Yes the neighborhood will change, but it will take 10-25 years

The New York Times has an article, "A Luxury Apartment Rises in a Poor Neighborhood. What Happens Next?: Economists say rents would fall. Neighbors fear rents would rise. New research tries to find the answer," about the incursion of high priced apartments into what is otherwise a lower cost residential area.

I wasn't great at economics in college (math is pesky for me), but I am a pretty good observer and analyst and this is what I've learned* analyzing similar phenomena in DC.

• Rents won't fall because the new housing being added is targeting a different market segment compared to the pre-existing property mix
• Theoretically, over time, rents might stabilize, because supply has been added, if housing demand isn't greater than supply
• But if housing demand is greater than supply, new additions don't reduce rents
• More importantly, rents won't decrease, because a different phenomenon is occurring
• Rents will increase because the neighborhood has been repositioned from one that was not desirable to one that is desirable.
• Demand for housing in that particular neighborhood rises as a result, and so do rents.

(* What I have learned has been gained in part by incorporating apt insights by others, including commenters on the Greater Greater Washington blog, and on my own, especially from charlie.)

I've written about these issues a lot over the years.  It's what urban sociologists call the reproduction of space.

-- "The nature of high value ("strong") residential real estate markets" (2017)

Providing the right preconditions are present or can be created -- transit, accessibility, central location, attractiveness, amenities, walkability etc. -- this neighborhood will become newly integrated into the residential choice landscape at the metropolitan scale, whereas before the neighborhood hadn't been on the list of neighborhoods that people were willing to consider.

-- "The eight components of housing value" (2016)

Manayunk, Philadelphia.  There is a book on commercial district revitalization, in part about the Manayunk neighborhood of Philadelphia.

One incident he recounts is the impact of a Philadelphia Inquirer Real Estate section feature about the neighborhood, and how immediately, even the day it was published (on a Sunday), people started  visiting the neighborhood to look at houses, and how the velocity of neighborhood improvement changed.

But it takes a long time.  Over long periods of time, 10-25 years, if housing demand in the overall  market remains high, the neighborhood will change.

It takes that long, and it will wax and wane depending on the market.  E.g., on my street in DC, in 2008, houses cost under $400,000.  Now over $800,000.  But a couple years ago it peaked at even higher prices, since then it has waned a bit (and I am not exactly sure why--I think the Trump Administration's shrinkage of government has had some impact).

In 2003--when the Path and Pitfalls book was published, you could still buy a house in DC's H Street NE neighborhood for under $125,000.

Now houses cost $800,000 and up, are being subdivided into flats, etc.  There is a Whole Foods and other supermarkets, an awesome bookstore, restaurants and taverns galore, and plenty of new apartment and condominium buildings--note, mostly infill on commercially zoned property, not a change to pre-existing housing stock.

Prices will rise as neighborhoods become attractive at the metropolitan scale.  This piece is 8 years old, "Exogenous market forces impact DC's housing market" and it has some flaws.

I mixed up a couple different things going on, one of which isn't too relevant to DC.

But the basic issue is that the supply of housing is relatively fixed, especially for single family housing.  Obviously, if demand rises and supply doesn't move much, prices go up.

What I should have said succinctly is that as neighborhoods become attractive at the metropolitan scale, the highest income households seek to live there, bidding up prices, and outbidding people who make less money, even if on a relative basis, those households that are outbid are still high earners.

People outbid seek to live nearby, triggering a similar process of price appreciation.  As higher income, but not the highest income, households get displaced from the most attractive neighborhoods, in turn they move to nearby neighborhoods possessing similar characteristics, but not yet part of the metropolitan residential landscape.

They spark the process of "reproducing that neighborhood" and drive prices up.

Capital deepening.  University of British Columbia Emeritus Professor David Ley calls this process, "capital deepening."  From the Toronto Globe & Mail article, "An avalanche of money: An expert on how income disparities are reshaping Canada's metropolitan areas zeroes in on Vancouver":

"Because every time redevelopment occurs you get a substantial increase in the socio economic status of occupants … [market-rate] supply is only for high-income people. So, whenever redevelopment occurs, it means higher income people are occupying the space," says Dr. Ley. "Two things are happening: there is gentrification in the inner city, but then there's what I call 'capital deepening,' which is an area that is becoming richer."

One-over neighborhood.  Live Baltimore, the resident attraction and recruitment program, calls this the "one over neighborhood."  You can't afford to live in Federal Hill or Charles Village, so you choose to buy in the closest neighborhood to the most desirable neighborhood, the one that is most similar to it.

Displacement.  WRT displacement, there are a couple issues.  If people own and want to stay, they won't be displaced--most major cities have a dampening program on the speed at which property assessments increase taxes.

If people rent it's a different story.  Properties get upgraded or converted to owner occupied and lower income households get displaced.  But this plays out over long periods of time.

Plus long time owner households choose to cash out--it appears that they've been displaced, but they haven't, as they've chosen to leave.

In neighborhoods predominated by single family houses, displacement likely occurs more quickly.  If there is a mix of multiunits and SFH, it's a slower process.

Most cities don't have programs to maintain affordability in pre-existing multiunit buildings.  It can be abetted by portfolio investment in maintaining affordable multiunit properties, but most cities don't seem to be too active in trying to do so.

Separately, DC has a tenant right of purchase law, and some organizations exist to help apartment dwellers band together to buy properties.

The separate phenomenon of supergentrification.  New York City, San Francisco, Western Los Angeles City and County, and similar places also experience a different phenomenon, one Loretta Less calls supergentrification ("Applying the supergentrification thesis to San Francisco, Santa Monica, and other cities experiencing hyper-demand," 2014).

Super high earners, bankers, financiers, high tech start up equity participants earn multimillion dollar salaries or bonuses, and drive prices up in the most desirable areas much faster. It's not even about the one percent but the 0.1 percent, where houses are bid up from $5 million and above.