This entry was posted on 3/1/2006 11:55 PM.

Gentrification.  As an abstract idea it can have so many connotations, but what does it really mean?   With today’s entry I will write about how the stage is set for gentrification to start.

 In the beginning, an economy is strong and people need places to live and grow their businesses.  So people build houses or commercial buildings or both to meet the strong demand.  In the area in which they build, they put in a solid infrastructure, and use good construction.  The community is vibrant and economically viable.  People invest in real estate.  They invest their money into rental houses, apartment buildings, and commercial buildings.

 For a number of possible reasons, the economy in this area starts to falter.  Many people quit wanting to live in it and businesses don’t make as much money as before.  The people who invested their money in real estate when the community was prosperous start losing money.  When investors realize their property is losing value instead of gaining value, they stop seeing repairs and maintenance as increasing the value of their investments.

 Once property values start sliding downwards, many property owners stop improving, or even maintaining, their buildings.  This pulls down the value of neighboring properties and the property values spiral downwards.  When single-family houses can’t bring much of a price they are divided up into rental units.  Many property owners get all the rental income they can out of buildings without putting much back into maintenance until they have squeezed all the value they can out of the properties.  When buildings are no longer rentable they are abandoned.  Other houses and stores are abandoned when their owners cannot make the payments and are foreclosed on.  Unlike in more prosperous times, there is not much of a market for foreclosed properties.  As this process continues, the number of abandoned and dilapidated houses increases.  And now the stage is set.

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