Source: Foundation for Economic Education
by Eugenio Garza
“Gentrification has cultural, historical, legal, ethical, and social dimensions. At its core, it is an economic phenomenon. And a fairly straightforward one: as demand increases for housing in attractive, dynamic, and safe neighborhoods, so do average rents. With the entrance of more affluent residents, local business owners respond to new incentives and offer goods and services catering to the new arrivals, almost always increasing prices (and sometimes even increasing quality). Due to the inelastic nature of housing supply and regulations that hinder the expansion of available housing, market prices rise in ways that can seem ‘excessive’ to the public. Restrictive regulations and bureaucratization of the housing market, such as the lengthy and costly legal processes for lease disputes, tax structures that discourage investment in rental housing, and strict density restrictions, prevent agile increase in housing supply. With supply constrained, higher rents are not surprising.” (07/21/25)