Conventional wisdom has long dictated that gentrification is bad for low-income Americans. Progressives especially have decried the influx of higher-income residents into impoverished areas, saying they displace renters and homeowners, jeopardize work practices, disrupt family life, and undermine cultural connections.
But these alleged evils are not backed by evidence or even common sense. And while many rigorous studies have challenged the notion that gentrification displaces original low-income residents, anti-gentrification activism remains a powerful force in urban politics. Witness Amazon’s forced retreat from New York City.
Now, the facts are seeming to turn this “wisdom” on its head. A recent working paper from the Philadelphia Fed authored by researchers Quentin Brummet and Davin Reed demonstrates that gentrification not only benefits original residents, but also gives their children a better chance of rising out of poverty.
Using data from the 2000 Census and the 2010–2014 American Community Survey, they compared gentrifying and non-gentrifying neighborhoods in 100 of the largest US metropolitan areas. Drawing conclusions similar to previous studies, they found that gentrification — defined here as the increasing share of college-educated residents — only slightly raises the exit rate of original residents. Crucially, those who opted to leave were not substantially worse off in terms of employment outcomes or commuting distances.
The study revealed that gentrification comes with a large decrease in aggregate neighborhood poverty rates and significant increases in employment rates, median income, and home values. At the same time, gentrification did not generate steep rent increases for less-educated incumbents. Because median rental price figures often hide market segmentation, some home prices in gentrifying areas can increase drastically while a significant portion retain the same rents.
Possibly most importantly, gentrification was found to have immense benefits for the incumbents’ children. For these children, neighborhood improvements have already been shown to have significant impacts. We know from research carried out by Raj Chetty that neighborhood amenities and socioeconomic diversity are strong predictors of upward mobility. Lower-poverty neighborhoods have been shown to improve educational attainment rates and boost later career earnings for impoverished children. These children are themselves less likely to go on to become single parents, creating a virtuous cycle that helps the next generation.
Now, Brummet and Reed have found that gentrification reduces children’s exposure to neighborhood poverty while boosting neighborhood education and employment rates. This, in turn, increases the chance of disadvantaged children attending and completing college. Over time, gentrification seems to bring greater economic prosperity and opportunity to America’s poor children, giving them access to the resources and tools needed for success.
By reducing exposure to concentrated poverty and increasing exposure to employed adults and stable families, children in these neighborhoods have a greater chance of leading successful adult lives. So the next time you hear someone lamenting the changing urban environment and the surging number of college graduates in formerly-gritty neighborhoods, just remember that the presence of those newcomers improves outcomes for poor children.
From American Enterprise Institute, by Robert Doar