Winners and Loser In Gentrification

By EGP Editorial

Much is being said and will continue to be said about the displacement of residents when real estate in a neighborhood suddenly becomes hot.

As property values go up and buyers are willing to pay more, a growing number of residents find they are facing higher rents and the real prospect of dislocation,

Depending on who’s talking, someone in these transactions is doing something wrong; or right.

Unfortunately, there will always be winners and losers when real estate is involved.

But is it fair to criticize homeowners who want to sell their properties for more than what they were worth during the mortgage crisis?

Studies have shown that for Latinos, their greatest source of wealth comes from home ownership. It’s what they depend on to get them through their retirement years or to pay for a child’s college education.

On the flip side, the cost of rent is a deterrent to eventual home ownership or saving for the future, because a large portion of a lower-wage workers’ income goes to cover housing expenses.

The issue has become more critical as housing has become less affordable and fewer affordable housing units are being built.

Residential housing is not the only area where the impact of “gentrification” is being felt.

In Highland Park, small businesses are being displaced when commercial buildings are sold to investors who buy at top prices for commercial property in hot areas.

Many small businesses that have managed to survive during tough economic times now find themselves on the outs because they did not have long-term leases in place and cannot afford the higher rents developers need to charge to cover their costs and to see a return on their investment.

In many ways, the unfolding story is one that sheds light on the inequality of business acumen that exists in this changing market. Small business owners used to doing business on a handshake and a promise are finding that hard work alone will not keep them alive.

The reality is that many small shops and cafes just don’t have the resources to be able to move and pay rental deposits for a new location. They work on lean margins, because for a long time the majority of their customers were low-income and unable to afford high prices.

It’s a vicious circle.

Who’s to blame? There is no easy answer.

New mortgages must be paid; taxes and the cost of refurbishing old buildings to their former glory require large investment of capital.

What’s the solution? Again, there’s no easy answer.

What’s clear is that small business owners, many who are Latino or Asian and have English as second language, need assistance gaining the business skill sets that will allow them to protect their businesses and to stay in business.

To often, local city officials talk about helping small businesses, but that’s as far as it gets.

It’s not likely to go over well, but perhaps what we need is to require new businesses owners applying for their first business license to attend a boot camp that will help them get the skills they need, like what’s involved in leasing property, in this marketplace.

As a society, it’s in our interest for our government to provide services to small business owners who are in danger of losing their investments and equity, after all they do the bulk of hiring in this country..

If thi suggestion sounds to paternalistic, we’re open to suggestions.

We believe that property owners should be entitled to sell and new owners should be entitled to make a reasonable return on their investment.

It’s a tough situation we at EGP know first hand. The offices where we are located have been sold and we must undertake the heavy cost of moving to another location.

It’s no ones fault; it’s just the way things are. We understand the financial risk investors are taking when they enter a new market, and empathize with those who feel the burden of paying for the risk.

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August 20, 2015  Copyright © 2012 Eastern Group Publications, Inc.

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