The Rising Value of Time and the Origin of Urban Gentrification

By Yichen Su, here is more from the AEA meetings:

I estimate a spatial equilibrium model to show that the rising value of high-skilled workers’ time is an important driving force behind the gentrification of American central cities. I show that the increasing value of time raises the cost of commuting and exogenously increases the demand for central locations by high-skilled workers. While change in value of time is an initial force behind gentrification, its effect is substantially magnified by endogenous amenity improvement. The model implies that welfare inequality in the recent decades increases by more than the rise in earnings inequality if the forces behind gentrification are considered.

You will find other interesting papers on gentrification at this link, for instance: “We find that areas with
more gay and lesbian couples are more likely to experience gentrification.”

Comments

I'm an IP attorney who works for a big tech form. I used to live in San Francisco in the Mission District where there has been the the most gentrification. I recently moved to Silicon Valley because the commute was atrocious. I don't see how people valuing their time causes this sort of gentrification as people around here are choosing to live farther away when they choose to live in San Francisco.

I think a great number of people ride the tech buses, where the value of time savings is lower because you can do work on the buses and they’re comfortable. They’re also free as opposed to the high cost of driving a car.

Moreover, much travel is not commuting. If you’re a young person who goes to bars and restaurants and apartment parties a lot, living right in the mission saves you tons of time.

Finally, lots of commutes within Silicon Valley are long by car anyway.

I think that, discounting google bus passengers, the people living in SF proper likely also work there. There's Twitter, there's Zendesk, and there's a million other companies, from five-person startups through 250-person small businesses.

This was certainly the case for me. I decided that the cost and the disgustingness of the city was too much, and eventually moved to the East Bay. This changed my commute from a 15 minute commute to a 30-90 minute commute (highly variable depending on traffic)

As an aside: It wasn't the length of the commute that bothered me so much as the variability. I had to leave at 7am just to arrive at work by 9, and this meant that fairly frequently I got in between 7:30-8:00. I wonder what these gentrification trends look like when considering this.

I think the Bay Area is unique in that one of its central business districts is 40 miles away. Most gentrified neighborhoods in most cities, such as New York, Boston, Chicago, and so forth, are near downtown, which is where the high-paying jobs are.

Regarding the LGBT gentrification thing, I have some theories from observing one such neighborhood in my home town over the last 15 years....

- Perhaps not lesbian, but definitely gay males as DINK couples (Double Income No Kids) have significant spending power over and above other just-couple-type family units.

- Because of the non-traditional nature of their families, they don't have as much fear of certain kind of neighborhoods/school districts as more traditional families. Their risk strategy isn't just more pro-risk, it's entirely different from traditional families

- These communities are by-and-large more youthful. Youthful = more risk, faster pace, less fear plus the time and lack of dependents to take risks on property that could potentially turn into a complete loss.

- Certain lifestyle choices within those communities don't disfavor economically high-crime neighborhoods, they may in fact be part of the appeal. Quick access to drugs and prostitution are in fact pluses. Controversial statement yes, but that was what I saw...

- Political and cultural unity. Once an area begins to be known as the "gay" district, it draws more of the same type of people to it. More of the same type creates the political nucleus to fight for the interests of that group and its property owners, sometimes to the exclusion of but also to the benefit of the "straights".

What's so funny is that the ultimate beneficiaries of this real estate pioneering aren't alternate lifestyle groups, it ends up being the traditional straight high-income family units that buy it all up long after the heavy lifting is over. Even in CA or NY I don't know of any "old-money" LGBT districts that aren't themselves being gentrified away.

I guess someone's always got to be first.

Some side comments to add:

Once a neighborhood becomes "gay", it might drive out people that dislike gays, thereby favoring a certain cultural milieau that is amenable to higher earners.

People who don't have kids tend to work longer hours so it's possible that kids are actually a liability in terms of income potential, thus the highest earners are single, or dinks. (i.e. don't have kids until your career is well established)

"...it might drive out people that dislike gays, thereby favoring a certain cultural milieau that is amenable to higher earners."

Maybe somewhere else, but I didn't see this. Any anti-gay wealth that may have been there had long since left, and the anti-gay cohort that was there was largely black and evangelical. I also think that the higher earners thing is a myth. It looks like "higher earners" because the property prices are so depressed and rents so low that median earners have more disposable wealth, but aren't in fact making anything appreciably special (you're right the longer hours and no kids helps this). Don't get me wrong, the appreciably high-earners were there in small numbers, but you knew who they were because they lived in town-house apartments and overall better properties, albeit surrounded by some really rough areas.

Another thing that happens that isn't talked about frequently (again controversial) is the influence of one or a few wealthy gay real estate investors. In the example I elude to, this happened where a purchase of a solid block of between 150-200 properties kicked it off. These were essentially slums, cheapo rehabbed, and rented out at market rates (or below market rates or free to people they liked...you get the idea...flop houses) but within a year you had 10 new bars and nightclubs, gas stations, clinics, etc. etc. etc. all pop up serving what were essentially a new community of flunkies and junkies for these dudes.

There was nothing high-earner about this crew of people, except for the SME owners that came in to take their money.

Upwardly mobile gays v. poor, ethnic minorities. Such the dilemma for intersectionality!

Agreed: gay men like to renovate (and flip) and it's easier for men w/o kids to live in higher crime neighborhoods.

it's easier for men w/o kids to live in higher crime neighborhoods.

Why would that be? Are there a lot of children kidnapped in higher crime neighborhoods? Do the criminals also mug kids on their way to school? It seems to me that high crime neighborhoods are usually crawling with kids.

“...crawling with criminals.”

There, fixed that for you.

What's the origin of the criminals that occupy high-crime neighborhoods? Do they invade from other high-crime neighborhoods, develop their criminality after moving into the high-crime neighborhood or are they born and raised there?

Evidently after the neighborhood is gentrified by the LGBT invaders the criminals leave to make other neighborhoods high crime. And so the cycle goes on.

Unless children are somehow immune from getting mugged, assaulted, hit by a stray bullet, etc., then that possibility would alter the calculation in deciding where to reside more for a parent than a non-parent.

Well off, stable gay couples as footsoldiers of gentrification for those reasons, sure, solid arguments that apply.

But how many gays in city centres are actually in well off stable couples? Remember, gays are not particularly smart (educational attainment or psychometrics), or particularly careerist and don't form relationships (stable, long term pair bonds) at a particularly high clip.

While gentrification pretty much hits all gay neighbourhoods more than it does equivalent minority neighbourhoods, even those gay neighbourhoods that are pretty downscale, not just the neighbourhoods where upscale gay couples move into.

I suspect this is mostly driven by a couple broad factors:

A) What gays are not doing: Low interpersonal violence, low property crime, low random vandalism. How many innercity minorities, particularly those with plenty of teenage male children, can boast that? If you want a cheap city centre place, assuming costs are equivalent, do you want to live in a place with lots of those non-threatening gays, or a place you'll be beaten up or robbed?

B) The general fragility and short life spans of gay communities: Gay folk don't reproduce themselves, biologically, so turnover will always be higher than for communities of ethnic minorities which do. Black or Latin neighbourhoods will produce children and a good portion of them will want to stay in "the hood", because of simple human sense of place and home. That'll serve to staunch gentrification. But gay communities don't do this, they must be the "hot" and fun place to attract gays generation after generation, or they have no longevity. Gay neighbourhoods just have more attrition in general, and gentrification is only a special case of this.

>Remember, gays are not particularly smart (educational attainment or psychometrics), or particularly careerist and don't form relationships (stable, long term pair bonds) at a particularly high clip.

Gay men have MUCH higher college completion rates than other groups. https://www.jstor.org/stable/10.1086/679393

>. In fact, of all gender and sexual identity combinations, gay and bisexual men have the highest predicted probability of college completion: 44 percent, which is well above the national average for bachelor’s degree completion of 32 percent – and well above heterosexual men’s predicted probability of 28 percent.

44 vs 28, OK, maybe a little high education attainment then, though most still do not complete. I would think probably because of structure in the opt in / opt out identity and tolerance in classes. There might be some age structure in there to account for. But still it may be like that.

Don't earn higher income though, I think - even in households dual income offset by less market specialisation and market competition - http://blogs.lse.ac.uk/politicsandpolicy/how-your-sexual-orientation-affects-your-salary/ or https://www.sciencedirect.com/science/article/pii/S0167268118300908.

B) was good. I didn't think of that, but absolutely makes sense.

Cheers for the response. Some extra mortality from sexually transmitted disease / riskier preferences for drugs and alcohol etc. might also deepen this pattern as well. Not sure I have a handle on how significant those are tho.

Gay men tend to stay out on the streets later, which makes gay male neighborhoods better for the safety of women walking home at night.

Steve is correct. The Castro has a vibrant nightlife with young adults walking around at all hours.

That tends to keep street crime down as there are more eyes watching would-be muggers.

Yeah, but maybe women walking home at night is indicative of crappy neighborhood? Cars and parking, schedules, and companionship are all 'nice things'.

Actually (employed, clean-looking) women walking alone at night is an almost surefire sign of a safe neighborhood. Women aren't fools.

Indeed we are not. I believe you have missed my point entirely.

What is it?

Seems like these conclusions are obvious to anyone with an understanding of history. Why did people move into the cities in the first place? Because that's where the jobs were. The question isn't why people move to cities (that's been known for thousands of years); it's why people moved OUT OF cities for so long.

As for EverExtruder's observations, those fit the model of early adopters to a T. The LGBT and DINK crowds are early adopters of neighborhoods. They deal with the inevitable issues that arise from early adoption (bugs in software, design flaws in hardware, crime in real estate). Once those are dealt with, the late-adopters move in. Pretty standard model.

That's not to downplay this research--the best research is always obvious in retrospect. One researcher famously said, after finishing "On the Origin of the Species", that it was so elegant, simple, and obvious in retrospect that he was astonished no one else had thought of it.

'the best research is always obvious in retrospect. One researcher famously said, after finishing "On the Origin of the Species", that it was so elegant, simple, and obvious in retrospect that he was astonished no one else had thought of it.'

Very true, and a challenge when teaching an intro level course because when you tell the students about some Nobel prize-winning research they might react by saying "so Akerlof won a Nobel for saying that used cars are cheaper than new cars?".

There are some exceptions, Samuelson's famous example of comparative advantage, and most people need to think about the Coase Theorem for awhile upon first hearing it. And AFAICT many of the breakthroughs in computation especially cryptography are opaque to people who aren't computer scientists.

1. Crime
2. Crappy schools
3. Overcrowding (but most gentrified neighborhoods were once home to large middle-class or working-class families, so not a major factor)

Not exactly rocket science.

“We find that areas with more gay and lesbian couples are more likely to experience gentrification.”

Oh my...

Red to green, flicked cigarette, 4-5.

As if so-called knowledge workers aren't good at wasting their time; indeed, my observation is that they are expert at wasting their time. It's just that they choose to waste their time doing things other, non-knowledge workers choose to waste their time. The idolatry of so-called knowledge workers reflects, what, envy and jealousy? Rene Girard is everywhere!

No ray, the idolatry isn't what's fueled by jealousy, it's your own incoherent misunderstanding of technology that is driven by envy. That's why you're a hater, as the kids say.

Quality control is a homestatic part Quality assurance, which is tied to revenue. It's well and good to be a congressman or a senator because your knowledge-economy is established. Look at healthcare, a booming industry, so obviously healthy. Wrong. The Student Educational Benefit Trust went bankrupt underwriting (collateralizing) university health care, tied to what? Well, banking. Students at universities now have to enroll in Obamacare, a $3600 difference with no time to account for what? Oh yea, medical care.

https://www.cleveland.com/news/2019/01/westlake-based-student-health-insurance-plan-at-4-ohio-colleges-shuts-down-abruptly.html

Look at the NYT. The first thing a newspaper should ask themselves is does this past the "literacy test." The "literacy test" is, is the newspaper sure themselves what they are saying?

Does the NYT expect that their average audience knows Nancy Pelosi is the only woman to hold the post of Speaker? Yes. Write away, redundancy.

Her election came on Day 13 of a government shutdown, and her handling of an increasingly combative President Trump will likely define the 116th Congress.

Why "likely"? So it's over 50% but under 75%? Could it be because likes have to do with facebook and they suspect it will drive clicks? That's fine! But it's stupid as hell. You can talk about social issues the NYT has, but let's be honest, probably economic influence is their most "harmful."

Ms. Swisher takes the reactionary route, talking about two glamorous industries. Apple and Marijuana. She could have written one word: You know that word that means "when computers are built too quickly, sacrificing quality assurance?"
https://www.nytimes.com/2019/01/03/opinion/apple-revenue-china-innovation.html?action=click&module=Opinion&pgtype=Homepage

"electrocution," hour 13 of a kindergarten shooting, and her nuanced understanding of not being alive anymore will likely define the worst shooting in US history.

I don't know how this is supposed to work for people who have kids. I have not noticed swimming pools and playgrounds among the amenities that come with gentrification.

Would you expect them to be? Modern parenting doesn't include things like free time to play--the only time kids get to enjoy a swimming pool is during swim practice, and playgrounds are too dangerous for kids to play on.

My wife and I are considered weird because we let our kids run, jump, and play at the playground, while we talk. All the other parents are clustered around their kids, making sure Junior and Suzie never are in any danger whatever, including (horror!) tripping over a piece of mulch (not joking here). I once rolled up my pant legs and walked into an ankle-deep stream with my kids, to point out some interesting features of the stream, and parents were literally herding their offspring away from me.

No, if you want evidence of parents/families, look for athletic organizations, schools with more security than the average prison, that sort of thing.

I wonder to what extent that modern sleep disorders / anxiety are attributable to not spending enough time outside. Indoor swimming pools are great but you don't get sunlight exposure that way. People that spend time outdoors seem happier.

I've worked on enough construction sites to view your last claim with a very hefty dose of skepticsm. Folks who spend free time outdoors may be happier those folks who don't; I don't know, I'd need to see some research. But folks who work outdoors? New folks run screaming (I've seen turnover as high as 90% for workers in their first three years). There's a STRONG selection bias, and it ain't because working outside makes you happier!

Some outdoor jobs are physically very demanding or dangerous, and the fact that many people quit or can't do them doesn't mean that being outside doesn't make you happier.

The swimming pools and gyms/playgrounds are in the basements.

Really? That actually makes city life more attractive. Except for the whole not getting any sunlight thing.

Part of the answer is lower percentages of children than in suburban-style detached home neighborhoods, as others have pointed out. There are certainly still some families with children in these neighborhoods, though.

I don't agree with Hazel's overall point, however. My admittedly anecdotal observation is that gentrified neighborhoods tend to have at least small neighborhood parks / playgrounds / dog parks. I'd hypothesize that proximity to such parks is one driver of both higher property values and likelihood of gentrification. A typical part of the gentrification cycle is that these parks start out relatively unsafe and dilapidated and then become both safer and nicer (better amenities, lighting, etc.) over time due to a combination of political pressure, private donations, and local volunteer activity.

As an extreme example of this change, look at Tompkins Square Park in Manhattan. It's evolved from a homeless encampment characterized by high-crime and open heroin use in the 1980's into a nice park in the midst of a high-value gentrified neighborhood.

The implication is that autonomous vehicles will reduce gentrification, as more time could then be spent in the car more valuably.

“We find that areas with more gay and lesbian couples are more likely to experience gentrification.”

But not artists? I thought they were the first wave of gentrification, looking for large empty and cheap spaces. Which pretty much means a place in an undesirable inner city neighborhood.

There's a lot of overlap of those two groups in the diagram.

And, here I thought you died in 1923. Silly me.

Real artists (who need cheap work space), then poseur artists/hippies, then gays and lesbians, then straight young singles, then straight young couples, then families.

A while back, there was a panic by some environmental types that the Net would dilute or maybe even erase the concept of "place". After all, the Net embodied a move to an information economy, and information could obviously be traded from anywhere.

So wrong.

Our billionaire overlords want to be conspicuously associated with expensive, exclusive, prestigious physical addresses. (Case in point: the various Trump towers.) They also want ultra-tight "control", which thus far has been simpler when employees are imprisoned in towers of cube farmettes rather than trading information from "anywhere". Since billionaires now dictate the location of (most) "jobs", said "jobs" have become concentrated in those ridiculously expensive and time-consuming but prestigious places.

The real joke is that tech types in those places often excuse the tremendous waste of time and money by citing access to "culture" - something they say that Podunk (i.e. any place not Manhattan or San Fran) utterly lacks. The punch line is that said tech types often have little actual use for "culture" except for signaling. And that's OK because they have absolutely no time for it. Most must spend every waking moment slaving away just to cover the outrageous rent.

That is precisely why Google and similar outfits so often trick out their buildings/campuses like kindergartens: many employees will be stuck there almost 24/7/365.

So it's pretty simple and not much to do with the value of a person's time. Nobody's asking, not even for a nanosecond, where and how said person desires to live. No, the orders have come from on high that decently-paying economic activity, tech or otherwise, shall be largely suppressed except in selected areas of a very few megacities. And yet so many megacity elitists are still shocked, just shocked, mind you, at the election of The Donald, or at actions such as those of the gilets jaunes.

Perhaps this does not work, or apply to people with kids. See school age population, % of total: Mass. 14.7, Boston 11.1, California 16.6, San Francisco 8.9, Washington (state) 16, Seattle 8.4, etc.

I just find it hilarious that liberals have to pretend to be worried about their cities becoming nicer places with nicer people.

I beg you -- please keep it coming.

“We find that areas with more gay and lesbian couples are more likely to experience gentrification.”

Well, duh.

Once you remove school quality from the equation, a lot more neighborhoods become livable. Once enough gays and lesbians invest in a neighborhood, the rising prosperity will generate more local tax revenue which will improve the quality of public services (alongside greater private investment in restaurants, shops, etc.) That makes the neighborhood an attractive place for heterosexual couples with children.

gays and lesbians = more prosperity? Then more tax revenue? Which of course all goes to that neighborhood, where the improved public services all concentrated as well. So people move in with their kids. What fairy tale location would this be?

https://en.wikipedia.org/wiki/Gay_village

Gay villages usually started off in crappy parts of town. Gays were outcasts and wouldn't be safe living openly alone. So they banded together to form small communities of likeminded people. They picked cheap neighborhoods because they couldn't afford anything else thanks to discrimination in the job market.

The communities grew, attracting new residents who invested in the gayborhoods, increasing job opportunities and the quality of public services. There are dozens of high profile examples of this phenomenon. Boston's South End, NYC's Hells Kitchen and Greenwich Village, San Diego's Hillcrest, LA's Silver Lake, etc.

Although, to be fair, these areas don't necessarily become more attractive to families with young children as the gentrification prices them out. The original discussion was around gentrification, not family formation.

Seems plausible. The research is telling u that cities are round, slightly bulging in the center. Mathematically; maximizing transaction rates and minimizing their total count makes a sphere. So we now know why cities tend to be circular, all thing being equal.

I show that the increasing value of time raises the cost of commuting and exogenously increases the demand for central locations by high-skilled workers.

Is it the value of the highly- skilled workers ' time that increases demand for central locations or the fact that their income allows them to be able to afford them? If a highly-skilled worker's time is so valuable how can they possibly afford to sleep? Wouldn't it be in the interest of the nation's GDP to supply these workers with unlimited amphetamines so they can increase productivity? Or is that already happening?

I'll add another data point. I live in a home that costs approximately 2x per square foot vs. what I could get if I lived further away from the center of my moderately sized U.S. city.

Commute length was a big part of the decision. I (we) also like not living in a cookie cutter suburban neighborhood with an obnoxious HOA.

What is the next step in the neo-liberal urban economics time preference process?
Will that be to assign dollar values to offspring?
Or perhaps to signal some monetary or other taxability to remove whatever intangible quality of life benefit that might accrue?
Only when MRS = MRT might all be satisfied, and probably not even then.
Darn externalities, those humans.

I'm not convinced that Su's explanation is much if any of an explanation of a gentrification, unless it includes the idea of congestion increasing commute times.

For one thing, pushing against and at least partially offsetting the idea of higher value of time is the greater options for productivity and entertainment of commute time compared to several decades ago. In the case of commuting via public transit, smartphones and tablets offer greatly enhanced productivity and entertainment options compared to decades ago: everything from email to reading to watching movies or TV shows. Even for drivers, talking on a mobile phone or a wider array of entertainment options (satellite radio, podcasts) offer greater productivity and entertainment for a given commute time.

Echoing and expanding upon prior comments, I'll offer a variety of other explanations that I think are cumulatively far bigger factors than increased "value of high-skilled workers' time".

For one, begin with the idea that it generally take something "wrong" with a neighborhood located relatively close to the concentration of high-income jobs in a large-ish downtown for it to be a dilapidated, low-income area. In the case of large U.S cities a few decades ago, the typical problems were a combination of poor public schools and high crime.

With respect to poor public schools, this problem sadly hasn't been fixed in most cases but a variety of factors have made it less important. There's delayed childbearing and the rise of DINK couples. Even if couples do have children, the math of paying for private school looks different for a two-earner couple having 1 or 2 children later in life (i.e., during higher-income years) compared to a one-earner couple with a stay-at-home mom and 2 or 3 children. As TA points out above, these cities/neighborhoods have lower school-age populations than surrounding suburbs, though still some school-age population.

As for crime, there's the well-chronicled trend of declining urban violent crime rates over the past several decades. In particular gentrified neighborhoods, of course, the drop has been even more dramatic, but I'd argue that a lot of these neighborhoods are also starting from a much lower-crime baseline than would have been the case a few decades ago.

I would also argue that a variety of lesser but contributing factors have pushed this trend.

The tendency toward scheduled activities versus "free play" for higher-income children reduces the relative appeal of low-traffic, very low-crime suburban neighborhoods where kids can be sent out on their own to play with friends.

One factor that I haven't seen mentioned: I think that the trend toward harsher laws (and more negative societal attitudes) toward drunk driving has also enhanced the appeal of these urban neighborhoods. This is complementary with not having children, as a childless lifestyle pushes toward a variety of activities (going to bars, several drinks with dinner at a restaurant, attending live music events) that involve drinking alcohol outside the home. Anecdotally, it seems striking how many of the businesses in these gentrifying / gentrified neighborhoods are either bars or restaurants with extensive drink menus / alcohol sales. And living in these sorts of neighborhoods puts a host of these bars and restaurants convenient, either within walking distance or at least a fairly short taxi (now Uber or Lyft) ride.

What came first, the chicken or the egg?

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