A Personal Finance Fix to the Gentrification Problem
By: Rocco Pendola
Tags: Cities, Money, Los Angeles, Housing, Personal Finance

I write a fair bit about my neighborhood. It’s part of East Hollywood in the heart of Los Angeles, a 10-to-15-minute drive (without traffic) from Downtown and Skid Row. And it’s gentrifying quickly. Like much of Los Angeles, mostly luxury (some affordable), mixed-use apartment buildings continue to rise nearly everywhere in my stomping grounds. The pandemic doesn’t appear to have slowed construction.

The image with the pretty leaves and grand houses illustrates two things — yeah, we have fall in Los Angeles and my neighborhood appears fancy:

My neighborhood is unique — classic and beautiful Los Angeles Craftsman homes sit in a relative oasis over a couple blocks, surrounded by gritty East Hollywood and its mainly multi-unit apartment buildings. These houses, including the one that’s on the market, have skyrocketed in value over the last decade.

The aforementioned apartment development also surrounds these Craftsman homes. Within just a few blocks of where I live, at least five mixed-use apartment complexes — at varying stages of completion — have replaced everything from strip malls to single-family homes or duplexes. One is low-income veterans housing. The others are market rate or a mix of market rate and affordable housing.

I don’t have a problem with this. In fact, there’s credible research, particularly from Columbia University’s Lance Freeman, that illustrates a more nuanced view of gentrification.

Indigenous residents of gentrifying communities sometimes perceive gentrification as favorable, in part because of the increased amenities neighborhood redevelopment tends to bring. While this is great, we can’t let the positive effects of gentrification simply trickle down and just randomly happen to benefit residents who not only face potential displacement, but witness their neighborhoods undergo profound practical and cultural change.

I’m all about ideas to flip the gentrification dynamic around. To start with the existing community and “the real order that is struggling to exist and to be served” and use it to fuel positive — and inclusive — neighborhood change.

So my first dumb, idealistic, and unrealistic idea.

As it stands, when new development happens one of the few considerations politicians, planners, and policymakers make for the gentrifying community’s existing residents are developer incentives. For example, a city will allow a developer to build at increased densities in exchange for affordable housing on-site or at another location in the same city.

While this is great, it doesn’t address keeping current residents in the community while ensuring they can thrive in what ends up being their new neighborhood.

I propose developer incentives — increased density, building a floor or two higher than typically allowed — that would require significant considerations for existing residents:

Reserve the equivalent of an entire floor of new development for low-income residents who live in the neighborhood.

Allow only residents of the gentrifying neighborhood (not the entire city) to enter a lottery to rent these units at affordable rates.

Maintain the apartments they vacate at affordable rates for the next tenant.

Subsidize landlords to help facilitate this form of rent stabilization.

Provide residents who move into the new, affordable units with a one-time cash stipend of ($10,000, $25,000, $50,000?) under the condition that they meet with a personal finance counselor to help assess their personal financial situation and suggest how to best direct these funds.

As I write this — and, again, this is a rough sketch designed to get ideas flowing — I realize the shortcomings.

First, it appears I make the assumption that existing residents would welcome the idea of leaving their current home in exchange for a brand new luxury apartment. For several reasons (cultural and historical among them), this might not be the case.

This said, some residents would jump at the opportunity. To that end, it’s a better ending than being displaced with no place to go. Or, at least, a significant struggle to figure out where and how you’re going to live next.

Second, it feels top down to give somebody money and assume they need help managing it.

There must be a strong community focus. Organizers need to go in and target residents not only with need, but who willingly and happily opt into this type of program. Place focus on empowering people along several lines by:

Allowing them to actively take part in the change their neighborhood is undergoing.

Acknowledging the financial implications of a gentrifying neighborhood, particularly for existing, low-income residents, and working to mitigate the potential detrimental impacts.

Providing low-income residents with something we tend to completely ignore — financial education usually only accessible to middle and upper middle class people.

Gentrification happens whether we like it or not. As it stands, we act like we care about what happens to low-income neighborhoods in the process. But we don’t. We pay lip service to social concerns. We placate existing residents. Or worse, we do nothing. We bulldoze neighborhoods and force people to fend for themselves.

Under my plan (which is back of the envelope at this point), we target people who need protection from displacement and attendant financial assistance most. We preserve affordable housing not just in the new development, but in the existing housing stock. And, most importantly, we actually put people on the ground in these neighborhoods to figure out who needs and wants what, with a focus on neighborhood preservation — to the greatest, most realistic extent possible — and economic empowerment.

Let’s digest this and continue the conversation with an extension of this idea and others in future articles. My broad approach looks to connect the things I care about most — personal finance, inequality, neighborhood development, and well-being. I aim to use these articles to help flesh out the connections and make them come alive.