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  • On Gentrification effect and the local business


    During the last decades, neighborhoods in a number of cities both in the US and around the world had experienced gentrification — a dramatic shift in their demographical and economical composition towards better-educated and affluent residents. The classical explanation of the phenomena stands with the idea of high-income households became disappointed in the suburban style of life, and made a decision to relocate back to the downtowns. While this process leads directly to the rise of taxable income for the cities, it also results in the large shift of how cities are planned and used, leading to the growth of the local businesses, and the reduction of car traffic. Potentially, this might also might offer an opportunity for a socioeconomic, racial and ethnic integration. The concentrated poverty, that is thought to diminish the chances of the poor, might be reduced if middle-income households settle in formerly poor neighborhoods(Wilson 2012) It also appears that local residents could benefit from this process if it stimulates more retail and cultural service; Presence of residence with the larger political influence may help the community to achieve better public services. Local residents may also benefit if gentrification contributes to local job creation and enhances local demand, adding extra profit to local businesses.

    However, despite those potential advantages, local communities and activists often oppose gentrification. Their main concerns are that low-income households are vulnerable to the displacement resulting from rising apartment rents. A common response for the activists is to pressure the local government for more affordable housing development and legal/financial assistance programs for local residents establishment. Nowadays, those concerns are widely spread and articulated in media, bringing more activists and concerned citizens to the topic, and creating multiple treads of the same discussion over the pros and cons of gentrification.

    The concerns on this process are equally true for the local businesses, which are mostly one-shop enterprises, oriented on the needs and demands of the low-income clientele. As such, they have some concerns on matching the needs and interests of those new customers with the higher demand and different preferences. Of course, business is also affected by the rise of the rent price. Struggle with those two problems at once might make local businesses either to relocate or to be closed, being replaced with more expensive and high-end ones. This, again, affects local residents, shrinking down their access to affordable retail and service. As reported, in 2015 this process led to the unprecedented number of closings between small local business.(Ehrenhalt Alan)

    Paradoxically, this comes with the fact that gentrification of the neighborhood leads to the sprawl of the local small businesses and even strongly associated with the hipster culture of local coffee shops, restaurants and (cooperative) groceries. Moreover, Ironically, those new businesses tends to rebuild the 'artisan' flavor of mom-and-pop venues. "Prosperous residents who were drawn to these neighborhoods in part because of the quaint mom-and-pop stores are finding that their own presence helps drive the stores away", - Ehrenjalt says. This contradiction might be described as part of a much larger phenomenon: hypergentrification, defined as a mature stage in the gentrification process when merely affluent residents are displaced by the truly rich, and when commercial real estate properties reach a market value that makes it difficult for anyone but a national or global corporation to pay the asking price.

    To address this issue, several laws and policies were provided by the local government. From 1945 to 1963 New York City actually had a commercial rent-control law on the books, presented amid fears of wartime rent gouging, yet was used in only a few cases. In 1980's Small Business Survival Act (SBSA) was presented, providing that tenants in good standing had the right to negotiate 10-year leases with their landlords and would have imposed binding arbitration when no deal could be reached. This law was never submitted, end even nowadays, under the governance of the current major, situation did not change much. Gale Brewer, Manhattan borough President, arguing that this initiative will never pass, proposed a milder small business protection project, which protects tenants for as long as one year, yet this initiative did not find large support nor from either local businesses nor from real estate.

    To be said, there is no single good and working policy example on this issue: Some cities introduce a surcharge on the vacant property over and above the property tax; San Francisco has a law that, under certain circumstances, allows neighborhoods to vote on which chain stores can locate in the area. This last approach is unlikely to attract support in other cities, yet it brings us back to the roots of the problem, - residents, both locals, and new gentrifiers. It might be true that if the residents who patronize a neighborhood’s businesses are deemed to have some rights, then the idea of providing some stability to commercial life might be considered from the other perspective.(Ehrenhalt Alan) Yet, this will require some cooperation and co-understanding between two groups of residents to be grown in the very first years of particular neighborhood's gentrification.

    In order to develop this kind of pro-active participation and cooperation, one might find useful to understand the probabilities, where this process might start next, and what are the general mechanisms of the gentrification in terms of the local business. Potentially, this may lead to the better understanding of how local businesses could be improved or transformed to survive the realities of the new market and serve both old residents and newcomers for the benefit of all.

    Literature review

    While at first Gentrification was seen by many as a solution for the large set of urban problems, , including the rise on taxation for the cities and revitalization of the low-income central parts of the cities, as well as an opportunity for the higher socioeconomic, racial and ethnic integration, it appears to be the most contradictory process reshaping our cities. Local communities and activists argue that this process leads to the displacement of the most vulnerable low-income households, destroying local communities and business. (Freeman)

    Scientists have been drawn to the phenomenon of gentrification since it first emerged during the 1970s as a major force shaping urban neighborhoods. The researchers have several interests in the phenomenon. First, they sough to investigate whatever the specific city or neighborhood is affected, and if so, to which extend, to gentrification, and whatever we can detect, or predict the process of gentrification with some general knowledge or data, being primarily focused on the demographics of the gentrification.(Hammel),

    The other direction reflects general fears on the effects of gentrification. Several studies attempted to measure the level to which gentrification might harm the communities and vulnerable households, by leading to the displacement of the jobs in the close proximity. (Vigdor), (Atkinson)

    However, there is no much of academical discussion on the economic aspect of gentrification in terms of local business, to e surprise. This might be partly explained by the lack of the actual data for this analysis (Stacy) On the other hand, this subject is well-articulated in media. This year, for example, was claimed as the year with the unexampled number of local business closed due to the rocketing rent price, affected by gentrification. (Ehrenhalt Alan). Yet, small business by itself is a subject for research. Indeed, there is a plenty of research on small business in the urban environment, including interesting models and techniques on the spatial aggregation and prediction. For example, Ceasar Hidalgo proposes a simple predictive algorithm on the pairing of the venues (Hidalgo). The Livehood project develops the spatial networks technique, which allows to reveal "digital" representation of the neighborhoods measure the dynamics of their transformation.(Cranshaw). While being of great potential, those techniques were never implemented to undestand nor to measure the process of gentrification