Welcome to the complicated push-pull of modern gentrification. While gentrification can be defined as the process of renovating and improving a house or district so that it conforms to middle-class taste, many people use this term negatively, suggesting the displacement of poor communities by rich outsiders. However, the effects of real estate gentrification are beneficial especially to the newcomers of the community.
Many features of gentrification are useful. Who wouldn’t want to see new investments and increased economic activity in their neighborhood? While it may sound like the only ones benefiting are the new residents, yet old residents of the neighborhood benefit from real estate gentrification as well. Low-income residents that decide to stay in gentrifying neighborhoods benefit in:
- New job opportunities
- Longtime homeowners benefit from higher property values
- Credit scores of the poor residents improve in gentrifying neighborhoods
So it appears that real estate gentrification doesn’t always lead to displacement. As Philly Fed concludes in his findings about gentrification, it does not lead to low-income residents being pushed into another neighborhood. (See also: what have we learned about the cause of recent gentrification.)
Living near the urban core leads to a lower cost of living. It means being able to save yearly costs of transportation since you will able to walk to most places. It means being able to have easy access to all kinds of services like doctors and schools and stores. New residents will find life in a gentrifying neighborhood will find it beneficial not only for the cheaper lifestyle, but also for the cultural diversification that will be found in such a neighborhood.
Investors of course find real estate gentrification an effective strategy. They find in these neighborhoods higher investment potential, such as rapid increases in property values. An investment property can be purchased cheap and rented out for income. In real estate gentrification, rents will go up and investors can produce double-digit returns. So as some would say, out with the old and in with the new!
Many aspects of gentrification are enticing. Unfortunately, not all residents find it beneficial. Established residents find themselves socially and economically marginalized. Gentrification is often viewed as a failure of social justice, where the “wealthy” newcomers are applauded for improving a neighborhood where “poor” residents are displaced by high rents and high economic change. For the old residents of the neighborhood, they see gentrification as:
- High increase in rents and prices
- Increase in the number of evictions
- A decline of industrial use
- Political conflict, aggravated by differences in race, culture and class
So while it may sound like real estate gentrification is a change for the better, it is not so great for people who lived in a neighborhood for years calling it home. How you do know where to stand? Are you with gentrifying a neighborhood and investing in its new and improved lifestyle? Or are you with keeping the old and eccentric so you can invest in a more affordable neighborhood?
There has to be an in-between solution when it comes to real estate gentrification. Investors need to understand the situation thoroughly before investing. If the gentrification is going to cause displacement, think twice before acting.
There are different strategies for making money in real estate other than by investing in gentrifying real estate. Mashvisor provides these strategies and helps investors invest their money wisely.
Change almost always involves winners and losers. Low-income people are barely the winners. The effects of gentrification vary widely with the particular local circumstances. Residents, community development corporations, and city governments across the country are struggling to manage these unavoidable changes to create a win-win scenario for everyone.