Limited Housing Supply Correlated with Higher Rates of Gentrification

Recent research conducted by Laurie Goodman, Ellen Seidman, and Jun Zhu focused on the pace of gentrification in metropolitan statistical areas by measuring the rate at which high-income homeowners buy property in low-income neighborhoods based on 2018 Home Mortgage Disclosure Act and 2018 American Community Survey data. 

"Our examination reveals that, in many MSAs, high housing costs—resulting from a lack of available housing—cause affluent buyers to look for homes in low- and moderate-income (LMI) neighborhoods. That means cities’ housing supply can determine how fast gentrification may occur. Boosting the supply of housing can slow the pace of new buyers moving into lower-income neighborhoods," say Goodman, Seidman, and Zhu. 

A geographical analysis of high-income households in 20 largest U.S. metropolitan statistical areas found that Los Angeles had the highest rate of high-income mortgage borrowing for the purchase of housing in low-income neighborhoods in 2018 at just over 60%. In Chicago, a city with more affordable housing, that rate was only 21%. "Boosting the housing supply by easing local land use, building, and zoning restrictions and encouraging alternative forms of housing like manufactured housing and accessory dwelling units would make homes more affordable and allow more buyers at all income levels to find homes, slowing the pace of gentrification," according to the researchers.