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Why Gentrification Happens

Alumus Antonio Vazquez Brust presents his theories on the phenomenon of gentrification.

Gentrification is an urban process that occurs when:

  1. Higher income residents move into a neighborhood;
  2. Lower income residents are displaced;
  3. The essential character and flavor of the neighborhood changes.

Having stated what is it about, the next step is to ask why. Luckily, the abundance of literature on this topic ensures there’s no lack of inspiration for theory-making. After reading many recent papers on this topic, I think three main causes can be singled out.

Interestingly, all three explanations can be seen as complementary, adding up to a nuanced explanation of the phenomenon.

Theory 1: City people wanting to live in cheap places next to rich neighborhoods


Veronica Guerrieri, Daniel Hartley, and Erik Hurst studied the link between within-city migration, neighborhood housing price dynamics, and gentrification.

They hypothesize that rapid appreciation of poor neighborhoods with low house prices occur in response to exogenous city-wide “shocks” in housing demand, and “among all the poor neighborhoods it is the poor neighborhoods that are next to the rich neighborhoods that appreciate the most.”

And not only that, poor neighborhoods that appreciate rapidly also gentrify:

“Poor neighborhoods close to rich neighborhoods experience larger increases in neighborhood income, larger increases in the educational attainment of neighborhood residents, and larger declines in the neighborhood poverty rate than do otherwise similar poor neighborhoods that are farther away from the rich neighborhoods.”

Ultimately, the authors attribute this phenomenon to a key positive externality of neighborhoods: individuals like to live next to richer neighbors. So when housing demand spikes, low price houses closer to rich areas are the ones desired by individuals whose purchasing power allows them to secure residence there, displacing (willingly or not) long time lower income residents. Guerrieri et al. call this process “endogenous gentrification.”

Theory 2: The return of car-sick suburbanites, that flock to central areas well served by public transit

Edward Glaeser, Joshua Gottlieb, and Kristina Tobio also studied intraurban differences and spatial heterogeneity during housing price growth.


They evaluated a number of theories for what actually causes gentrification, and found support for the notion that the areas that change their character over time—from low-income to high-income—are mostly the poor neighborhoods that benefit from a physical or transport-enabled proximity to downtown.

As concentrated poverty areas will either cluster close to job opportunities, or be served by public transportation in order to enable that closeness, “centralized poverty actually reflects urban assets, not a lack of urban amenities, and buyers valued those assets more highly during the boom. In particular, centralized poverty often reflects the presence of a stronger public transit network, which attracts the poor to the center … We find that large gaps in public transit usage between core and periphery significantly explain centralized price growth. Those central cities with more public transit usage may be more difficult to reach by automobile from outlying suburbs, which could also make them prone to gentrification.”

Their findings also contradict the endogenous gentrification theory, as “the tendency of growth to occur in [a] more centralized location was more pronounced within those metropolitan areas where richer people were more likely to live farther from the urban core.”

This is in opposition to Guerrieri et al., who found that price growth occurs near rich neighborhoods, not away from them. Of course, a synthetic combination of this two apparently competing theories could explain when and how growth is experimented in one way or another.

Glaeser et al. do not attempt to explain why there is a link between central areas with good public transport coverage and price growth, only hinting at market speculation after the realization that central city space is scarcer—and thus more valuable—than suburban land. But we can turn to a succinct article from the The Economist that explains with no shadow of a doubt how gentrification is caused by the return of population (and capital) flow from the suburbs:

“The best explanation is that it is the bounce-back from urban decline. For much of the 20th century cities across the rich world lost population thanks to suburbanisation … But in recent years these trends have reversed.”

The article goes on to detail the causal chain: Cities have become cleaner and safer, while record numbers of child-free, university-educated people that drive less than their forebears want to enjoy the urban life experience in places well served by public transport systems.

Furthermore, deindustrialization signals a decline in employment at factories that had been located away from congested cities, superseded by tertiary-sector jobs densely packed in city centers. All of this made the inner-city attractive to the high-income population, that was quickly followed by bohemians, artists and other pioneer gentrifiers. These neighborhoods were until then populated by minorities that didn’t have a choice. The return of the well-off inflates rents and forces people with less resources out of the city.

Theory 3: Global neoliberalism shifting public policy towards speculator-friendly market oriented development 


An alternative interpretation of gentrification considers it the intended result of long cycles of disinvestment followed by speculative re-investment in specific neighborhoods.

This disingenuous process results from the cooperation of policymakers with capital owners, allowing higher income people, but especially financial speculators, to reap substantial profits in detriment of the poor, thus further accelerating capital concentration and inequality.

This theory advanced by geographer Neil Smith is comprised of two main thesis:

  1. As neoliberalism became the predominant global socioeconomic system, the state became an agent instead of a regulator of the market, abandoning policies addressing the needs of social reproduction in favor of capitalist production. Globalization facilitates the simultaneous occurrence of this process in both the Global North and South.
  2. As urban policy strategy shifted its goals from fostering social reproduction to maximizing capital investment, gentrification, which was initially a “sporadic, quaint, and local anomaly in the housing markets of some command-center cities,” became ubiquitous as the consequence of a neoliberal program.

But what is this urban strategy exactly?

“Gentrification as urban strategy weaves global financial markets together with large- and medium-sized real-estate developers, local merchants, and property agents with brand-name retailers, all lubricated by city and local governments for whom beneficent social outcomes are now assumed to derive from the market rather than from its regulation. Most crucially, real-estate development becomes a centerpiece of the city’s productive economy, an end in itself, justified by appeals to jobs, taxes, and tourism. In ways that could hardly have been envisaged in the 1960s, the construction of new gentrification complexes in central cities across the world has become an increasingly unassailable capital accumulation strategy for competing urban economies.”

—Neil Smith

So, there you have it. It’s interesting how all three proposed theories are not mutually exclusive. The forces they describe—external and internal, spontaneous and orchestrated—can be seen as complementary contributors. It is possible that some gentrification processes respond to varying mixes of causes, and maybe some others are purely the result of one of the described causes, but their outcome is similar.

Works Cited

Guerrieri, Veronica, Daniel Hartley, and Erik Hurst. 2013. “Endogenous Gentrification and Housing Price Dynamics.” Journal of Public Economics 100 (April): 45–60

Glaeser, Edward L, Joshua D Gottlieb, and Kristina Tobio. 2012. “Housing Booms and City Centers.” American Economic Review 102 (3): 127–33.

Smith, Neil. 2002. “New Globalism, New Urbanism: Gentrification as Global Urban Strategy.” Antipode 34 (3): 427–50.

Antonio Vazquez Brust, or just Tony, is an Argentinean urban planner and information technologist. An alumnus of our Master of Science in Urban Informatics program, he collaborated with the Boston Area Research Initiative (BARI), conducting original research at the intersection of urban science and public policy. He also likes coffee. A lot. Follow @vazquezbrust on Twitter.

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