The Story of Gentrification Part 1: How to Spot It
Hi All,
I know that most of us here are very familiar with the idea of gentrification. It comes up all the time in the media, it’s something that some buy and holders will look out for, and it’s a code word for rapidly increasing neighborhood home values. As such, it’s incredibly valuable to be able to identify it. And it is easy to identify—in the later stages. But the earlier stages, when the most value exists, are harder to identify. It’s for that reason that I’m going to take you through the story of west Oakland, an area that’s experiencing massive current gentrification.
I grew up in Oakland, and I’ve lived in the Bay my entire life as well as been around Oakland for all of it. I’ve seen so many changes. When I was kid, downtown was dead, and it was Oakland’s super-violent area. There were a lot of not-so-nice parts of Oakland, and I grew up in one of them. Fast forward to today, and you’ll see a very pleasant downtown with tons of restaurants and shops, and rapidly gentrifying areas in the west Oakland. How did this massive shift come about?
Oakland is set up so that there’s a strip running more or less straight north and south, and then a long strip running southeast along the Bay. West Oakland is the westernmost portion, bordered by North Oakland on the north and downtown to the east. West Oakland’s gentrification didn’t happen in isolation—in 1999 Oakland’s mayor at the time, Jerry Brown, rolled out his 10K plan, where he sought to add ten thousand new housing units to downtown.
So freezing the frame in 1999, we’ve got an underdeveloped downtown, and blighted areas in north and west Oakland. In 1999, the most expensive house in west Oakland sold for $220,000. The cheapest sold for $27,000. If the prices increased at the rate of inflation, that would be $312,400 and $38,000 in today’s dollars. Instead, those numbers are now $135,000 and $825,000. In other words, independent of inflation, prices are about three times what they used to be.
With the 10K Plan taking off in downtown Oakland, that plan coupled with the housing bubble slowly worked house price increases towards west Oakland. Downtown saw the most change, with many more than ten thousand new residents moving in and new shops and restaurants popping up. The high prices spread from there, making their way to north Oakland, and then to west Oakland. Finally, west Oakland was in the full throes of gentrification.
That’s a similar story—prices spread from one desirable location to one nearby neighborhood, and then to the next. But how specifically, and for what reasons did gentrification happen here? What were the signs that it was happening in its early days?
The earliest sign of the transformation was in the type of person who was looking at buying in west Oakland. Traditionally, the west Oakland occupants worked at the port of Oakland, or in some of the local factories nearby. As the gentrification process happened, artists were drawn over. The starving artist caricature may be a cliché, but artists do tend to be very price-sensitive. As gentrification processes happened in San Francisco, these artists were looking for similarly affordable space near similar amenities. With downtown developing, and an easy transit link to San Francisco, they had a very cheap space that satisfied their needs in west Oakland.
As the crime rate dropped and more amenities began moving in (and continued gentrification in San Francisco), office workers with solid lower middle class jobs began buying in the area. They were drawn there by the same package of amenities that the artists appreciated: proximity to San Francisco, and proximity to downtown restaurants and culture. Lastly, west Oakland has become a home for the upper middle class, as Googlers, finance workers, and other tech industry employees have begun moving into west Oakland.
So what were the signs? It’s fairly simple: access to amenities that other areas lacked (San Francisco transit), an increasing middle class looking for room to grow, and growth in available amenities in the area. It happened as more adventurous members with slightly higher income than the current neighborhood buyers, and saw a more desirable package in terms of money and amenities than their current situation. As these adventurous first movers came over, others from their income level began to follow. Finally, the adventurers from the next higher income class began to come. The process repeated, until it’s reached its current level of an upper-middle-class worker as a buyer.
What does this mean for YOU when you’re looking to see if a neighborhood is gentrifying? Talk with a realtor. See if the type of buyer is changing. And also look at amenities that are moving into an area, as well as amenities that are almost impossible to replicate (transportation access, marquee attractions). If the amenities are right, and the buyer is changing, you’ve got early stage gentrification on your hands.
Hopefully this post has proved insightful--I know it was for me! Coming tomorrow: Part 2 – how to take advantage of it