Gentrification

[mustachioso]

Political views aside, is there any way to put a value on gentrification for home price or rent increase?

For example, I've noticed the westside of Costa Mesa, CA seems to be set on removing low income residences for luxury apartments and condos.

examples:
1. Low income housing being displaced by luxury residential
  * This is the article that caught my eye to look into the area further (http://abc7.com/news/oc-motel-demolition-to-displace-low-income-families/1046856/)
2. Current industrial has been re-zoned for residential. part of the "westside re-vitalization committee"
3. Sober living homes being heavily restricted / closed
4. The obvious: situated a mile from the beach, near Irvine (jobs), Newport Beach (avg home price >2M), Huntington beach, etc


More:
http://articles.dailypilot.com/2013-10-24/news/tn-dpt-me-1025-rsi-new-house-development-20131024_1_rsi-development-homes-energy-star

http://www.richmondamerican.com/California/Orange-County-new-homes/Costa-Mesa/Maple-Crossing/

http://www.latimes.com/tn-dpt-me-0507-costa-mesa-council-20150506-story.html

[Poorman]

Investing in gentrifying areas can lead to some big gains in appreciation, but I don't think there is a reliable way to put a value on it.  I'm sure there are some large commercial real estate companies that have a model for it, but at best it's an educated guess.  It would completely depend on what type of property you buy, how it is situated, and what value the market places on it after gentrification has run its course.

Gentrification tends to happen faster near market peaks when property can be sold at a premium, so I think the best way to play it is to buy near the bottom of a crash in an area that has a strong chance of gentrifying, then sell near the market peak.  Then you capitalize on both the market cycle and the gentrification.  That should give you a shot at out-sized returns.

At the current time, we are well into the real estate up cycle, so I think the better play would be to find an under performing property and turn it around (in essence take part in the gentrification), then either sell out or raise rents to the new gentrified level.

Both of these strategies, the buy-and-hold and the fix-and-flip, can be used in non-gentrifying markets as well, but the idea is to utilize them in a gentrifying area to supercharge the returns.

[sobezen]

San Francisco is a prime example of gentrification and it is going to continue despite widespread protests from supporters of low income and highly subsidized housing. Entire districts in the City (SOMA, Mission, Richmond, Sunset, Marina, etc) are being impacted. The simple reason is the incredible demand in the City. Regardless of the type of housing, be it a single family, multi-unit, luxury condo, or even mixed-use structure. Speaking strictly from analyzing SF, gentrification occurred partly due to businesses (reference tech companies in SF like Twitter, Uber, LinkedIn, et al) being offered significant tax incentives by the SF Mayor's office. Add the significant influx of highly skilled and well compensated tech workers flocking to the City, is it any surprise housing prices (including rents) are the highest in the Nation? Even without the dramatic increase of tech workers, professionals from various industries such as medicine, law, finance and of course, small business are in abundance in SF! As a long-time native resident I am not remotely surprised by the increasing gentrification occurring throughout the entire City. The challenge is finding balance without creating highly costly entitlement programs to support greater low income housing. In a few days we are voting and it will be interesting to see the voter results.