Opening a Starbucks Raises Neighborhood Home Prices, Says Harvard Study
Yelp reviews also correlated with increased housing costs
Gentrification is an omnipresent threat to any urban neighborhood. It starts with subtle shifts in area demographics, as outsiders take advantage of lower rents. Gradually, storefronts start to change. Before you know it, some of the people who’ve called a place home for years (sometimes even for generations) are priced out. Now, a Harvard Business School study hopes to reveal exactly how these sorts of transformations take place.
What they found may shock you: Starbucks is an indicator of gentrification. The study seems to have already confirmed the conventional wisdom that the introduction of the coffee chain to a neighborhood is synonymous with higher rent. By looking at business data from Yelp coupled with housing information from the Federal Housing Finance Agency, researchers were able to conclude that the opening of a new Starbucks in a given ZIP code raises area housing prices by 0.5 percent within a year.
According to the paper, the opening of a Starbucks is likely a response to shifting demographic patterns rather than an active driver of housing demand. "The most natural hypothesis to us is that restaurants respond to exogenous changes in neighborhood composition, not that restaurant availability is driving neighborhood change," it concludes.
The study further suggests that the incidence of Yelp reviews for Starbucks is “predictive of neighborhood change.” For every ten reviews, housing prices in a given ZIP code rise 1.4 percent. That makes sense (anecdotally at least), given that the presence of people who feel the need to leave (likely angry) Yelp reviews for the newest outpost of an international coffee chain are just about the surest sign of gentrification there is.
While the correlation between overpriced coffee and overburdened renters might be the most salient (if least surprising) aspect of the study, the reliance on Yelp data could have important implications for how the hot-button issue of gentrification is studied in the future. While not as rigorously scientific as more official data sources, the service’s listings and reviews offer a more dynamic snapshot of a changing neighborhood.
“Yelp data has the advantage of being more up to date than most official government statistics," HBS associate professor Michael Luca told CNBC. "It also contains metrics on things like cuisine, prices, and ratings that can be difficult to observe otherwise."
So in other words, if you want your rent to stay cheap, steer clear of anywhere a Starbucks might open up, and definitely don’t be the kind of person who leaves passive-aggressive Yelp reviews. It’s easy to feel powerless when it comes to stemming the tide of gentrification. But if keeping your thoughts on that new restaurant or coffee shop to yourself keeps that overpriced high rise from going up, it’s worth a shot.