Gentrification and Neighborhood Housing Cycles: Will America’s Future Downtowns

This paper identifies a new factor, the age of the housing stock, that affects where highand low-income neighborhoods are located in U.S. cities. High-income households, driven by a high demand for housing services, will tend to locate in areas of the city where the housing stock is relatively young. Because cities develop and redevelop from the center outward over time, the location of these neighborhoods varies over the city’s history. The model predicts a suburban location for the rich in an initial period, when young dwellings are found only in the suburbs, while predicting eventual gentrification once central redevelopment creates a young downtown housing stock. Empirical work indicates that if the influence of spatial variation in dwelling ages were eliminated, longstanding central city/suburban disparities in neighborhood economic status would be reduced by up to 50 percent. Model estimates further predict that between 2000 and 2020, central-city/suburban differences in economic status will widen somewhat in smaller cities but narrow sharply in the largest American cities as they become more gentrified. JEL Code: R00, R14. Jan K. Brueckner Department of Economics University of California, Irvine 3151 Social Science Plaza Irvine, CA 92697 USA [email protected] Stuart S. Rosenthal Department of Economics 426 Eggers Hall Syracuse University Syracuse, NY 13244-1020 USA [email protected] Funding for this project from the John D. and Catherine T. MacArthur Foundation, the Ford Foundation, and the Syracuse University Center for Policy Research is gratefully acknowledged. We thank Dan Black, Ken Small, and seminar participants at the University of Toronto for helpful comments. Excellent research assistance has been provided by Yong Chen and Michael Eriksen. Any shortcomings in the paper are ours alone.