Gentrification can bring economic investment to low-income neighborhoods, but not all residents experience the benefits of that investment equally. Such neighborhood change often attracts new residents with higher incomes and displaces those with lower incomes, who disproportionately tend to be renters and people of color (PDF).
Because it can drive displacement, gentrification can exacerbate the racial wealth gap, which stems from decades of systemic policies that have prevented Black and other people of color from accessing the same wealth-building opportunities—such as access to careers with higher incomes and homeownership—as white people.
In recent years, the West End and Visitation Park neighborhoods of St. Louis have begun to see signs of gentrification. These historically Black communities are experiencing increased economic investment, rising rent and housing prices, and a growing white and higher-income population. Absent any intervention, these forces of economic development and chance could displace long-time Black residents.
However, one nonprofit community development intermediary and funder in St. Louis, Missouri, Invest STL, is piloting Rooted, Cultivating Black Wealth in Place, an initiative aimed at combating displacement in two historically Black neighborhoods. The Urban Institute is evaluating the program to assess its impact on displacement risk and wealth building. The analysis will also uncover financial planners’ role in helping beneficiaries pursue these outcomes. And if this pilot is successful, scaling it could help address the racial wealth gap more broadly.
The link between the racial wealth gap, economic development, and displacement
The Black-white racial wealth gap is rooted in decades of policies such as redlining, racially restrictive covenants, and job discrimination. Even with the end of these policies on paper, the homeownership gap is now greater than it was in 1960, and Black people are most likely to be renters and have lower incomes. Shock events like natural disasters, financial crises, and gentrification exacerbate these patterns and intergenerational inequities.
Because of Black and renter households’ lower incomes and wealth accumulation, they are especially vulnerable to displacement (PDF). Seattle, Nashville, and many other cities show patterns of increasing costs of living displacing these groups of community members.
This is true in St. Louis, too. Invest STL conducted a displacement analysis of the West End and Visitation Park neighborhoods based on the Uprooted Project’s model. It found both neighborhoods have experienced significant demographic change since 2000, a key signal of gentrification with the potential for displacement.
In addition, these neighborhoods are experiencing either an acceleration in their housing market or are located adjacent to a census tract with an accelerating housing market—a separate sign of gentrification.
In West End and Visitation Park, where most residents fall into these categories, the trends mean these entire communities are susceptible to displacement.
This can further widen the racial wealth gap, because data show people who are displaced from Black communities generally move to neighborhoods with less economic investment.
How wealth building could reduce the risk of displacement
Invest STL’s pilot program aims to prevent Black residents from being displaced by helping them build wealth. It will give 50 Black households $2,000 each to spend on debt mitigation and immediate financial needs and $20,000 to invest. Recipients can spend the funds on property purchases, property improvements, small business investments, and new investment accounts. Each participant will receive access to a financial planner and estate planning support.
Evidence from the pandemic suggests direct cash transfers can help stabilize people inclusively and equitably. Though income alone does not lead to long-term wealth building, it can contribute. The Rooted wealth-building initiative has some similarities to income-focused direct cash transfer programs through its provision of $2,000 to meet immediate financial needs.
But Rooted goes further by adapting the direct cash transfer model to help participants achieve upward mobility. In addition to $2,000 cash to cover short-term needs, it provides a large sum for them to invest and build wealth. It specifies how the money must be used, the investments are focused at the neighborhood level, the money is offered up front, and it is a larger sum than many other cash programs—all elements that non only stabilize residents, but will also yield them long-term benefits.
What comes next?
Evaluating the impact of this project is critical for quantifying the potential of wealth building to combat the effects of gentrification. Over a three-year period (ending in 2025), Urban will assess its implementation and outcomes—including whether this could be a viable strategy for closing the racial wealth gap more broadly.
To assess the impact of this financial intervention, Urban will observe how beneficiaries invested their money, whether through a property purchase, property improvements, small-business investments, or a new financial account. From these investments, Urban will determine whether the investment increased wealth for the beneficiary and, in turn, whether any additional wealth accumulation from this financial intervention reduced their risk of displacement. This pilot will also present an opportunity to understand financial counselors’ role in helping beneficiaries achieve these goals.
Time will tell whether the model can decouple racialized displacement from economic development. If successful, the project would give local policymakers an additional tool to fight the harmful effects of gentrification and advance equitable growth.