Gentrification is unavoidable and, “Nearly everyone Forbes interviewed for the story agreed that gentrification is a real risk (Bertoni, 2018).” Redevelopment in opportunity zones will raise housing costs and increase risk of gentrification. “Gentrification is rooted in the commodified nature of housing and the built environment (Clark, 2005).” Especially in places with high social equity and vulnerability index readings by Smart Growth of America, gentrification must be approached carefully with “do no harm policies that protect vulnerable residents (Coes & Loh, 2018).”
If the developer builds housing for original residents who are living in poverty, a non-concessionary impact development may become a concessionary impact development. Investors would not receive high enough yield in returns or may go out of business. If the developer builds luxury housing for wealthier households, they have a greater chance of yielding above market rate returns but would increase the rate of gentrification. If housing costs rise rapidly in poverty-stricken areas, original residents would not be able to pay for their increased rent. It is a difficult balancing act to weigh risks of displacing the poor versus profiting exceedingly.
Gentrification is a shift in an urban community toward wealthier residents and businesses, with consequent increases in property values. Gentrification is typically the result of investment in a community by real estate development businesses, local government, or community activists. It can and often does spur economic development, attract businesses, and lower crime rates. In addition to these potential benefits, gentrification can lead to some adverse population migration trends in which poorer residents are displaced by wealthier newcomers.
(Amirtahmasebi, Orloff, Wahba, Altman, 2019)
Higher the tract density, faster the rate of gentrification. Gentrification is an “unintended consequence of urban regeneration” (Amirtahmasebi, Orloff, Wahba, Altman, 2019) and led to “negative health effects primarily in residents that were low-income (Mehdipanah, Marra, Melis, Gelormino, 2018).” Research has shown that urban renewal policies are vital to managing gentrification.
The Community-Participation model may be a potential solution to gentrification as it includes vulnerable original residents in early stages of urban renewal. Studies by Mehdipanah, Marra, Melis, Gelormino, in 2018, showed that lowering risk of gentrification through policy planning with the Community-Participation Model often led to positively impacting original resident’s physical health. “Working with communities help to guarantee that investment yields the greatest returns when it is community informed and community driven (Hubbard & Lee, 2018).” City led community redevelopment meetings may potentially be a place for impact developers to offer new jobs to original residents who are facing displacement. New jobs from redevelopment projects for original residents would help to avoid rapid gentrification and may allow for original residents to stay in their homes.
To improve gentrification, stage models were developed in the 1970s “to represent gentrification in an orderly, temporal, sequential progression (Lees, Slater & Wyly, 2008).” In the beginning stage, “risk-oblivious households” move into neighborhoods which carry higher levels of risk and find it still acceptable to live in. These pioneers often rehabilitate their homes and “pursue a nonconformist lifestyle.” The neighborhood starts to change as “risk-conscious mainstream professionals move in” and increases average income statistics for the area. Upward mobility starts to move wealthier residents into redeveloping areas and start to bring more business opportunities for the community. As these changes become more profound, it begins to attract real estate professionals like realtors and developers, “(who) cater specifically to a more affluent base of consumers—further increasing the appeal to higher-income migrants and decreasing accessibility to the poor (Amirtahmasebi, Orloff, Wahba, Altman, 2019).” As real estate professionals invest and renovate properties for more affluent customers in this neighborhood, real estate prices start to rise. As homes from this neighborhood become more desirable, demand from buyers continue to grow; raising real estate prices even further. Original residents then begin to move out and more “affluent conservative households move in, attracted to what is now a safe investment.Eventually, gentrification is seen to stabilize at an endpoint of mature gentrification (Lees, Slater & Wyly, 2008).”
Although there are new jobs being created by developments and businesses in opportunity zones, there are no requirements for hiring employees within opportunity zones. If new jobs created by the opportunity zone legislation are not given to original residents, this may accelerate gentrification, increase risks of displacement and homelessness. “Communities of color and low-income neighborhoods want greater investment that preserves and strengthens current residents, business and cultures, instilling value in people rather than displacing them (Hubbard & Lee, 2018).”
According to Georgetown University’s Beeck Center for Social Impact, “Impact objectives for opportunity zones should be established and tracked, including but not limited to goals for raising the standard of living for current residents (Hall, 2018).” Therefore, use of the Development Impact Bond model should be utilized with social impact objectives. The Development Impact Bond model may track and incentivize results.
A combination of Development Impact Bond and Community-Participation models may be solutions for achieving social impact. New jobs could come from construction, ongoing maintenance, security, and new businesses. These new jobs may allow original residents to stay in their community and occupy newly built units. Job opportunities for opportunity zone residents may be part of a results-based incentive from the Development Impact Bond model to lower risk of rapid gentrification. Original residents who are facing displacement should be given a path to contribute to their community redevelopment process and given an opportunity to not become displaced through new jobs.
New jobs coupled with do no harm strategies such as, “tenant protections (just cause eviction protection), tenant opportunity to purchase, preservation of affordability restrictions on existing housing stock, rehabbing existing housing stock and vacant properties, need-based assistance for homeowners, and foreclosure intervention, (Coes & Loh, 2018),” all de-risk rapid gentrification and homelessness. California’s new Tenant Protection Act of 2019 will go into effect in the beginning of 2020 and enforce just cause evictions. California is trying to manage rapid gentrification and homelessness with a 5% cap on rent increases at a statewide level (5% plus inflation and not to exceed 10%). This cap on rent increases will go into effect in the beginning of 2020 (Dillon, 2019). Another California legislation (SB-329) was recently approved on October 8th of 2019 by Governor Newsom to address section 8 housing voucher discrimination by landlords. Protective legislations like these will guard social capital but investors may need to account for additional sunk costs. “The key question is then whether the law (in context) can provide the tools for residents to remain within their community, and prevent displacement, without impinging on the rights of others to enter that community, or for that community to change over time via different processes (including regeneration) (Hubbard & Lee, 2018).” Change is needed in these communities, but how to go about this change is just as important as the change itself. Ending homelessness starts with compassion, let’s work together to start preventing homelessness.
Bertoni, S. (2018). An Unlikely Group of Billionaires and Politicians Has Created the Most Unbelievable Tax Break Ever. Forbes
Clark, E. (2005) The order and simplicity of gentrification––a political challenge. In R. Atkinson and G. Bridge (eds.), Gentrification in a global context: the new urban colonialism, Routledge, London.
Coes, C., & Loh, T. (2018) Locus & Smart Growth America: National Opportunity Zones Ranking Report, Washington D.C
Amirtahmasebi, R., Orloff, M., Wahba, S., & Altman, A. (2019) Managing the Potential Undesirable Impacts of Urban Regeneration: Gentrification and Loss of Social Capital. The World Bank
Hubbard, P., & Lees, L. (2018) The right to community? City, Vol 22:1, (P.8-25)
Lees, L., Slater T., & Wyly, E. (2008) Gentrification, Routledge, NY.
Dillon, L. (2019) California Will Limit Rent Increases Under Bill Signed by Gov. Gavin Newsom. Los Angeles Times
Hall, L. (2018) In the Land of OZ (Opportunity Zones) Who Will Benefit? Beeck Center Georgetown University