The Consequences of Gentrification: A Focus on Residents’ Financial Health in Philadelphia

Abstract

(ProQuest: ... denotes formulae omitted.)IntroductionDebates surrounding the consequences of gentrification have focused largely on the displacement of incumbent residents, though recent studies generally have not found evidence that lessadvantaged residents in gentrifying neighborhoods move at a significantly higher rate than similar households in nongentrifying neighborhoods (Ding, Hwang, and Divringi, 2016; Ellen and O'Regan, 2011; Freeman, 2005; Freeman and Braconi, 2004; McKinnish, Walsh, and White, 2010; Vigdor, 2002). Gentrification, the socioeconomic upgrading of a previously low-income central city neighborhood, however, may affect the social and economic welfare of the residents in gentrifying neighborhoods in ways beyond just residential displacement.In this article, we contribute to this body of research by examining the relationship between gentrification and the financial health among residents, measured by individuals' credit scores, in Philadelphia from 2002 to 2014. We use a unique individual-level data set-the Federal Reserve Bank of New York Consumer Credit Panel/Equifax (hereafter noted as CCP)-and more precise gentrification measures in the city of Philadelphia. The CCP data provide extensive information on residential location and consumer financial health and credit use, which enables us to observe residents' mobility patterns and how their financial status changes in relation to the changing characteristics of the neighborhood where they live, including gentrification.Gentrification could affect residents' financial health indirectly in many ways, though existing studies do not suggest a direct link between gentrification and residents' credit scores. With the inflow of new lending institutions and improved access to financial services that can accompany gentrification, existing residents in gentrifying neighborhoods could gain improved access to mainstream financial products. Furthermore, gentrification could lead to increased labor market opportunities if the local economy improves, which could also help people make debt payments on time and improve their credit scores. Given the rising home values and the resulting increased home equity that often come with gentrification, existing mortgage borrowers may have greater incentive to keep current with their mortgage, which would help maintain or improve their financial health status. The rising housing and living costs that come with gentrification, however, could cause liquidity problems for many residents in gentrifying neighborhoods, especially those who are more financially vulnerable. Such liquidity problems could be manifested by increased levels of delinquencies on credit payments, tax foreclosures, evictions, and bankruptcies, all of which would negatively affect an individual's financial health. Further, financially vulnerable residents who move from gentrifying neighborhoods as a result of the rising costs accrue additional financial burdens from moving and may also face additional financial burdens from broader declines in affordability as neighborhoods gentrify throughout the city. Nonetheless, individuals who expect to experience larger improvements in financial health may may be more likely than others to live in gentrifying neighborhoods, but individuals who anticipate large decreases in their financial health may be more likely to move from gentrifying neighborhoods. Despite reasons to believe that gentrification is associated with residents' financial health outcomes, few studies have examined this relationship.In this study, we examine the relationship between gentrification and residents' financial health in general and across different subpopulations based on a random sample of adult residents in Philadelphia from 2002 to 2014. We find that residents who do not move from gentrifying neighborhoods experience an average increase of 11.3 points in their Equifax risk scores, a widely used credit score and our measure of individuals' financial health (higher scores indicate better financial health), over 3 years. …