Congratulations! You Gentrify: Displacing a Community

200 Replies

This question is one I pose to anyone who has an opinion on the topic. 

Obviously we're all here because we like something about the idea of REI and passive income. As the process goes, we find a "good deal" in some area, maybe make an improvement or 2 to the "deal", and if all goes well, we sit back watch the fruits of our labor grow through rental income, increased property value or equity. Now, multiply this by 100... 100 of us have found 100 deals, made 100 improvements, and raised 100 property values.

Boom. We just gentrified an area. A community that used to live there can no longer afford to be where they've grown up because there were a lot of good "deals" for investors to take advantage of and help our families and bolster our investment portfolio. 

Granted, we may not have intentionally displaced a community, but collectively, we do. We just saw an opportunity and took advantage. 


The question(s) I pose: 

  1. Do you think gentrification is an issue?
  2. Do any of you ever struggle with the reality that we collectively price people out of their communities? 
  3. Do you ever think of it that way? 
  4. Do you ever feel bad about contributing to the gentrification of communities? 
  5. What are the alternatives?

This is just a philosophy question and some things that I think of, not pointing fingers or trying to be accusatory, or maybe I am. Just wanting to get a conversation started! 

Nice post !!!

I will take a stab.

when my parents moved to Cupertino California in the mid 60s they bought our 2 story 2400 sq ft home on a nice lot for 22k.. when I got out of high school along with a bit of collage I got my real estate license at 18 and well after a rough start I finally started to make commission income to the point were I was like Holy cow now I get it.. why work by the hour. 

Anyway within the first year I had saved up enough for a down payment for a house and in those days U did 80 10 10 this was 1976 ish.. 10% cash HML put up 10% and you got a bank note for 80.. by the time I was ready to buy

Houses in Cupertino had just gone above 100k.. who could afford that   I could not.. so I had to go to Milpitas ( which was not very desierable in those days sitting right off the bay and down wind of the dumps) the slang was Smellpitas.. 

but I scored a new construction for 70k  with the 7k down and well.. So yes I got priced out..  now within a few years I was making enough I could buy back in that market and ended up buying  a home in the early 80s in Palo Alto for 185k.. which was a huge sum .. especially for a 900 sq ft 3 and 1 with no dishwasher or garborator.. if you get my drift. 

So all of those homes just sky rocketed not because of rehab.. but because of JOBS.. Steve Jobs and others like him.

Now fast forward to other areas of the country were we do build infill.

For Instance we are active in Charleston SC  we were the first builder to build a new construction on the wrong side of the tracks in that city.. it was a huge risk and so it caught on I am on my 30th new build.. and there have been articles in the paper talking about pricing the locals out.. however I do look at like the locals that were there the property shot up buy a huge amount. and when they do sell they make a big chunk of change and can relocate.. they are not forced to sell.

The issue of young couples or singles buying were they were raised has been going on for decades.. 

But you have many different reasons neighborhoods crumbled and now are targets for regentrification.. 

One thing that does not really help though in my mind though is when ALL the sales are to investors.. this brackets the values of the homes.. IE the values will never rise above what an investor will pay for a cash flow.

You need owner occ to get prices to rise in my mind.

So that's my 5 cents.. I do infill new construction in Portland  Charleston and Indy.. and we do rehabs in about 10 other markets.. 

Fore homeowners, I think that you are confounding cause and effect.  When a flipper goes in and buys up a house that is in great need of disrepair, the homeowner who can no longer afford to live in the area gets paid out up front and is gone before the neighborhood improves.  This is the case regardless of the method of acquisition by the flipper, be it a bank foreclosure or what have you.

Gentrification is thus a result, not a cause of community displacement.  The people who were removed were priced out of the community to start with.

Where this starts becoming complicated is with people renting property.  Their rents are set when the area is less gentrified and when the neighborhood rises, the landlord realizes that they are leaving money on the table by letting a long term tenant stay at below market rates.  In my personal opinion, people simply need to become more aware that renting is a risk.  People always focus on the risks of owning a house but don't necessarily consider the risks associated with renting (rent increases, possibility of displacement, etc).  But when you make the choice to be a renter, you are handing away control of your housing.

"Gentrification" is not wrong.

A neighborhood is either desirable or expensive or undesirable and inexpensive. It can move in either direction for a variety of reasons. 

Maybe a community loses its industry and there are no more jobs, so prices go down, but it's still a bad place to live because there are no jobs and no future. Maybe hot new industries come to town and the opposite happens.

Maybe crime goes up, and people who can afford to leave move away. Maybe crime goes down, and people who used to avoid the neighborhood start moving in.

The list goes on and on.

Suppose we have a low-cost area that is in reasonable commuting distance from high-paying jobs. Why is it low-cost if it's so well-located? The obvious answers include crime and dilapidation. There are two ways things can go from here: The conditions improve and the prices go up, or the conditions stay lousy and the prices stay low. The "anti-gentrification" crowd tells you that price increases are immoral, but are they really ok with crime-ridden slums? Of course not. They promote magical thinking - the idea that we can get rid of crime and fix up the buildings without increasing the prices, even though the only reason that the prices were low was the conditions!

All of this without even mentioning that everyone who OWNs in a "gentrifying" neighborhood wins the appreciation lottery.

Shorter commutes are more green. It's better for society as a whole if the people working the high-paying jobs live near them. People doing little to no work don't have any particular reason to prefer one area to another, nor should we pander to them. The idea that you are more entitled to live in a particular area if you "started out there" has terrible implications and quickly becomes oppressive. 

Finally, of course, the elephant in the room is identity politics. Most ant-gentrification rhetoric usually stems from toxic identity politics. People who get very angry when Identity Group A is displaced by Identity Group B don't care one whit when the opposite happens somewhere else. At best, such people are consistent in supporting the displacement of "richer" people by "poorer" people, or at least those they imagine to be so, while opposing the displacement of "poorer" by "richer." But adding emotional rhetoric doesn't change the facts above.

There is no good reason to keep crime in place, to keep dilapidation un-remedied, or to maintain filthy hovels when better alternatives are available. 

in my experience too alot of these areas start out being gentrified by young first time home buyers that could not afford to buy in better neighborhoods...my first home in a less than desirable neighborhood and my sweat equity allowed me the financial foundation to be where I am today:)

in my experience, I see a different side to this. In 2012, I started buying houses for all I was worth in a somewhat blighted area if Dayton, ohio. I knew the north riverdale area had great built smaller houses, but high vacancy. Maybe 20 percent vacancy with 10 percent needing complete demo. I moved into the best of these and set to work rehabbing some of the most distressed homes right near my home. I'd put in 15k or so plus six months of sweat, blood, whatever it took to restore some rock solid mid century beauty. I'd start at the curb and by the time I was done, the neighbors were my friends and they were improving their places too! Today I've completed ten of these, and the city has done the majority of the demo. The rents and prices are up a lot, but i am not sure about the displacement. I mean, these places were vacant, now someone lives there.

  1. Do you think gentrification is an issue?

No.

  1. Do any of you ever struggle with the reality that we collectively price people out of their communities?

No

  1. Do you ever think of it that way?

No

  1. Do you ever feel bad about contributing to the gentrification of communities?

No (flawed question)

  1. What are the alternatives?

Search up "Jumpstart Germantown" . Started by an established hard money lender/developer, he has a training program for aspiring developers. After completing his course you get pretty decent terms on a HML. Not a guru schtick, an actual class. The idea is to train local folks to take control of the process of "gentrification" in their own community instead of allowing only outside developers to.

Change is the only constant. You're not doing any favors by "sitting out" of gentrification. Someone else will if you don't. Plus homeowners benefit tremendously from the rising values. Renters are the group most screwed by changing values - but that is the nature of renting.

1. Only for tenants. Tenants get gentrified out. Homeowner's get bought out. That's an important distinction that everyone kind of knows, but it bears saying out loud (or, as it were, in writing).

2. I work with a lot of FTHB and offer the down payment assistance programs available in California and the Bay Area. These pay me less, but every time I do one I'm putting a family in the position of being gentrification-proof.

3. Of course investing in an area helps area values. For those that are homeowners, the investor doing a rehab is excellent news.

4. I would if the majority of my volume wasn't owner occupants, mostly first time homebuyers. 

5. In my case I karma balance the landlord loans with the first time homebuyer loans. As a landlord, you could do similar things, like offer Section 8 for some of your units. There are also various local government programs for the recently incarcerated (I've done loans for felons), people that just finished rehab (check), domestic abuse victims (check), and so on.

A caveat for #2. Right now the urban core is hot, and is where gentrification is occurring, because that's where young high income people want to be. This means the lower income folks don't buy in (f. example) Oakland or Silicon Valley. They buy in Stockton and Vallejo. But tides turn, in the 50s it was all about the burbs, the 1980s into the late 90s were all about the burbs too. Whenever those preferences turn again and the burbs are cool again, guess who is in a position to be bought out for a big fat payday? Those FTHB families I'm putting into Vallejo/Stockton homes today, that's who.

@Evan Parker

1. Do you think gentrification is an issue? YES.

2. Do I struggle with the reality that I am part of pricing people out of their communities? NO.

3. Do I ever think of it that way? YES.

4. Do I feel bad about contributing to the gentrification of communities? NO.

5. What are the alternatives? FEW TO NONE.

I've answered your questions, Evan.

Now let me tell you a story and ask you something.

I'm Greek, born in Greece of ethnic Greek parents, Greek citizen, speak the language, lived, worked, and paid taxes there for seven years as an adult.

In the year 1452, the Ottoman Empire invaded Constantinople and took the city, the capital of the Greek world. Those parts of the Greek world that were not already being subjugated by various Italian principalities and the Ottoman Empire fell under the full control of the people who self-identified as Turks. The people were oppressed by outrageous taxes, many children were snatched away from their families, there were forcible religious conversions, widespread sexual slavery to the polygamous Turks, many churches were turned into mosques, and all the Greek people of the capital of Byzantium and its hinterland were declared subject forever to Mehmet the Conqueror and his issue

Approximately 400 years later, in a series of bloody wars that lasted the better part of a century, the Greek people (with a great deal of help) succeeded in winning back approximately HALF of what were their ancestral lands, the western half.

Ready for my questions, Evan?

1. Are you ready to march by our side when we invade what is today the Republic of Turkey to take back the rest of our ancestral lands?

2. Will you be there, cheering us on when we force Turkey to give up what it their largest and most splendid city today, Istanbul, the city that they stole from us, and all the most valuable lands in the west of the Asia Minor landmass?

3. Tell me, Evan, when was the last time you gave two s**** about the centuries-long plight of the Greek people?

4. About our long enslavement, about the social problems that continue to plague the half-formed country after 400 years of slavery, the long-term knock-on effects of being the impoverished, denuded, robbed, and cheated father of all of Europe, of all of western civilization?

Let me guess, you didn't even know most of this story (and of course there's a lot more). You don't want to know. You have more important things to worry about than justice for my people.

Because we're a minority in this country, and our many problems don't directly affect you.

No, we the Greeks have been well and properly screwed by history from 1452 to the present day, because the world is an unfair and cruel place to those who think there really are such things as decency and justice, rather than just shadows on a wall and lies used by the strong to maintain the status quo that exists and endlessly profits them.

In this world, justice, right and wrong, only matter between parties of equal power. Other than that, the strong do whatever they want and the weak suffer whatever they must.

Get strong, Evan, and stop asking after justice.

This is a natural occurrence. If you get priced out of a neighborhood..... gotta move somewhere you can afford. The fact that you grew up there, your family lives there, you’ve never lived anywhere else does not entitle you to continue living there if you can’t afford it. I was raised in a pretty expensive coastal area. Most people my age can’t afford to buy homes there right now. Most move away to cheaper areas buuuuuut for some reason a ton of people love to complain about it. Think the city or government should subsidize their housing because they’re “local”.....

99% of the time gentrification is a good thing. If you can’t afford to live in an area.... ya don’t get to live there. Same as your vehicle.... can’t afford a Lamborghini, ya don’t get a Lamborghini. Enjoy your civic! Nothing wrong with it. For some reason when it comes to housing it’s different. You only deserve what you can afford.

Originally posted by @James Free :

"Gentrification" is not wrong.

A neighborhood is either desirable or expensive or undesirable and inexpensive. It can move in either direction for a variety of reasons. 

Maybe a community loses its industry and there are no more jobs, so prices go down, but it's still a bad place to live because there are no jobs and no future. Maybe hot new industries come to town and the opposite happens.

Maybe crime goes up, and people who can afford to leave move away. Maybe crime goes down, and people who used to avoid the neighborhood start moving in.

The list goes on and on.

Suppose we have a low-cost area that is in reasonable commuting distance from high-paying jobs. Why is it low-cost if it's so well-located? The obvious answers include crime and dilapidation. There are two ways things can go from here: The conditions improve and the prices go up, or the conditions stay lousy and the prices stay low. The "anti-gentrification" crowd tells you that price increases are immoral, but are they really ok with crime-ridden slums? Of course not. They promote magical thinking - the idea that we can get rid of crime and fix up the buildings without increasing the prices, even though the only reason that the prices were low was the conditions!

All of this without even mentioning that everyone who OWNs in a "gentrifying" neighborhood wins the appreciation lottery.

Shorter commutes are more green. It's better for society as a whole if the people working the high-paying jobs live near them. People doing little to no work don't have any particular reason to prefer one area to another, nor should we pander to them. The idea that you are more entitled to live in a particular area if you "started out there" has terrible implications and quickly becomes oppressive. 

Finally, of course, the elephant in the room is identity politics. Most ant-gentrification rhetoric usually stems from toxic identity politics. People who get very angry when Identity Group A is displaced by Identity Group B don't care one whit when the opposite happens somewhere else. At best, such people are consistent in supporting the displacement of "richer" people by "poorer" people, or at least those they imagine to be so, while opposing the displacement of "poorer" by "richer." But adding emotional rhetoric doesn't change the facts above.

There is no good reason to keep crime in place, to keep dilapidation un-remedied, or to maintain filthy hovels when better alternatives are available. 

Great response. The next question I'd pose is, are there community investments that can be done prior to displacement to uplift the individuals that are impacted by the crime, dilapidation, or filthy hovels? Because if not, ultimately they will just migrate to somewhere else and in following the logic, simply re-create what was previously created, no? 

Should there be focus on building skills within the dilapidated communities to improve the area? Or allow those who have built skills elsewhere, to find the dilapidation, and move the prior folk out? 

Because to your point, a lot of these gentrified areas are centrally located to many metropolitan areas that contain high skill jobs within a stones throw from where they live, yet the people in the communities are seemingly never "skilled" enough to take advantage of the career opportunity in their back yards. We must consider the fact that the opportunity that is within their backyard came about because of the relatively cheap land that could be acquired there by major industries/by major developers.

So -  

  1. Company A finds suuper cheap land in/near City A.
  2. Company A builds a new location, bringing in X amount of "medium/high skill" jobs
  3. The people who lived in City A are now next to fantastic opportunity for medium/high skill jobs.
  4. The people in City A have not had prior school investment from the city
  5. The people in City A have not had prior community investment from the city
  6. Company A, who benefited from the cheap land of City A, recruit employees from City B
  7. Company A, invests in scholarship programs for schools in City B. 
  8. City A eventually becomes City B version 2
  9. The people in City A are displaced somewhere else to repeat the cycle. 

If investments are what it takes to turn a dilapidated community around, why aren't investments viewed as the solution to prevent the extreme dilapidation of a community? 

Originally posted by @Adam Bush :

The only thing constant in life is change. If you cannot change and adapt with your environment(job skills) you will be pushed out. Simply, nature.

Very true. Adaptation is key. 

Originally posted by @Chris Mason :

1. Only for tenants. Tenants get gentrified out. Homeowner's get bought out. That's an important distinction that everyone kind of knows, but it bears saying out loud (or, as it were, in writing).

2. I work with a lot of FTHB and offer the down payment assistance programs available in California and the Bay Area. These pay me less, but every time I do one I'm putting a family in the position of being gentrification-proof.

3. Of course investing in an area helps area values. For those that are homeowners, the investor doing a rehab is excellent news.

4. I would if the majority of my volume wasn't owner occupants, mostly first time homebuyers. 

5. In my case I karma balance the landlord loans with the first time homebuyer loans. As a landlord, you could do similar things, like offer Section 8 for some of your units. There are also various local government programs for the recently incarcerated, people that just finished rehab, domestic abuse victims, and so on.

A caveat for #2. Right now the urban core is hot, and is where gentrification is occurring, because that's where young high income people want to be. This means the lower income folks don't buy in (f. example) Oakland or Silicon Valley. They buy in Stockton and Vallejo. But tides turn, in the 50s it was all about the burbs, the 1980s into the late 90s were all about the burbs too. Whenever those preferences turn again and the burbs are cool again, guess who is in a position to be bought out for a big fat payday? Those FTHB families I'm putting into Vallejo/Stockton homes today, that's who.

Good points, I like the idea of balancing the units between different rental styles. To you point, I always preach ownership to anyone I can get to listen to me for 3 seconds. It's such a simple concept, yet seems to be so fleeting in a lot of situations. 

I also try to educate individuals who aren't aware of their options and how "simple" it can be to own with the right steps. 

Originally posted by @Tanner Marsey :

This is a natural occurrence. If you get priced out of a neighborhood..... gotta move somewhere you can afford. The fact that you grew up there, your family lives there, you’ve never lived anywhere else does not entitle you to continue living there if you can’t afford it. I was raised in a pretty expensive coastal area. Most people my age can’t afford to buy homes there right now. Most move away to cheaper areas buuuuuut for some reason a ton of people love to complain about it. Think the city or government should subsidize their housing because they’re “local”.....

99% of the time gentrification is a good thing. If you can’t afford to live in an area.... ya don’t get to live there. Same as your vehicle.... can’t afford a Lamborghini, ya don’t get a Lamborghini. Enjoy your civic! Nothing wrong with it. For some reason when it comes to housing it’s different. You only deserve what you can afford.

 I completely agree with getting what you can afford. There is nuance in there though, but overall I understand what you're getting at. 

@Evan Parker , This is a question that is bigger than "ask the REI folks", and I think your gentrification example has more to do with capitalism and society as a whole, of which landlords/developers/etc are just cogs in the machine.

Everyone gets to draw their own lines about what part of society they want to participate in and how they personally wish to balance the good and the bad. When you talk about building skills and providing jobs where people live, that's really where government intervention comes into play (federal, state, and local). Just to add a footnote to @Tanner Marsey 's post, not everyone can afford that Lamborghini, and that's okay, but it's really only through the government that you can create an even playing field so that people have as equal an opportunity as possible to achieve a higher status (if that's what a person wants).

i have seen property values literally double in one year. i see first hand that inflation/rent rates/cost of living increases faster then minimal wage. Home owners that are retired or on a fixed income simply cant afford the taxes and forced to sale. Or the owners get a 65+ home owner exemption and then when they die and the family cant afford to pay taxes due.

i feel bad and fortunate at the same time to be in a position to help those who are effected by it, by proving low income housing and to make sure everyone we rent to has a safe and clean place to live.

@Evan Parker please let me know what alternatives you come up with and if I can help in future with it. I believe in balance...... 


  1. Do you think gentrification is an issue?  Yes I recognize that it is an issue. It's a shame to see the rich culture of a distinct historic area devolve into a sterile, strictly profit-driven environment that excludes locals, where a less diverse subset of the population can afford to live and generic trendy architecture replaces historic buildings. 
  2. Do any of you ever struggle with the reality that we collectively price people out of their communities? No because I believe that demand is the root cause of gentrification. As landlords, we provide safe and clean housing at market rent. We don't create the economic fundamentals that drive housing demand. 
  3. Do you ever think of it that way? I think demographic evolution is what creates gentrification. Rising rent is a reaction to an influx of people and industry/jobs to an area. Landlords aren't able to just charge more rent arbitrarily. What we do is accommodate people's housing needs appropriately according to the market. It's not like we're politicians or titans of industry that sway market forces with our decisions, we just provide housing in the path of progress. 
  4. Do you ever feel bad about contributing to the gentrification of communities? No for the above reasons. 
  5. What are the alternatives? Gentrification is always coupled with rising property value. When property value goes up people have equity in their homes. When people have equity in their homes, times are good for that neighborhood. People can afford to make repairs, additions and other capital improvements that further increase value. The housing stock is improved as well as the tax base so schools, parks, police departments etc. have sufficient funding and quality of life goes up in the community. The alternative is bleak: undesirable areas with decreased demand for housing which causes declining property values and a high percentage of homeowners that have negative equity. When people are underwater on their homes, property condition and value declines, the tax base shrinks, the area starts circling the drain into poverty and the community suffers. If you look at places with flat or declining property value, the locals are also leaving but for a sadder reason than gentrification. They leave because there is nothing left to stay for.  

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