To Understand a City’s Pace of Gentrification, Look at Its Housing Supply

Published: 2020 | Laurie Goodman, Ellen Seidman, Jun Zhu | Urban Institute

Abstract

Gentrification is a hotly debated subject, with conversations centering around what happens to neighborhoods’ income and racial mix as new buyers move in and how that affects current residents. Although the impacts of gentrification are still being studied and debated, it’s important to understand what increases the pace of gentrification, which we define for this analysis as how fast high-income homebuyers move into low-income neighborhoods.We combined two datasets to examine the movement of high-income borrowers into low-income areas and the varying pace of this movement across different metropolitan statistical areas (MSAs). Our analysis focuses only on income because homebuyers’ race or ethnicity was not available at comparable levels of granularity in the two datasets. Our examination reveals that, in many MSAs, high housing costs—resulting from a lack of available housing—cause affluent buyers to look for homes in low- and moderate-income (LMI) neighborhoods. That means cities’ housing supply can determine how fast gentrification may occur. Boosting the supply of housing can slow the pace of new buyers moving into lower-income neighborhoods.