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3 Real-Life Ways to Uncover Gentrifying Neighborhoods, Maximize ROI, and Stay Ahead of the Curve!

FRIDAY, OCT 05, 2018

Gentrification is dramatically changing the urban landscape and bringing a host of new challenges, as well as opportunities to local leaders, business owners, urban planners, and real estate investors across the nation. Some are still quick to dismiss it as just another buzzword thrown around without much thought, yet it is proving to be one of the leading factors of change - whether we’re talking just about business and housing, or entire industries, such as the real estate industry and urban planning. Today, we take a closer look at what gentrification really is, how it affects communities, and most importantly, how to predict gentrification in your area to maximize ROI and stay ahead of the curve.

What is gentrification?

Gentrification is a term coined in 1963 by the British sociologist Ruth Glass, but it started making headlines in the past 20 years or so. It’s used to describe the movement of higher-income, usually white households into lower-income, minority neighborhoods, which can have the effect of displacing poor, mostly people of color in favor of a white, middle-class population. Just like with any other social change, there are potential risks and costs that come with gentrification. For example, the most obvious drawback of gentrification is the possibility of demand by wealthier households driving up housing prices and property taxes and forcing lower-income residents to move.

Many will argue, though, that there are just as many benefits of gentrification as there are disadvantages - from more money flowing into a neighborhood, buildings and parks being renovated and built, to new retail and service businesses opening in the area. However, whether you’re a critic or an advocate, one thing is certain: gentrification is changing the world around us, and if you want to stay on top of your game in the real estate market, you’ll need to keep an eye for early signs of gentrification.

How to uncover gentrifying neighborhoods

It’s only natural that the real estate industry plays a major role in the process of gentrification, and your ability to spot the onset of gentrification can make or break your business. To help you not only survive but thrive in your market, we put together a list of some of the early signs of gentrification people often overlook.

Follow the smell of pumpkin spice latte

Back in 2014, Williamsburg, Brooklyn got its first Starbucks. Mere four months later, the second Starbucks popped up. While this would barely be worth mentioning across the river in Manhattan, in trendy Williamsburg the reactions were mixed. The reason - mixed feelings about gentrification. But what’s Starbucks got to do with it? 

A recent study on gentrification shows that a new Starbucks can be one of the early indicators that gentrification is under way. While a small number of businesses might end up going out of business due to competition, the end result is usually an increase in number of businesses. Almost as a rule, housing prices follow suit and go up. The study also found that the growth in the number of Yelp reviews is another indicator of neighborhood change: for every 10 reviews, there’s a 1.4 percent increase in housing prices in the ZIP code.

Social Explorer already comes with all the Decennial Census and American Community Survey data, so we took a look at the Williamsburg area to take this theory for a spin. We used the swipe mode to visually compare median house values from 2008 and 2015 and instantly spot areas where the value went up in just a few clicks instead of sifting through endless tables. We focused on the Williamsburg area in this article, but you can do this for the entire U.S.

It’s not only Starbucks that can point to a gentrifying area - better grocery stores and more expensive restaurant choices can also be used to predict an uptick in the number of college-educated residents within a particular area. We wanted to take this theory for a spin, so we uploaded all Starbucks locations to Social Explorer to check if they’re correlated with some of the other gentrification indicators. In the map below, we visualized population over 25 with master’s degree or more across the nation and uploaded all Starbucks locations for cross-reference. You can explore the U.S. in detail to see how these variables correlate, or play around with other variables. Social Explorer allows you to change the visualized variable with a few mouse clicks, so simply click Change Data and select a different variable to compare with Starbucks locations.

Look for demographic changes

Demography is another, more traditional indicator of gentrification. A study conducted by Ingrid Gould, Davin Reed, and Keren Mertens Horn found that wealthier and educated people are more likely to move into lower-income and predominantly minority urban neighborhoods when violent crime falls sharply. Because education tends to be reliably correlated with crime, income, and housing costs, the percent of people with college education in an area can be another good gentrification indicator. Again, we turned to Social Explorer and the data it provides to see if the number of residents with master’s or higher degree grew from 2009 to 2015 like the median house value.

 

Social Explorer’s Decennial Censuses on 2010 Geographies project is an ideal tool to help you track changes over last 40 years using the same geographies. Data is available on census tract, county, state and nation level and covers variables such as population, age, race, income, education, housing and house value, and many more variables that can be used as gentrification indicators. 

Lower crime, higher ROI

There’s a heated debate as to whether lower crime rates are caused by wealthier and more educated people moving into lower-income neighborhoods, or they’re moving there as a result of crime rate dropping. What’s certain, however, is that lower crime rates are a gentrification indicator you need to take into consideration when searching for a new location or a neighborhood.

When combined with other indicators we covered so far, it provides you with a much more detailed picture of any area you might be interested in. 

Put big data to use

Needless to say, there are countless other gentrification indicators that might help you uncover gentrifying areas before your competition. We’re generating more data than ever before. In fact, more data has been created in the past two years than in the entire previous history of the human race. However, less than 0.5% of all data is analysed and used right now, so you’ll definitely want to make sure you do your research and keep an eye out for new gentrification indicators before making big investments.
 

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