Housing & Mortgage
Opposite of Gentrification: Twice as Many U.S. Areas in Decline
Examine neighborhood-level income changes to understand home price trends
There’s been a lot of ink spilled on the effects of gentrification on working class neighborhoods.
But there are actually a lot more neighborhoods where the opposite of gentrification is happening: middle- and upper-income residents moving out, lower-income residents moving in.
The trend has implications for millions of Americans who own a home or are thinking of buying one. In a neighborhood that is losing its more affluent residents, home prices are likely to underperform, just as they tend to outperform in areas that are gentrifying, as incomes rise.
As a buyer, you may value home price appreciation above all, and thus be attracted only to rising-income areas. Or, you may value economic, racial and cultural diversity more highly, and be happy to forgo a swiftly rising home price for those factors. Either way, knowing the underlying income trend in an area is crucial information.
Near-term, the coronavirus-induced economic slowdown could hammer home prices almost everywhere for a while. But when the economy begins growing again,
neighborhood income patterns will be a crucial factor in gauging long-term price performance or residential real estate.
Forty percent of Americans in major metro areas live in neighborhoods where incomes are declining, compared to 22% living in ones with expanding incomes, according to a study by William Stancil of the University of Minnesota Law School.
Stancil examined Census data from 2000 to 2016 to identify neighborhoods that attracted more affluent residents and a lower share of lower-income residents, and neighborhoods that got fewer affluent residents and a higher share of lower-income residents.
The law school tackles civil right issues and views “income concentration” as important, Stancil explained in an interview. “Right now the problem is that there are huge areas that are economically declining, and they’re trending toward economic and racial segregation."
There have been a multitude of studies on gentrification, and other researchers have used different metrics to identify gentrifying areas. But the University of Minnesota study is interesting because it looks at all the Census tracts in the 50 largest metro areas in the country, not just certain urban ones that the researcher has deemed prime for gentrification.
This broader approach is more useful for homeowners and buyers who want to get a fix on income changes in neighborhoods of all sorts, both urban and suburban.
The study comes with a cool mapping tool that allows users to zoom in to the street where they are living, or are considering buying a home, and see if it is in a Census tract that gained or lost lower-income residents from 2000 to 2016.
Stancil doesn’t dismiss gentrification as an important force. He finds that 9.4 million Americans (including 4 million in the suburbs) live in rising-income areas that are losing lower-income residents, or gentrifying. But aside from some cities on the coasts, notably Washington, D.C., and Los Angeles, gentrification isn’t the biggest factor changing where people live, he said. Low-income concentration is happening in far more neighborhoods.
“It’s happening virtually everywhere, in every metro area,” Stancil said.
Detroit, for example, has gotten a lot of attention in recent years because young white professionals are once again moving into the city, which has lost nearly two-thirds of its population since 1950. It’s regarded as a hopeful sign for a city that suffered through decades of neglect and disinvestment from the business community after heavy white flight in the 1950s and 1960s.
Yet the University of Minnesota study looks at the entirety of the Detroit metro area, including suburbs and gets a less optimistic picture. Forty-nine percent of residents live in a neighborhood that is getting poorer, while only 1% live in one getting more affluent. It means the Detroit area, which has seen huge job losses in the auto industry in recent decades, is losing ground to faster-growing metro areas.
“Detroit is far away the most troubled major metro area in the country,” Stancil said.
Dallas, by contrast, is a rapidly growing metro area. Still, some of its older inner-ring suburbs, like Garland and Mesquite, are declining economically as middle class residents move to newer suburbs.
Of course, if you’re a resident in an area with declining income, you likely don’t need a study to see changes. Look at your shopping centers. Retailers begin moving out if they think an area is on the way down economically. Supermarkets close and are replaced by dollar stores.
Your insurance agent or stockbroker or dentist may move to a newer suburb, because they figure there will be more business there. These changes often happen before the residential neighborhoods themselves begin changing.
For decades, the big force transforming metro areas was people moving from aging cities to newer suburbs. Now the pattern has grown more complicated with some people moving into cities, while others move out of aging suburbs.
“Growth at the urban periphery continues, but there is growth in the city, too,” Stancil wrote. “Poverty persists in the urban core, but poverty has also spread to the suburbs.”
He’s right, and it’s a trickier terrain for homebuyers and homeowners to navigate.