Gentrification and your neighborhood coffee shop

by Zain Jaffer

Gentrification is defined as the process by which a poor neighborhood is turned into a middle class or upscale one by rebuilding most of the roads and structures, and encouraging those who are more affluent to move into the area. 

It can be a politically sensitive topic globally, since many of the less privileged feel they are being displaced and discriminated upon. However, there is a way that it can be done to minimize the opposition. 

One way is for developers to also improve the standards of housing and living for the existing residents in the area, not just turn it into an upscale nightlife or shopping district. Most residents, whether they are rich or poor,  would probably appreciate having well-lit areas with no graffiti, no broken windows, no scattered trash, no drug dealers, street walkers, porn shops, and unrepaired damaged buildings or houses.

For example, a 2018 Harvard study says that when a Starbucks branch opens in a particular area, the study authors said they found a 0.5% increase in real estate prices in that zip code within the year. One could argue that this simply validates the fact that a Starbucks (or a comparable type of establishment) cements the middle to upper class status of the area, since a Starbucks would probably not locate in a very depressed crime prone area.

Harvard economics professor Edward Glaeser used Yelp data for the study. He also found that each ten unit increase in the number of Yelp reviews is associated with a 1.4 percent increase in housing prices in the ZIP code. Presumably because those who leave Yelp reviews tend to be a certain demographic, and if they are leaving more reviews in a particular area, then they must be frequenting that area more often, even possibly residing there.

Starbucks and similar coffee chains like Coffee Bean & Tea Leaf, Seattle’s Best, and others are already common in many areas, so those might not attract too much attention. That’s probably not the case with more upscale places like Dean & Deluca, which are probably better for more upscale areas.

The only exception is if there are too many new establishments that bring too many new people in, the older residents may feel threatened because of traffic, crowding, and displacement from their old activities and routines. The hustle and bustle of a big city being brought into an area also turns some older people off. For example, long time residents used to a slower, simpler way of life may not appreciate having to drive around for several minutes just to find parking.

Instead of thinking this is just for larger cities with depressed sections like in San Francisco and New York, it is also applicable for smaller cities experiencing a new wave of migration like Austin and Charlotte. But in order to do this successfully, having a point person who has empathy for the local community who are already living there is really key. The locals need to feel that the improvements are not targeted against them, but rather something that will benefit them and add vibrancy and excitement to their area.

As long as gentrification is handled and communicated well, with regard for the less fortunate who live in that area, uplifts everyone’s standard of living, and not put too much stark contrast between the rich and the poor, then it is a desirable activity for real estate developers to undertake.