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Benefits of gentrification outweigh costs; restrictive zoning reason for lack of affordable housing: study

The word “gentrification” is often said with a sneer. Since the phenomenon was first observed and named (in 1964) in London, where upper middle class households had begun purchasing working class and derelict housing in the traditionally deprived East End, it has spread around the globe. Wealthier people in cities from Toronto to Sydney have moved into such rundown neighbourhoods—Toronto’s Cabbagetown in the 1960s and 70s was a classic case—and turned them into highly desirable middle class neighbourhoods. Property values soar. Nineteenth century homes are appreciated for their charm and “potential” and given a whole new life, lovingly restored. Those front-yard cabbages that fed people during the Depression in Cabbagetown have long since been replaced by roses and pretty water features.

But what happens to the people who live in those homes when the gentrifiers arrive? They must leave their homes and move away. Displacement is the term used in discussions of the phenomenon, and displacement comes with a social cost. That social cost is usually discussed in relation to the social benefits of gentrification. Since entire neighbourhoods are “improved” and made more livable, property values increase, and city taxes rise. Weighed against the satisfaction of those who now live in a newly stabilised neighbourhood is the dissatisfaction and resentment of the displaced. That resentment has often led to violence and conflict in the community. There have been studies showing that displacement leads to homelessness. Because of these and other social costs, gentrification has many opponents, both at the grass-roots level and in local governments.

A new, very pro-gentrification contribution to the discussion comes from the Montreal Economic Institute (MEI). In Montreal, say the authors of a paper on gentrification, recent examples of vandalism against certain businesses in two neighbourhoods have been motivated by opposition to gentrification. This is unfortunate they argue, because gentrification “is a tool for improving the living standards of everyone, including the poor.”

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The neighbourhood of Hochelaga-Maisonneuve in east Montreal is undergoing gentrification, and there have been several acts of vandalism against businesses in the area by protesters.

Instead of opposing gentrification, those who are concerned about the plight of the poor should condemn the vandalizing of private property, as well as the distortionary regulations that harm the most vulnerable. Easing land-use regulations would lower housing prices, which would largely limit displacements and provide access to more affordable alternatives elsewhere in the city, thus allowing the full benefits of gentrification to materialize.

As the process progresses, they explain, new residents from different walks of life move in, thus increasing social diversity in the neighbourhood. This in turn generates “social capital,” defined as the circulation of knowledge between individuals who meet and connect with each other in the neighbourhood. New skills are learned and productivity is enhanced. Upward social mobility becomes more likely, especially among children. Employment opportunities increase, incomes rise, a broader range of services is offered, and “an overall improvement in the quality of neighbourhood life.” Gentrification is then “a powerful force for reducing poverty.”

But again, what about the poorer people who already live in the area undergoing gentrification? Their lives are improved too, say the MEI authors. Gentrification reverses the decline or stagnation of an area and improves living standards. Gains in housing, local amenities, income and services available tend to “largely offset” the cost of higher rents, they argue, so poorer people will choose to remain. Without gentrification, a declining neighbourhood is likely to decline faster, with disinvestment and housing abandonment becoming more prevalent. As people move out of the neighbourhood, those who remain may have limited resources to invest in community improvements. This decline, the Montreal economists argue, would cause more displacement than gentrification.

Some displacement will occur as rents go up, but it would be “foolish” to try to prevent all displacement. It happens all the time, they say, as people’s “circumstances and constraints” change. The real culprit is found elsewhere.

The best way to limit the costs of displacement is to make sure there is enough affordable housing in the area. It is not the gentrifiers, argue the MEI authors, who cause home prices and rents to rise; it is zoning laws. A “well-established consensus” exists among economists that regulatory obstacles in the form of zoning laws hinder the adaptation of housing stock to movements of the population. If zoning laws become too restrictive, they limit the supply of real estate, leading directly to a “dramatic” decrease in housing affordability. Restrictive zoning may alter the types of development projects that are approved, and, in general, they claim, this has discouraged the building of rental units and favoured higher-end housing. “Distortionary regulations” harm the most vulnerable, and land-use regulations should be eased to help lower housing prices and limit displacement.

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