moving to Europe I have resisted getting a car. In fact “resisted” isn’t the word, I haven’t been tempted. This even in Germany, which is a car culture — but also a bycicle and train culture with physical charactersitics to match.

        On holiday in back in Australia, I had good fun driving around everywhere and found it easy it was to limit my social drinking accordingly. So yes it is “environmental” in the sense that my environment modifies my incentives and hence my behaviour.

    • Jeff,

      I really like points #1 and #2. I definitely think there are economies of scale and network effects at city centers which are self-propelling. I’m a younger, childless, millennial and I can personally vouch that these are strong attractions for me.

      The ability to network with other professionals and find a good spouse just exists in abundance at the center of a city in ways that do not exist out in the burbs.

      However, with regards to point #3, I think the big driver for a lack of car driving is lack of income. Most millennials simply do not have a lot of discretionary income. My guess is that my generation could somehow recoup that $30,000 in wages from lost productivity you’d see a lot more cars. I think the environmentalist aspect is mostly a way of rationalizing a lack of capacity that young people would otherwise feel frustrated about.

  2. I saw a discussion at City Journal in which Edward Glaeser mentioned that manufacturing was leaving the city centers and wouldn’t return. The square footage per worker in manufacturing is now 4 times or so more than other types of work so land costs were killer. I suspect we are also seeing the folding of “shop” type businesses, e.g., small sheet metal shops, as the owners age out. The purchasers or heirs expand but in outer suburb light industrial parks. So the “good” lower wage jobs are either following the workers or the workers are following them. Low wage jobs in the inner core are in restaurants or other service industries.

    This “gentrification” is a real monkey wrench in the urban mass transit plans. The people who use mass transit are moving out of the center and don’t work in the city center either. Unhelpfully, trains, subways and many buses don’t run very long after the bars and restaurants close thus leaving the workers to need to drive. Those who depend on government assistance are limited on how far they can move as they have to stay near the social workers and also inside the city limits.

  3. “Households below the federal poverty line are migrating outwards from city centers. The poverty rate has increased significantly several miles outside the core in many cities.”

    Yes, but not very far. You end up with a doughnut — wealth in the city center and in the newer, outer suburbs with lower incomes in the outer city neighborhoods and adjoining suburbs. You can see the process in action here:

    http://reboot.rebootillinois.netdna-cdn.com/wp-content/uploads/2014/04/Chicagos-middle-class.gif

    Wealth grows at the center, poverty migrates to the edges, and the middle class moves out.

  4. Also, on another note, I definitely think an underappreciated issue how land planning does (or doesn’t) respond to market forces and how these price distortions affect social welfare.

    From my own point of view these forces are very important but don’t get nearly as much play as things like income inequality, offshoring, obamacare, the deficit, etc.

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