In Defense of Gentrification

Gentrification gets bad press.  It is blamed for all sorts of misconduct.  This concept applies to a situation in which wealthy renters or homeowners displace poorer ones.  Gays have often been blamed for this behavior, as have Jews.  In British Columbia, Canada, it is the Chinese who bear the brunt of this accusation.  Whites, too, have been castigated for replacing blacks, for example in Harlem, Manhattan, on the northern border of Central Park.

The case against the gentrifier is strong, at least at the outset.  Here we have a poor neighborhood.  Yes, it has its problems, as do all sectors of the city, rich or poor.  But it is functioning.  It supports its inhabitants.  It is a community.  People know each other, help each other.  Many have been friends with each other for decades.

But then along come a bunch of outsiders, flush with cash, and they start to replace the original occupants.  The latter gradually scatter to the four winds.  The inhabitants lose their social clubs, their mutual support for each other, their togetherness.  They now live among strangers.  These people clearly suffer at the hands of this financial onslaught.

Wait a sec.  We can readily understand how poor renters can be driven from their homes of many years by these seemingly callous replacements.  But owners, too?  Even in poor areas, there are some who own their own houses, small businesses, etc.  But inexorable market forces undermine their attachment to the neighborhood as well.  No one is safe.

How does this work?  First, assume that 90% of the residents are renters and only 10% proprietors. They are otherwise pretty homogeneous.

For one thing, if nine tenths of your friends, business associates, and fellow members of fraternal orders move out of the community, your own ties to it are bound to fray.  Second, consider the economics of the situation.  When poor people occupied the locality, the property in question was worth, say, $50,000.  But now, with all the wealthy interlopers taking up residence in the vicinity, the selling price rises to a cool $1,000,000.  Taxes are far higher now, as they are based on assessed value, which has catapulted.  Also, your new neighbors likely represent a demographic different from your own.  You can stay put if you want.  But with your newfound wealth, you can relocate to a district more similar to the one you previously enjoyed and purchase a dwelling at a far lower price.  With the difference, you can live off the interest on your enhanced bank account.  Given these considerations, it is no accident that not only do tenants tend to depart, but so do property owners.

This process does not constitute ethnic or genetic cleansing, but the similarities are obvious.  One type of people replaces another.

Is there anything to be said, given the plight imposed upon those who suffer from neighborhood disarray, on behalf of gentrification?

Yes, there is.  For one thing, the newcomers have not violated any laws.  No one has a right to live in any given locale unless he owns part of it or has permission to do so from the owner.  Every action on the part of the gentrifier is part and parcel of the free enterprise system, the one that has immeasurably enriched us all.  This is an aspect of competition, pure and simple.  Do not the well-to-do have the right to offer owners, landlords, money for goods and services they desire?  This is a matter of plain old justice (not the “social” variety, which always militates against the affluent, even if they honestly earned every penny in their possession).

If we pass a law against gentrification, we preclude people bidding against each other exactly as they please.  If the rich have come by their assets dishonestly, this should be treated at the source of their criminal behavior.  It shouldn’t prompt us to then stop everyone else from “bartering and trucking” in real estate.

Then there is the fact that there is nothing special about housing.  This sort of thing occurs throughout the entire warp and woof of the economy.  You don’t see too many of the impoverished driving around in Rolls-Royces, even though they would presumably enjoy doing so.  Why not?  Prosperous folk have “gentrified” the poor out of luxury automobiles by bidding more for them than the latter can afford.  It is the same with caviar, jewelry, fine wines, and all other cuts “high off the hog.”  If we want to prevent the rich from outbidding the poor for domiciles, and want to be logically consistent, we should follow through in all these other cases as well.  But we then reduce the incentive to prosper and ruin the overall economy.

Under which conditions will the people at the bottom of the income distribution suffer more: from a system that encourages everyone to strive to be rich (given that the only way to succeed in this is by providing others with desired goods and services) and allowing them to spend their earnings exactly as they wish?  Or from one that disallows this?  The answer is obvious.  Paradoxically, the “least, last, and lost” of us will prosper far more under a system of freedom than the reverse.  People “vote with their feet” in this direction.  Immigration patterns are invariably out of countries with less economic freedom and into those with more.