An Australian View of the Rent Gap Hypothesis

Abstract

Abstract Of the several competing theories of gentrification on offer, Neil Smith's rent gap hypothesis has attracted the most attention, probably because it is the most formal and ambitious in its claims. The three key aspects of the theory include: (1) the proposition that gentrification must be preceded by the formation of a rent gap in the inner city property market, (2) the “capital switching”hypothesis, and, (3) the claim that the beginnings of gentrification and coincided with a capitalist crisis of overproduction. Each of these propositions is evaluated with data assembled for metropolitan Adelaide, the state capital of South Australia. Shifts in matched land and house price gradients between 1970–85 reveal the existence of a well-formed rent gap in Adelaide by the late 1960s and its steady contraction thereafter. Because of the stratagems adopted by the South Australian and local governments for closing the rent gap, gentrification represented the third-best response so far as capital was concerned. When the flow of housing investment within the urban economy is analyzed, Smith's portrayal of gentrification as a “back to the city movement of capital”receives qualified support. The only incontrovertible evidence for the redeployment of housing investment from the outer to the inner suburbs relates to a significant change in public housing strategy. While investment in rehabilitation and townhouse production has been mildly countercyclical on at least one occasion during the last twenty years, the postulated connection between gentrification and crisis conditions in the national or regional economy remains in doubt. The purposive intervention by the state government in concert with the city has been a much more potent agent for gentrification.