Managing the Potential Undesirable Impacts of Urban Regeneration: Gentrification and Loss of Social Capital

One of the unintended consequences of urban regeneration is gentrification. Gentrification is a shift in an urban community toward wealthier residents and businesses, with consequent increases in property values. Gentrification is typically the result of investment in a community by real estate development businesses, local government, or community activists. It can and often does spur economic development, attract businesses, and lower crime rates. In addition to these potential benefits, gentrification can lead to some adverse population migration trends in which poorer residents are displaced by wealthier newcomers. In a community undergoing gentrification, the average income increases and the average family size decreases. Poorer pregentrification residents who are unable to pay the increased rents or property taxes may be driven out. Consequently, new businesses arrive to the area, which can afford the increased commercial rent. They cater specifically to a more affluent base of consumers—further increasing the appeal to higher-income migrants and decreasing accessibility to the poor.

When designing an urban regeneration project, the social aspects of the initiative should be as important as environmental and economic considerations and should be fully taken into account at the outset of project preparation. Community engagement is one way to discover, define, and address social issues pertaining to the regeneration project. As such, people with the right skill set are needed for the job.

Gentrification is a very complex matter and there are numerous arguments for and against it, as well as its social consequences for the community. It should be noted that whereas some scholars have negative views about gentrification, others simply accept it as a market reality. Some others have criticized it as social restructuring by the state or even “displacement” (Snel and others 2011). Gentrification could be led by the market or the state. Indeed, urban regeneration policies implemented by central or local governments can have a tremendous impact on gentrification, as well as on the lives of the original residents. In this section, we focus on a variety of tools that cities have used to address the problem of gentrification and access to affordable housing.

A second unwanted consequence of regeneration projects—related to gentrification and out-migration of the original population—is the loss of social capital, or community ties. Broadly speaking, social capital can be defined as a set of social norms of conduct, knowledge, mutual obligations and expectations, and reciprocity and trust that are widespread within a given region or community. The concept is also connected with social networks (Colantonio and Dixon 2011).

Social capital refers to the collective value of all “social networks” (who people know) and the inclinations that arise from these networks to do things for each other (norms of reciprocity). The term “social capital” emphasizes a wide variety of specific benefits that flow from the trust, reciprocity, information, and cooperation associated with social networks. Because social capital creates value for the people who are connected, the urban regeneration team should be concerned about how out-migration and relocation will impact economic opportunities for the population. For example, the loss of access to information flows can disrupt the relocated population by reducing opportunities to learn about jobs.

The case of Anacostia in Washington, DC, offers a good example of how to manage gentrification in the targeted neighborhood. For example, the Arthur Capper/Carrollsburg development guaranteed one-for-one replacement of demolished public housing units in the same footprint as the original development. At the Southwest Waterfront, the planning effort was crystalized in an agreement between the developer and the long-term residents by which the tenants received affordable units in the new housing development. The Yards project also includes affordable housing units.

Tools to Mitigate the Undesirable Social Impacts of Urban Regeneration

How can project managers avoid these undesirable social outcomes? This section outlines some tools that have been used in different contexts to minimize the negative impacts of urban regeneration projects.

Successful urban resettlement requires attention to density and diversity, usually in a context of rapid change. High population density is an obvious hallmark of urban life. Although population density in the urban landscape creates opportunities (such as concentrated demand for goods and services, employment, and land and other natural resources), it also creates problems, such as pollution and waste disposal. Resettlement in urban areas is often expensive because public infrastructure must be built, rehabilitated, or upgraded in an area where people are already living and working. As a consequence, even projects acquiring little land in urban areas can generate a fairly large displacement. Furthermore, even a temporary loss of land or other assets can cause severe and costly impacts.

When Is Resettlement Justified?
Even though population displacement should be avoided when possible, some urban regeneration projects might require resettlement in order to be implemented. The need for resettlement should be looked at from a cost-benefit point of view. Project planners should attempt to understand the project’s potential winners and losers. Potential gains can be manifested in terms of property value increases, tax revenues, and private investment in the area that might not otherwise occur. Potential losses may involve displaced populations and businesses, as well as hardship in accessing jobs due to distance. Some positive aspects of the regeneration projects may be hard to quantify. This includes improvements in the quality of life, quality of urban environment, and an improved image for the city. But the negative impacts, such as resettlement, will be observed by the community. The point is that resettlement is only justified if the regeneration project brings large enough gains for the city to outweigh the losses of the impacted population. In many cases, project teams can develop win-win situations, whereby the resettled population lives in improved conditions. See, for example, box on vertical resettlement in India.

Early resettlement planning is always advised. This is especially important as resettlement costs can escalate quickly in urban areas. A good practice is to base the initial project design on an assessment of social and demographic conditions and then revise it to incorporate information from public consultations. Timing is crucial, because resettlement mistakes can be especially costly in urban projects. Careful, early, and participatory planning is necessary to later avoid major revisions in respect to investments during implementation. It also helps to ensure that the displaced populations accept resettlement conditions.

Resettlement itself is invariably complex. The many tasks to be performed range from urban planning to the issuance of land acquisition notices, to provision of resettlement-site infrastructure, to payment of compensation, to provision of employment or other forms of economic rehabilitation. A substantial number of governmental agencies scattered horizontally across several jurisdictional levels are therefore likely to be involved in any operation.

Resettlement can be an opportunity for low-income communities, as it can help them gain titles to properties they occupy. Resettlement of low-income informal communities often provides opportunities for moving beyond the narrow mitigation of adverse impacts to promoting community development, security of tenure, and rational land use.

The Principle of Minimizing Displacement
Technical considerations are fundamentally important in project design, but they are not the only factors to consider. Environmental and social factors are also important. In dense urban settings, minimizing displacement is likely to reduce overall project costs and make project implementation easier. From the social perspective, resettlement costs may not simply be directly proportional to the number of displaced people. Costs depend on the type and degree of impacts. Compensating a large number of people for minor or partial land acquisition may cost far less than physically relocating a few people and providing them with income-restoring alternatives.

In urban projects, minimizing both the number of displaced people and the severity of resettlement impacts—especially residential relocation and changes in employment—is necessary. Another good practice is to minimize the distance of any necessary relocation: families moving less than a kilometer in the city often find that their lives, community ties, and livelihoods are much less disrupted than those moving greater distances. The following are some of the steps normally taken in the early stages of project design:

• Send out information about project objectives and potential impacts within the project area. Given the diversity of tenure arrangements, a good practice is to supplement legally required notification with other public announcements to ensure that renters, owners, and others are informed about the project.
• Conduct a census of project impacts and publicly display the results.
• Solicit information from potential displaced persons regarding valuation of losses and preferences for possible resettlement options.
• Send out information regarding compensation rates and other entitlements. Also include the resettlement implementation schedule.
• Form a community-based committee to coordinate with the project resettlement agency.
• Require careful coordination of several layers of government and multiple line agencies for successful design and implementation of urban projects.

Compensation Methods
The rules for compensation will be formulated by each country and should follow existing rules, laws, and procedures. The general notion is that compensation should be fair, which means that it should cover both the expropriated assets and rehabilitation measures to help restore incomes or standards of living (including foregone income). It is key to have in place a set of procedures for asset valuation. The World Bank policy for resettlement establishes that compensation should be paid at replacement cost. The alternative of replacing at market cost may not be fair in countries in which land markets do not function well and prices are distorted.

The census of affected people should identify residential and commercial tenure arrangements for people with and without formal rights, such as residents claiming ownership of private land but lacking legal title. Other individuals and groups to consider include tenants, squatters on public lands, squatters in public safety zones, owners of enterprises lacking licenses or property titles, marketers, and mobile and itinerant vendors. Consideration also needs to be given to issues involving drains, riverbeds, and rights-of-way. Furthermore, urban residential and commercial areas in most developing countries often have informal (unauthorized or unlicensed) economic activity. The displacement of informal enterprises can be disastrous for people who derive their incomes from them. The loss of such information enterprises may also deprive communities of access to products or services. Potentially displaced formal and informal enterprises should be identified and appropriate remedies devised.

In many urban projects, the identification of replacement land and provision of replacement housing are serious constraints. Regarding land, the calculation of replacement cost is made more complex by gross disparities in land prices or, in some cities, the absence of a functional land market. The provision of replacement housing is often a crucial ingredient in urban resettlement planning. Remedies usually take some variant of two basic forms. In some cases, those losing their housing are relocated to newly-developed housing sites. In other cases, projects follow “fill-in” resettlement strategies, in which displaced people obtain existing vacant housing. Alternatively, new housing is constructed on vacant lots scattered throughout several areas. Land replacement, whether in kind or in cash, recognizes not only the quantity of land acquired but also its characteristics, such as location and productive capacity. For land in urban areas, location accounts for great differences in value. Because of its centrality, a parcel of land in the inner city may be worth many times the same sized plot in a peripheral area. Such an inner-city plot may also have advantages of location that cannot be compensated by a larger plot in a more distant area.

The Ahmedabad case study provides good lessons about how not to deal with resettlement. The Ahmedabad Municipal Corporation, the agency in charge of project implementation, proposed that the relocation of the project-affected households be done on municipal-owned land sites far from the riverfront, where the affected households were located. This was justified on the basis of project costs because the land used for relocation would come from the municipality through its land bank and not the project itself. This saved the Sabarmati Riverfront Development Corporation a considerable amount of resources. However, many of the informal settlements were relocated to residential complexes far from the city center. The project was also accused of not providing resettlement compensation to all affected parties.