Want to identify the chief culprit behind gentrification in your neighborhood? Look no further than your city’s housing supply — or lack thereof.
Metro areas with less affordable housing disproportionately drive high-income home buyers to lower-income neighborhoods, according to recent analysis from the Urban Institute, Washington-based nonpartisan think tank.
One clear sign of gentrification is when people buying homes in a neighborhood have more money than the existing residents. Most low- and moderate-income (LMI) neighborhoods in the United States appear not to be gentrifying, as the share of high-income residents and high-income home borrowers in them is similar at 35 percent and 28 percent, respectively. That’s according to the Urban Institute’s analysis of Home Mortgage Disclosure Act and American Community Survey data from 2018.
Yet in metro areas where housing is less affordable overall, the percentage of new mortgage borrowers with high incomes in LMI communities is much greater than the percentage of high-income households in those neighborhoods.
“These data show that when even affluent buyers must stretch to become homeowners, they are likely to look to LMI neighborhoods to purchase homes,” the Urban Institute researchers wrote.
Los Angeles, for example, had the second highest price-to-income ratio (a common measure of affordability) of any U.S. metro area in 2018. There, 60 percent of borrowers in LMI areas had high incomes, while only 38 percent of households in such areas had high incomes.
Chicago had a much lower price-to-income ratio, meaning it is more affordable. The share of high-income borrowers in LMI areas was more than 10 percentage points below the share of high-income households in LMI areas, which suggests that gentrification isn’t happening there.
An influx of high-income residents in lower-income areas often occurs in tandem with speculative real estate investment. In New York, a city where economic growth has been slowed by a shortage of affordable housing, real estate developers are dropping hefty sums in low-income neighborhoods in the outer boroughs such East New York in Brooklyn and Far Rockaway in Queens.
One way to slow gentrification is to increase the supply of available housing, according to the report. As of January, the U.S. had a shortage of 3.8 million homes, according to a study from Realtor.com.
Some policymakers have sought to address the housing shortage by loosening zoning restrictions and streamlining permitting for accessory dwelling units (also known as “granny flats”) and manufactured housing. Some advocates have pitched large-scale municipal housing built and owned by government, although the largest public-housing system in the nation, NYCHA, is falling apart for lack of maintenance and funding. Affordable housing development in the suburbs has proven elusive for decades because of local opposition, which recently got a boost from the Trump administration.