In 1980, US central-city residential real estate carried only a slight price premium.
In fact, prices were higher beyond than within 10 miles of city centers. Fast forward
20 years and the center commands the highest prices, whence they fall sharply with
distance for the ﬁrst ﬁve miles and then ﬂat lines. This pattern remains in 2010,
unscathed by the 2007 housing market correction (Figure 1).
This paper proposes that the roots of gentriﬁcation can be found in the shrinking
leisure of high-income households. This time scarcity, we hypothesize, has propelled
centrality to the top of the local amenities list.
Between 1965 and 2005, leisure grew but not for the college educated. In the
1985-2005 period, the contraction in leisure among college men was substantial enough
to result in an overall reduction for men (leisure grew among non-college men); for
women, leisure contracted across the board but at the twice the rate for college women
compared to non-college women [Aguiar and Hurst, 2009, table 2-2].
Long hours render non-work time scarce, planting low-utility activities such as
commuting in the cross-hairs. One of the simplest ways to control commuting is to
live close to work, which for skilled workers may mean the city center. There, by
deﬁnition, land is scarce and higher demand translates into higher land rents. In time,
local amenities adjust, boosting the attractiveness of the locality, further fueling the
gentriﬁcation process. The core driver, however, we propose, can be found in the labor
market processes that have produced a corps of high-income-low-leisure individuals
who live as singles or through assortative matching form dual-earner households.
Some of the cities with the steepest price increases have also seen the largest declines
in crime, New York City being a case in point with crime levels down by two-thirds
from their late-1980s levels. To investigate the role of improved public safety, we
split our cities into two equal sized groups, one with cities that saw large declines in
crime and one with cities that saw modest declines or increases over the 1985-2012 period.
Qualitatively, results hold in both groups.