Starbucks comes by its reputation as the bellwether of gentrification honestly: Its entry into an area really does predict a measurable change in demographics.
When the coffee giant colonizes a neighborhood, home prices tend to jump. The population tends to get more educated. And younger. And whiter.
New research shows that one new Starbucks predicted an extra 0.54 percent rise in local home prices. But the study also found that’s true of all cafes.
Harvard economist Edward Glaeser and his Harvard Business School colleagues Hyunjin Kim (a doctoral candidate) and Michael Luca find it improbable that a coffee chain has direct power over the housing market. Instead, they write, it’s plausible “Starbucks locations are chosen by individuals with very good judgment about where prices are going to increase.”
There’s no chicken-or-egg dilemma here. A new Starbucks strongly predicted a jump in home prices, but rising home prices didn't strongly predict where Starbucks is going to open a new location, according to their analysis, released in a new working paper from the National Bureau of Economic Research. Starbucks doesn’t follow the gentrifiers, it paves the way for them.
An increase in bars, restaurants and cafes was associated with a more-educated population in all cities. Young people had a particularly strong association with florists, bars and barbers, while a higher concentration of white folks tended to bring a rise in restaurants, wine bars and grocery stores.
If my math is correct, in Newtown Township, where the average home price is estimated to be $400,000, a 0.54% increase equates to an increase of $2,160 in value. However, the fact that Wawa – a convenience store – wants to open in Newtown may signal a 0.92% ($3,680) increase in home prices, which would generate an extra $0.37 in yearly real estate tax income per household for the township.