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Gentrification and its Benefits. Expanding Businesses and Reducing Crime Rates

Essay 2018 8 Seiten

BWL - Wirtschafts- und Sozialgeschichte


Table of Contents



Causes of Gentrification

Effects of Gentrification

Management Approaches to Counter Effects of Gentrification




Gentrification involves urban development in which the wealthier class displaces the low and middle classes. This displacement is driven by increased property values and high cost of housing. In most cases, gentrification process in a given community, primarily an urban community, is manifested by a significant decrease of average family sizes and an increase of average income. Some of the benefits of gentrification include expansion of businesses, economic development and reduced crime rates. It is also associated with negative consequences such as population displacement, loss of social diversity and homelessness. However, there are management strategies which can address these challenges including rent control, zoning ordinances and community land trusts.


Gentrification is viewed as a new phenomenon in management and urban development which has led to a shift in the urban community towards increasing property values and wealthier residents (Grant, 2003). This phenomenon is believed to be driven by increased investment in a given community by government agencies, real estate development businesses and community activists who promote private investment. In most cases, gentrification process in a community, primarily an urban community, is manifested by a significant decrease of average family sizes and an increase of average income. These are some of the features of a wealthier community, and they are accompanied by increases in property taxes and house rents. In such situations, old industrial structures such as buildings are converted into business and residential premises, in order to meet the demands of an expanded consumer base (Smith, 2005). As a result, some management aspects are affected; thus, creating a need for the change of management strategies. This leads to a displacement of the low-class community because residential premises become inaccessible to the poor (Grant, 2003). Some of the gentrified cities include Paris, London, Boston, Ottawa, Valencia, and Cape Town.

However, gentrification is associated with business attraction, economic development and reduced crime rates within the gentrified community. Therefore, this paper will provide a comprehensive overview on all aspects of gentrification.

Causes of Gentrification

From a managerial perspective, gentrification is caused by three aspects: economic globalization, production and consumption. Evidence shows that gentrified communities exhibit trends of economic globalization in which service industry replaces the manufacturing industry. This phenomenon is attributable to the restructuring of economic strategies and de-industrialization of cities (Smith, 2005). As a result, the city functions as an independent socioeconomic entity in which imports are decreased. In most cases, a gentrified community relies on banking and service activities as the core of the economy.

It is also suggested that gentrification is caused by production. In most cases, the relationship between production and capital investment defines the economic process of a global city. This leads to the emergence of the rent gap, decentralization of capital, deindustrialization, demographic changes, and fall in profits in the cylindrical capital movement.

On the other hand, consumption in a given community has been proposed as one of the most significant causes of gentrification in most post-industries cities. It is argued that the expansion of the middle class which comprised of professional elites transformed the traditional economic trends in which individualism from the lower and upper classes was manifested through consumption. As a result, consumption of residential premises became one of the most significant aesthetic objects; thus, transforming the urban lifestyle and culture. It is reported that the architecture of gentrification explains the tension between the middle and lower classes as it was the case by during the restoration of Victoriana (Lees, Tom & Elvin, 2010).

Effects of Gentrification

Gentrification, like any other economic process, encompasses benefits, as well as negative effects. The benefits of gentrification are attributable to the influx of the affluent class which promotes the service industry in the community. One of the most significant benefits of gentrification is the improvement of housing. Ordinarily, housing presents enormous challenges in the management of urban centers. Therefore, gentrification seems to solve this challenge because it favors the improvement of housing within the gentrified community. In addition, it is believed to stabilize declining areas. In most cities, suburban areas are known to experience degradation leading to the emergence of slums. This phenomenon is caused by the increased strain on urban infrastructure and services. Therefore, gentrification addresses an array of urban management challenges by reducing suburban sprawl and strain on the existing infrastructure (Lees, Tom & Elvin, 2010).

Another positive effect of gentrification is the increase in property values. As a result, property owners reap high income from real estate investment, and this serves as a means of attraction for potential businesses. It is also suggested that gentrification leads to a significant increase of local fiscal revenues. Moreover, gentrification has led to the rehabilitation of property with little state sponsorship (Lees, Tom & Elvin, 2010). Therefore, an increase in property values and local fiscal revenues promote economic development of gentrified areas. Economic development is also enhanced by an increase in purchasing power in the centralized economy, although it is uneven (Smith, 2005).

It is also believed that gentrification leads to increased social mix and reduction in crime rates. This phenomenon has been evidenced in gentrified cities such as London, Atlanta and Washington, DC (Lees, Tom & Elvin, 2010).

Despite the benefits of gentrification, the phenomenon is associated with a number of negative consequences. Some of the negative effects of gentrification include displacement of the low-income class by the wealthier class, community conflict and resettlement, homelessness, industrial displacement, loss of social diversity, and increase in local expenditure. In addition, gentrification leads to changes in local services which are usually accompanied by increased cost. Gentrified areas are also characterized by a significant population loss and under occupancy (Rowland & Gary, 2005).

Management Approaches to Counter Effects of Gentrification

In areas where gentrification has occurred, communities, local agencies and social groups have responded in different approaches. Some responses are consistent with management ethics, whereas others are political in nature. One of the most reliable management approaches to counter the impact of gentrification is the adoption of zoning ordinances. Ordinarily, zoning ordinances have been used as significant tools of urban planning, in order to support industries and local businesses. In this approach, developers are provided with incentives for maintaining existing businesses. In some circumstances, developers are required to maintain current commercial tenant, whereas the state creates industrial zones, in order to prevent industrial displacement. Therefore, zoning allows the development of new residential premises in the area adjacent to a commercial corridor leading to the stabilization of businesses. As a result, the stabilization of businesses through long-term leases ensures homogeneity in the economic process to prevent economic inequalities within the community.

However, it is worth noting that zoning in urban areas faces significant challenges. For instance, developers are forced to shift to the urban sprawl owing to the impact of extensive zoning policies. This is because developers face significant difficulties in rezoning urban living areas for residential development.

Community land trust is the second management approach that solves the problems caused by gentrification. This approach is enhances inclusionary zoning ordinances which stabilize property values in open markets. Ordinarily, gentrification is characterized by increased property values, and this aspect is believed to be a contributory factor to economic eviction in which the poor residents are displaced. Therefore, the adoption of community land trusts focus on removing real estate from open market, in order to prevent land speculation, an aspect of real estate investment, which raises property values.

Moreover, negative effects of gentrification can be addressed through adopting rent control legislation. In most places where national or local governments have jurisdictions to introduce rent control legislation, incumbent tenants are usually protected from displacement by the affluent individuals because increases in house rents are restricted. This maintains the affordability of residential premises by the low-class community. It also prevents new residents from displacing the incumbent residents because there is limited availability of housing. However, it is worth noting that rent controls do not prevent gentrification, but rather minimize negative effects associated with the phenomenon. This aspect can be reaffirmed by the gentrification of cities in California such as eastern West Hollywood and southern Santa Monica which gentrified despite the existence of rent control in the state (Heskin, Ned & Garrett, 2000).



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Titel: Gentrification and its Benefits. Expanding Businesses and Reducing Crime Rates