Definition of "Gentrification"

Shannon Pencille real estate agent
Shannon Pencille, Real Estate Agent HomeSmart

Gentrification is an urban development phenomenon wherein a specific area changes its population profile by way of an economic appreciation of its real estate.

The best way to understand gentrification is through an example: imagine Neighborhood X is located near a power plant, and its residential real estate is mostly occupied by blue-collar families. Said power plant ends up being sold to a big real estate developer, who builds a restaurant complex inside the power plant premises. Now, that area – which used to be visited only by residents and workers – is starting to attract people from elsewhere, because the area is the coolest spot right now. The food is good and the culture is great. With that, new business comes to Neighborhood X, the demand for real estate within the area rises, and slowly the prices rise too. With time, it becomes heavy on the blue-collar families that live there. They used to pay 1 dollar for gas, but now the gas station was sold to make room for another business that could make more money than the gas station could, so they need to drive further and pay more to fill their tank at a near neighborhood station. Food prices also rise, service prices also rise, and that’s not even the worst: Neighborhood X’s customs also changed. Now they have nightclubs, and life happens at a much faster pace, whereas “back in the day” everyone would be in bed at 10pm and kids would play baseball on the streets. The first ones to go are the ones who paid rent. Suddenly, the area growth forced the rent price up way beyond the reach of their pocket. Eventually,  Neighborhood X becomes too expensive even for the original blue-collar homeowners, because all else surrounding their home is at an all-time high cost-wise. They too are “pushed” out. The only thing reminiscing off the original Neighborhood X is the name.

That whole process is called gentrification and there are two sides to it.

At first, it seems like a nice idea because it brings nice things to an area that was once overlooked. Morale goes up. However, lower income people that have lived in an area for generations are economically coerced to leave the place because gentrification made it impossible for them to continue living there. Many have the argument that they won’t leave empty-handed, but most of the times it’s not enough to set up a new life anywhere close enough to the point they don’t end up spending too much on transportation and other disadvantages brought because gentrification pushed them out of their home. Plus, it’s fair to say that what made that place special was the combination of the new nice things with the cool nice people that used to live there, so, in the end, it can become a soulless place for everyone, effectively devaluing it.

That, for instance, has been the biggest preoccupations of every city on the running to become the home to Amazon’s second headquarter; will Amazon HQ2 set a new commercial real estate trend within its vicinities and cause such a severe gentrification that forces a complete remodeling of its population?

There have been some measures imposed to control and alleviate gentrification a bit, being rent control the most recurrent of them.

Real Estate Tip:

Want to take advantage of gentrification and find a house in a lower income place that is about to become popular so you can profit?

Or you’ve been caught by the gentrification bubble and need to sell your house for the highest price possible?

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