Gentrification has provoked considerable debate and controversy over how it affects neighborhoods and the people residing in them. The term gentrification has often been used to describe neighborhood changes that are characterized by an influx of new residents of a higher socioeconomic status relative to incumbent residents and by rising housing values. While many have associated gentrification with residential displacement, supported by neighborhood-level demographic changes taking place in gentrifying neighborhoods and anecdotal accounts, the empirical evidence on the relationship between gentrification and residential displacement, however, is far from conclusive, finding no significant evidence of higher mobility rates among existing vulnerable residents in gentrifying neighborhoods. Moreover, existing evidence offers little insight into the dynamics of residential mobility in gentrifying neighborhoods, particularly among vulnerable residents.
Our study sheds light on these issues by using a unique individual-level data set, the Federal Reserve Bank of New York Consumer Credit Panel/Equifax (CCP), to study the relationships between gentrification and the mobility patterns and financial health among residents in Philadelphia from 2002 to 2014. The CCP data consist of an anonymized 5 percent random sample of variables contained in the credit bureau records of U.S. consumers.1 The data include the census geography identifiers associated with each consumer’s credit file, so we are able to identify whether an individual has moved across neighborhoods. We find that residents in gentrifying neighborhoods in Philadelphia have slightly higher mobility rates, but more vulnerable residents (residents who have no credit scores2 or credit scores below 580, as well as long-term residents) are not more likely to exit gentrifying neighborhoods. In other words, when compared with the moving behavior of similar residents in nongentrifying neighborhoods, the mobility rates of more vulnerable residents in gentrifying neighborhoods are not significantly higher. While this result initially may seem counterintuitive given the increases in housing and living costs, this is not surprising in other respects: Improvement in neighborhood conditions and services could make a gentrifying neighborhood more attractive, providing greater incentive to stay in gentrifying neighborhoods even though they may need to bear higher living costs, and new infill development or previously high vacancy rates may limit displacement pressures on preexisting residents. These gentrifying neighborhoods, however, have become less accessible for disadvantaged residents, making more vulnerable movers less likely to move into them. Each year, more low-score residents, who are more likely to be low-income and minority,3 move out of gentrifying neighborhoods than those who move into these neighborhoods. Therefore, the socio-economic upgrading of the populations of gentrifying neighborhoods is more so due to the in-movement of higher socioeconomic status residents rather than the out-movement of disadvantaged residents.
The sample is constructed by selecting consumers with at least one public record or one credit account currently reported and with one of five numbers in the last two digits of their Social Security numbers (SSNs). The CCP data do not include actual SSNs. See more details of the data in Lee and van der Klaauw (2010) at www.newyorkfed.org/research/staff_reports/sr479.html.
Throughout this article, credit score is measured by the Equifax risk score, a widely used credit score produced by Equifax. Only the following variables mentioned in this paper are from the CCP data: credit score (Equifax risk score), length in residency, age, household size, delinquent accounts, and mortgage status.
Bostic, Raphael W., Paul S. Calem, and Susan M. Wachter. 2005. “Hitting the Wall: Credit as an Impediment to Homeownership.” In Nicolas P. Retsinas and Eric S. Belsky (eds.), Building Assets, Building Credit: Creating Wealth in Low-Income Communities (pp. 155–172). Washington, D.C.: Brookings Institution Press.View the Full Discussion Paper