By Su Mon
Over the past decades, many neighborhoods in Chicago have changed. Often, these changes are brought by gentrification, the "socioeconomic upgrading of a previously low-income neighborhood characterized by the influx of higher socioeconomic status residents and an increase in housing prices" (Ding and Hwang 29). Although this may sound positive, because it improves low-income communities and brings in revenue, it is far more controversial. Gentrification affects the community financially and culturally in both positive and negative ways. Community members and political officials argue that gentrification brings improvement to the community.
According to "The Consequences of Gentrification: A Focus Residents’ Financial Health in Philadelphia" written by Lei Ding and Jackelyn Hwang, gentrification improves economic status and increases the labor market. As the neighborhood continues to grow, more restaurants, bars, and stores open. These new businesses provide new jobs for the community, bring in revenue, increase property values, and attract more people to move in. New lending institutions come in and provide access to financial services.
Increased home values encourage mortgage borrowers to continue their investment because their home is worth more and will provide a profit when sold. Gentrification also indirectly may affect credit scores. An improved economy, increased labor market, and improved access to financial services may help individuals pay loans, which may improve their credit score. Access to financial services like banks can help individuals manage their spending and provide effective planning on repaying loans through financial planning sessions.
A person's credit score is very important. It is necessary for receiving any type of loan, including loans for a car or a home. It tells the lender how reliable or unreliable you are at repaying your loans. With a higher credit score, you are more likely to have a lower interest rate on your loans, which helps you save money over time. Studies show that "Residents who do not move from gentrifying neighborhoods experience an average increase of 11.3 points in their Equifax risk scores" (Ding and Hwang 36).
Despite the benefits of gentrification, there are multiple downsides that concern many community members and political officials. Gentrification increases the cost of living in the neighborhood. Increased rent, property taxes, and rising costs of living may cause financially vulnerable residents to leave. Difficulty in paying rent, property taxes, or other credit accounts can hurt lower income families' financial health and credit scores. Less advantaged residents may have to move to lower income neighborhoods with fewer opportunities for financial services. The correlation between gentrification and displacement is concerning for many critics. Research by the UC Berkeley Urban Displacement Project found a strong link between gentrification and displacement in a high-gentrification city like San Francisco. Nearly 26% of the families surveyed in the UC Berkeley study are at risk of displacement because of gentrification.