Thursday, January 21, 2016

Why Cities Have Been Gentrifying

A shortage of leisure time may be behind the growing vibrancy of the nation's cities, suggests a National Bureau of Economic Research study. Over the past few years cities have become magnets for time-starved skilled workers, who are driving up housing prices. By analyzing tract-level data for the 27 largest U.S. cities from 1980 through 2010, the study's authors find a critical shift in relative housing prices: In 1980, prices were higher in the suburbs than in city centers. By 2000, city centers had the highest housing prices.

Behind the shift in housing prices is reduced tolerance for commuting among time constrained, highly skilled (read: college educated) workers. "Gentrification may be the result of high-income households seeking to protect increasingly scare leisure by reducing time spent on low-utility activities such as commuting," summarizes the NBER Digest.

Living in the suburbs is doable when husbands work shifts and wives are at home, but the suburbs make less sense for a work force increasingly dominated by full-time workers (many of them dual-income couples). As leisure time contracted among skilled workers between 1985 and 2005, say the authors, those who could afford to cut the commute bought homes in urban centers, driving up prices and gentrifying neighborhoods.

Source: National Bureau of Economic Research, Bright Minds, Big Rent: Gentrification and the Rising Returns to Skill, Working Paper 21729 ($5)

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