Restrictive zoning and gentrification go hand in hand

When you can't add more housing, rents have to rise to push people out

Cabbagetown (City of Toronto Archives)

People often think of “gentrification” as “new buildings” - they’re expensive, and that’s what causes higher-income people to move into a lower-income neighbourhood, right?

In fact it’s almost exactly the opposite: lack of new housing results in gentrification, i.e. high-income households moving into lower-income neighbourhoods and displacing lower-income households.

Urban Institute study:

Our examination reveals that, in many metro areas, high housing costs — resulting from a lack of available housing — cause affluent buyers to look for homes in low- and moderate-income (LMI) neighborhoods. That means cities’ housing supply can determine how fast gentrification may occur.

In metro areas with a high price-to-income ratio, even high-income borrowers are stretching to purchase a home, and they are increasingly venturing into LMI areas. Middle- and low-income borrowers are finding it increasingly difficult to buy in LMI areas, as prices for low-price homes have increased faster than prices for more expensive homes. These areas with a high price-to-income ratio tend to have a lower homeownership rate than the national average. This is particularly true in California metro areas, but the New York and Miami areas also show signs of high-income movement in LMI neighborhoods and somewhat depressed overall homeownership rates.

For example, a recent story from Toronto:

Toronto is in the midst of a housing crisis that experts have pinned on a lack of supply, but it's damn near impossible to get anything built when rich people reside nearby.

Residents of the city's wealthy Cabbagetown neighbourhood are up in arms over a condo development planned to rise ten storeys from a site on Parliament Street just north of Carlton, and their campaign to cancel the developer's plans is receiving backlash from the public.

*record scratch* Wait, what? How did a neighbourhood called "Cabbagetown" became a wealthy neighbourhood? Wikipedia:

Cabbagetown's name derives from the Irish immigrants who moved to the neighbourhood beginning in the late 1840s, said to have been so poor that they grew cabbage in their front yards. Canadian writer Hugh Garner's novel, Cabbagetown, depicted life in the neighbourhood during the Great Depression.

It was poor right up to the 1960s.

The construction of new housing projects was halted in the 1970s. In Don Mount this effort was led by Karl Jaffary, who was elected to city council in the 1969 municipal election along with a group of like-minded councillors who opposed sweeping urban renewal plans. John Sewell led the effort to preserve Trefann Court, which covered the southern section of the original Cabbagetown. A bylaw was approved in the 1970s to ban any building higher than four storeys, in reaction to the high density high-rises being built in neighbouring St. James Town.

Cabbagetown was gentrified by affluent professionals, beginning in the 1970s. Many residents restored small Victorian row houses and became community activists.

Restrictive zoning and gentrification go hand in hand. Once you can't add more housing to an area, prices and rents need to rise to push people out.