Real-Time View of Gentrification

The crowd-sourced review website Yelp can be useful for locating where to eat and shop, and for homebuyers researching what amenities a housing market has to offer. Now Yelp and other digital platforms are being considered a useful, complementary data tool for developers, builders, and business owners to use. New research suggests that Yelp can predict which markets are attracting buyers. Such data tracking may help anticipate opportunities for economic growth in a specific neighborhood by locating gentrifying activity in particular areas in real time.

A new working paper from the Harvard Business School, “Nowcasting Gentrification,” shows that a burgeoning field of research is dedicated to understanding how digital platform data, including Yelp data, can measure gentrification and potentially anticipate economic trends, financial opportunity, and business-friendly environments.

The paper suggests that Yelp’s measures of local business activity, including entries and reviews of new cafés, grocery stores, and bars in a community, provides leading indicators for housing price changes and that, typically, home prices increase with the arrival of such establishments.

The link between higher education levels, higher income levels, and higher housing costs has been established. The authors assert that individuals in this group tend to be attracted to up-and-coming neighborhoods. They point out that individuals who flock to new and popular community amenities and businesses can be an early sign of up-and-coming neighborhoods.