Gentrifying Neighborhood Investment: Pros and Cons
Whether you reside in an urban or rural area, you likely have heard of the term "gentrification." To put this term simply, gentrification is the process of upgrading an older neighborhood, resulting in higher costs of living and displacement of residents. Gentrification is a complicated topic and process. While it can provide plenty of opportunities and jobs with buildings being renovated and new job opportunities popping up, it is evident gentrification imposes big costs on the original inhabitants of the neighborhood. In this article, we will discuss the pros and cons of investing in a neighborhood that is under gentrification.
Pros of Neighborhood Gentrification
There are plenty of benefits of gentrification in a neighborhood, including economic opportunities with a rising influx of shops and stores, creating much-needed capital, services, and goods to a low-income community. Below are more pros to gentrification within a neighborhood.
1. Revitalization of a Neighborhood
Revitalization of a neighborhood is the alteration of a neighborhood that improves the quality of life of its residents. When new shops and stores are brought in, neighborhoods afflicted by empty storefronts are filled with clothing stores, coffee shops, and other outposts for important services and goods. New businesses can revitalize a neighborhood and provide new life and resources to a declining community.
2. Property Value Increase
A major advantage of gentrification is an increase in property values. This change is favorable for those who are looking to sell their homes for a higher price. When an area is under gentrification, older buildings are renovated, causing property values to rise. When property values increase, residents with higher income are more than likely to move into the neighborhood, causing values to grow even higher. Those who wish to sell their homes with rising prices will see a new build of wealth. Local tax revenue can see an increase with gentrification, seeing as property taxes rise with property values.
3. Enhanced Infrastructure
Gentrification can lead to an improvement in neighborhood and city infrastructure, including new buildings, sidewalks, and roads. The improvements can create a clean, modern-looking neighborhood. Other community issues such as potholes or unaccessible and unsafe walking areas are addressed to ensure better living conditions for the public.
4. A Reduction in Crime Rates
A neighborhood that has low crime rates will provide inhabitants with peace of mind. While it is not always a guarantee, gentrification can reduce crime rates and improve the safety of the public. A reduction in crime rates can result from several factors, including an investment in community safety. This investment can encourage people to move to the new area because they know the community cares for them and ensures their safety. An increase in public safety can reduce crime rates and ensure the overall neighborhood is safe.
5. Increase in Property Tax Revenue
Local governments get most of their funding from public services from property taxes. When properties gain value, taxes rise, and government revenue is created that goes back into feeding the improvement of the community.
Cons of Neighborhood Gentrification
Despite having the potential to help improve the neighborhood and increase economic growth, negative ramifications can be expected as well. An influx of middle to upper-class residents can cause the cost of living to rise, which can cause displacement. Cultural erasure can happen when original inhabitants and business owners of an area are forced to vacate an area. Below are more cons to gentrification within a neighborhood:
1. Long-Term Residents are Displaced
Displacement is the biggest con of gentrification. When new developments or renovations to a low-income neighborhood seem positive, they can cause the local cost of living to rise. As a direct result, this can harm an area's original residents and local business owners as they are priced out. Opponents of gentrification argue this process caters to high-income residents, which can promote inequity over low-income residents.
2. Housing in No Longer Affordable
In many cases, developers and city planners will demolish housing complexes that provide affordable living to make room for new developments. Even if affordable housing is not knocked down, landlords of affordable housing units might see this as an opportunity to raise the rent to a point where low-income residents will be priced out.
3. Loss of Local Small Businesses
Gentrification can decimate small businesses. Chain stores are typically brought in to appeal to masses of people, and as a result, local mom-and-pop shops fall by the wayside with gentrification, and many are run by underrepresented community members.
4. Negative Impact on Education
Gentrification does have its more positive impacts on the school system, but it also has its negative impact on public schools. Families moving into neighborhoods that have gentrified usually opt out of public schools. This decision will leave public schools with limited enrollment opportunities and reduced educational resources.
5. Loss of Green Spaces
Gentrification can create new green spaces, but it can also lead to a loss of small community gardens. Gentrification can remap the entirety of the neighborhood, including the original green space. This process will result in more buildings with few green spaces.
Conclusion
Gentrification has its benefits for some, while for others, there are long-lasting negative impacts. Typically, communities that are subject to gentrification are negatively impacted due to low-income and diverse communities, among other things. There are plenty of examples of gentrification that contribute to the variety of pros and cons of gentrification. Contact Tina Saporito with Ronald Christopher and Associates for more information on finding a great home in a perfect neighborhood to invest in. We know the Palm Desert and Palm Springs real estate market and can help you source the right property for your portfolio.