Gentrification: What is it and how does it affect housing prices?

A noteworthy urban phenomenon over the past 10 years is gentrification,  a somewhat complex term to pronounce but essential to analyze. This process occurs basically when a working-class neighborhood with many deficiencies is gradually displaced by higher-income residents, expelling the former inhabitants. 

Here, we will analyze in detail what gentrification is, how it originates, and its effects on housing prices. We will also explore its types, causes, examples, and responses to combat or at least prevent it.

What is gentrification?

As mentioned, gentrification is a process where a neighborhood or urban area is renovated and housing prices increase rapidly. Middle-class people begin moving into the area, while low income residentsare practically forced to leave.

The term gentrification derives from the English word gentry, loosely translated as “bourgeois,” but it implies much more than a simple societal gentrification. It entails the expulsion of the most vulnerable people and a radical change in the life of the sector or neighborhood.

This urban phenomenon presents itself as a kind of urban quality-of-life improvement that, although real, benefits only a few. The main beneficiaries are new neighborhood residents and high-income individuals who start frequenting the area and eventually move there. 

Former residents, for the most part, are displaced due to changing conditions and rising housing and service costs. In the current context, with the arrival of peer to peer investor platforms  for tourist accommodations, speculative housing opportunities are emerging.

A bit more about the term:

This speculation affects part of the Spanish real estate market, ultimately impacting the smallest and cheapest housing segments and apartment investment. This generates a new form of exploitation that partially contributes to rising housing prices, especially rental prices. 

In this way, two new terms have become popular: tourism-phobia and touristification, which are directly linked to gentrification. However, the process of touristification has proven to be more toxic in its effects because it replaces a population with a non-population.

This process happens much faster and has led policymakers to speak of a “Gentrification 4.0,” with clear threats of creating dehumanized urban spaces. They add that these areas often lack basic services for stable residents, such as local commerce and affordable housing.

It even considers minimum conditions for people’s rest, and the situation is much more severe in tourist areas. That is, it transforms spaces where professionals of any kind will struggle to find housing near their workplace.

Types of gentrification

According to several authors, the world is experiencing the fourth wave of gentrification, moving away from the classic reference: rehabilitating neighborhoods to densify them. This allows the expansion into new geographies, including water sources, urban and rural peripheries, implementing rehabilitation, demolition, and new construction.

However, the constant displacement of low-income residents remains, stripping them of their neighborhoods to convert them for consumption, not just for residence. In this sense, there are various types of gentrification, which, based on their main purpose, could be classified as follows:

Studentification: 

Referring to the influx of a number of middle-class students from neighborhoods and towns near a university, for example. There are known cases of “studentification” that eventually turn a small town into real urban centers where students are the protagonists of social change.

Small cities that have served as models or monitoring centers for establishing universities or higher education institutes are transformed into student cities. These could be considered some positive aspects of gentrification, which, as we’ve seen, also has consequences that are not entirely positive, especially for the original residents.

Boutiquization: 

Seen as the invasion of small luxury retail merchants who arrive to replace the residential function of workers and low-income people. This is how the well-known mini-markets, cafes, makeshift clothing stores, and family-run community kitchens emerge.

Boutiquization ultimately formalizes a type of commerce that initially began informally, as authorities “assimilate” it and require tax payments. This generates revenue for municipalities but also turns them into consumers of services that sometimes do not even exist.

Touristification: 

Defined as the transformation of neighborhoods into enclaves intended exclusively for tourists, often offering corporate entertainment. Popular housing is replaced by accommodations, restaurants, and other services for tourist consumption. A variant of this occurs with the gentrification of coastal cities. 

Here, fishing villages, for instance, are transformed into summer and vacation hubs for the local and international middle class. 

Provincial gentrification: 

A process that occurs in a cascading manner, from a major city such as London, for example, toward smaller cities. Towns are gradually taken over by new residents and their new buildings, which eventually transform them into “bedroom communities.”

Rural gentrification.

An influx of middle-class individuals seeking permanent housing close to the countryside, displacing farmers and rural residents. A devastating consequence of this gentrification is the disappearance of agricultural and livestock-raising areas, which are replaced by profit-oriented activities.

The new colonizing urbanism: 

It is a process of “rehabilitating” neighborhoods, inhabited coasts, or residential centers in the developing world to make them available for the middle classes of the developed world. This neoliberal urbanism, affecting cities across the globe, is a form of neocolonization by the middle class and the white race. 

Supergentrification: 

It refers to a more intense form of gentrification taking place in select neighborhoods of large cities such as New York. This phenomenon involves greater private financing, stronger social changes—resulting in more evictions and exclusion—and a globally connected elite. 

Causes of gentrification

Gentrification is a truly complex, multifaceted process that arises from the combination of various economic, social, and political factors. Here are some of its main causes:

Land revaluation

Central urban areas with transportation, services, and job opportunities are highly attractive to new investors and residents.

Intervention of investors and developers

The real estate interest of developers and investment funds, together with municipal support, in many cases helps foster this phenomenon.

Demographic and social changes

Migration of groups of young professionals, artists, and other upper-middle-class individuals moving into affordable neighborhoods, bringing energy and attracting others.

 The search for authentic, established neighborhoods as an alternative to suburban areas.

Public policies

Government plans and projects aimed at revitalizing deteriorated urban areas undoubtedly drive gentrification, , attracting investments and infrastructure improvements.

Economic factors

The rise in the cost of living and inflation in other parts of the city can transform neighborhoods that were previously less attractive. Access to mortgage loans and financing for acquisition and renovation facilitates the purchase and improvement of properties in these neighborhoods, and it also makes it easier to invest in real estate with little money.

Impact of digital platforms

The popularity of digital platforms for short-term rentals increases housing demand in certain areas, driving up prices and promoting touristification.

Real estate market pressure

The lack of affordable housing in certain parts of the city creates pressure on residents to look for options in more economical neighborhoods. Investors purchase properties knowing that they can increase theirnet asset value quickly, which displaces lower-income residents.

How does gentrification affect housing?

The main consequence of gentrification is the displacement of people from a specific neighborhood to more affordable areas. It is quite common to see this “mass exodus” from central areas to the periphery, and even to observe how peripheral neighborhoods themselves become “gentrified.”

We are also seeing how the gentrification process affects the uses of the affected area, with it becoming increasingly “normal” for certain neighborhoods to have a reduced stable population. The result is a radical change in the type of commerce, where basic services disappear along with habitability conditions—such as being able to sleep at night. 

Another consequence of gentrification is the increase in commuting between the outskirts and central areas. This happens because a large number of people must travel from their homes to their workplaces, where there is greater cultural and recreational service availability.

This drastically affects long-term rentals, which end up decreasing in availability and rising significantly in price. The stable population begins to be replaced by a transient one. Later, basic services increase, and commerce designed to meet some visitors’ needs disappears, reducing the supply for regular residents. 

Examples of gentrification

A case already seen as a “classic” example of gentrification,  is Puerta del Ángel, Carabanchel, or Usera in Madrid. Here, one can observe how both the  per capita income of its inhabitants and rental prices have increased.

Another example is the Malasaña neighborhood, which went from abandonment during the 1980s and 1990s to becoming an attraction for young creatives. The same can be said for Lavapiés, La Latina, Huertas, or Chueca neighborhoods, also in Madrid—a type of “spontaneous” and natural gentrification. 

Regarding “Airbnb gentrification,” a consequence of more radical changes, one example is Barcelona, where tourism displaced many citizens. This altered the layout, uses, and services in areas such as Malasaña or Chueca, which shifted from spontaneous gentrification to tourist gentrification. 

Conclusion

There are many examples of gentrification in Spain, such as the ever-diminishing boundaries of real estate investment , driven by attraction policies, real estate tokenization, crowdfunding, and other forms of investment. Ultimately, to try to see gentrification as something positive, it would be a matter of weighing the pros and cons and analyzing them.

It’s an open secret that citizens with fewer resources are forced to leave their rental apartments in search of more affordable ones. The only question is whether the authorities with decision-making power are capable of legislating in favor of those most in need—some call it hope.

Plagiarism Check: 

AI Verification: