The California Bay Area is home to some of the highest rents and home prices in the nation. While the reasons behind the inflated housing costs are complicated, gentrification —the influx of wealthier people to an existing urban neighborhood, with a correlated change in the neighborhood’s character and culture and increase in rents and property values — is certainly a factor. (See The Truth About Real Estate Prices for a more detailed explanation.)
Renters are typically the hardest hit by gentrification. When rents increase, tenants are often pushed out – either through evictions or their own inability to handle the hikes. When landlords “cash out” and sell a building to take advantage of rising property values, the new buyers may evict existing renters to move in themselves, renovate the building and/or bring in new tenants at a higher rate.
The reason that’s pertinent here is that the Bay Area has one of the lowest homeownership rates – and, therefore, the highest rate of renters – in the country. At 62.9%, the portion of U.S. households owning homes has reached its lowest level in 51 years. In the San Francisco metropolitan area, it’s even lower: just 53.5%, according to an analysis of the U.S. Census Bureau’s annual American Community Survey.
The study was done by the Urban Displacement Project, an initiative of the University of California at Berkeley in collaboration with researchers at UCLA, community-based organizations, regional planning agencies and the State of California’s Air Resources Board. The project analyzes regional data on housing, income and other demographics to predict where gentrification and displacement are both happening now and likely to occur in the future.
The Bay Area's Gentrifying Neighborhoods
Using interactive maps from the Urban Displacement Project, Cory Weinberg, at the time a reporter for the San Francisco Business Times, identified some of the most-populous, low-income census tracts in the Bay Area’s nine counties that are deemed by the project to be at risk of gentrification or displacement. Here they are, along with the median sales price, median rent per month and median household income, according to market overviews on real estate aggregator website Trulia.com (as of September, 2018).
Ashland, Alameda County
- Median Sales Price: $502,500
- Median Rent per Month: $2,795
- Median Household Income: $53,801
Crocker Amazon, San Francisco County
- Median Sales Price: $842,000
- Median Rent per Month: $3,875
- Median Household Income: $63,500
East Palo Alto, San Mateo County
- Median Sales Price: $1,100,000
- Median Rent per Month: $3,650
- Median Household Income: $53,631
Gilroy, Santa Clara County
- Median Sales Price: $786,750
- Median Rent per Month: $3,200
- Median Household Income: $78,017
Hayward, Alameda County
- Median Sales Price: $680,000
- Median Rent per Month: $2,945
- Median Household Income: $60,167
Ingleside, San Francisco County
- Median Sales Price: $825,000
- Median Rent per Month: $2,950
- Median Household Income: $69,063
Redwood City, San Mateo County
- Median Sales Price: $1,550,000
- Median Rent per Month: $4,422
- Median Household Income: $79,403
Rio Vista, Solano County
- Median Sales Price: $385,000
- Median Rent per Month: $1,745
- Median Household Income: $62,917
South San Francisco, San Mateo County
- Median Sales Price: $1,030,000
- Median Rent per Month: $3,800
- Median Household Income: $82,586
The Bottom Line
Now could be the time to buy property in these gentrifying regions before housing prices increase further.
That said, there are disadvantages to buying in a gentrifying neighborhood. The community can become a victim of its own success, as shown in Flag Wars, an acclaimed documentary about the gentrification of a section of Columbus, Ohio at the beginning of the 21st century. Increasing rents and property values, along with the upward spiral of desirability, can erode the qualities that attracted new people to the neighborhood in the first place.
It’s important to note that while the gentrification process can lead to positive changes within the community – for example, reduced crime, increased economic activity and new investment in area buildings and infrastructure – the benefits are typically enjoyed most by the new arrivals and least by the old-timers, who often end up economically and socially marginalized. According to the film, “When success comes to a neighborhood, it does not always come to its established residents, and the displacement of that community is gentrification’s most troubling effect.”
For related reading, see Why the U.S. Middle Class Is Hit Hardest by Rise in Rent.