After a Starbucks opens in town, housing prices tend to rise, Harvard study finds

By Thomas Franck of CNBC. Excerpts:

"Key Points

• A new Harvard Business School paper uses Yelp data to find that the entry of each Starbucks into a ZIP code is associated with a 0.5 percent increase in housing prices within a year.
• “The presence of a Starbucks is far less important than whether the community has people who consume Starbucks,” the paper found.
• The economists say the study is the first of its kind to track gentrification using a platform such as Yelp, a potential new tool for policymakers hoping to monitor housing prices."

"It’s not clear whether housing prices are rising due to the Starbucks opening itself or simply because more affluent customers that would go to the coffee chain have moved into the area.

Harvard economics professor Edward Glaeser said Yelp data reveals it may be the latter. The study found that each 10-unit increase in the number of reviews is associated with a 1.4 percent increase in housing prices in the ZIP code.

“The most natural hypothesis to us is that restaurants respond to exogenous changes in neighborhood composition, not that restaurant availability is driving neighborhood change,” the paper concludes.
This is the broader point of the paper, which surmises that gentrification is “strongly associated” with increases in the numbers of grocery stores, cafes, restaurants and bars."

"What remains uncertain, though, is any idea of causality, Glaeser wrote.

“Yet, it seems true that Yelp establishments from 2007-2011 predict changes in education levels over the next five years, but education from 2007 to 2011 does not predict increases in the number of Yelp establishments, once we control for the initial level of Yelp establishments.”

So Starbucks may not be causing gentrification, but its arrival may confirm the gentrification trend.

“The presence of a Starbucks is far less important than whether the community has people who consume Starbucks,” Glaeser writes in the paper. “Consequently, we think that this variable is likely to be a proxy for gentrification itself.”"