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Starbucks Tends To Boost Housing Prices

In a study done by Harvard Business School, each new Starbucks boosts the value of housing prices in a neighborhood. And not by a small amount.

A new Starbucks introduced into a ZIP code reported a 0.5 percent increase in home prices. It’s not clear whether housing prices are rising due to the Starbucks, or just because the Starbucks is bringing more affluent people to the area.

Harvard economics professor Edward Glaeser said Yelp data reveals it may be the latter. The study found that each 10-unit increase in the number of reviews is associated with a 1.4 percent increase in housing prices in the ZIP code.

“The most natural hypothesis to us is that restaurants respond to exogenous changes in neighborhood composition, not that restaurant availability is driving neighborhood change,” the paper concludes.

Gentrification is associated with grocery stores, restaruants, and generally more expensive activities. The people will go where they feel is a perfect balance between fun and affordability.

A hot topic in policy debates worldwide, gentrification is defined as the process of rebuilding homes and businesses accompanied by an influx of middle-class or affluent people at the expense of earlier, often more impoverished residents. The lack of consistent data is the main issue in determining if the effects of gentrification are positive or negative.

This study shows that there are better ways to analyze the growth of gentrification.

“Economists have long used government data from statistical agencies such as the Bureau of Labor Statistics and Census Bureau for analyzing policy and the economy — these data sources are invaluable but come with important limitations,” Michael Luca, an associate professor at HBS, told CNBC in an email.

Data collected from Yelp compliments the existing data by providing real-time updates on local stores as well as an insight into how neighborhoods change during gentrification.

“Yelp data has the advantage of being more up to date than most official government statistics,” the economist added. “It also contains metrics on things like cuisine, prices, and ratings that can be difficult to observe otherwise.”

“Yet, it seems true that Yelp establishments from 2007-2011 predict changes in education levels over the next five years, but education from 2007 to 2011 does not predict increases in the number of Yelp establishments, once we control for the initial level of Yelp establishments.”

So Starbucks may not be causing gentrification, but its arrival may confirm the gentrification trend. One of the reasons gentrification is becoming more common, is because of the expansion of Starbucks.

“The presence of a Starbucks is far less important than whether the community has people who consume Starbucks,” Glaeser writes in the paper. “Consequently, we think that this variable is likely to be a proxy for gentrification itself.”

Posted by: kregkurt on September 7, 2018
Posted in: Uncategorized