A Personal Finance Fix to the Gentrification Problem

We need seemingly crazy ideas because what we’re doing now isn’t working

Rocco Pendola
Nov 26, 2020 · 8 min read
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Photo by Marian Kroell on Unsplash

I have a somewhat long history studying — off and on — gentrification, particularly in Los Angeles.

It started in and around 2006. While a PhD student at the University of California, Irvine, I conducted research in Skid Row. On the eastern edge of the Downtown Los Angeles core, Skid Row faces ongoing and intense gentrification-related pressure.

I wrote a short eBook about my experience, on the ground in Skid Row, in 2012. In it, I include the proposal I wrote to secure federal government funding to pursue my research. You can preview the book at Amazon. If you’re into the subject matter, I think you’ll enjoy it. It also helps further color this article.

As I look back on that time and contrast it with the here and now, it’s incredible how little has changed. On the ground, the same dynamics apply. In the political sphere, there’s still no viable solution to the housing or homeless crises, particularly in relatively expensive cities such as Los Angeles and regions like Southern California.

It would be helpful if we had regional governments with power to not only write policy, but make and enforce laws. In this perfect world scenario, we might then have a chance at increasing housing affordability. But it’s difficult to solve a regional problem when individual cities (from Los Angeles to Santa Monica to Pasadena to the myriad San Fernando Valley outposts) do their own thing, acting in their own interest.

However, there’s nothing I can do but digress and choose where to most effectively direct my intellectual and emotional energy. So I have opted to try to make a contribution, even if small, by connecting personal finance to gentrification in an attempt to, if nothing else, open a brainstorm for new and different ideas.

So here we go — installment one. While the idea I present might suck (or not), it’s a starting point to thinking differently. We need this.

I wrote an article for an urban planning website in 2008 about my experience in Skid Row. Rereading it, two things (both sort of suck) stick out at me.

One, the more things change the more they stay the same:

Skid Row is victim to a self-fulfilling prophecy of negativity. Most people perceive Skid Row via media reports and second hand accounts. This information typically portrays Skid Row as a wholly negative place in need of wholesale changes. Under the impression that Skid Row is nothing but a problem, intense police scrutiny, accompanied by gentrification, is the automatic answer. The LAPD arrests and/or cites people for once overlooked, minor infractions, including small marijuana sales, jaywalking, or sitting on the curb. “Broken windows” proponents insist that micro-enforcement of the law trickles up, deterring more significant crime. This and previous similar efforts have not worked. The rhetoric surrounding Skid Row, from all sides, is the same today as it was in 2004, as it was in 1984.

I wrote this in 2008, based on participant-observation from 2007 and 2008. From a policing perspective, it could be 1984, 2004, or post-George Floyd 2020 — little has changed in Los Angeles, let alone Skid Row. We still stigmatize and unfairly target poor and marginalized communities. We appear to have lost the will to even discuss innovative solutions to what are ultimately the development-related conundrums we face.

Two, even some well-intentioned people, who are sincerely trying to help, can’t help but consider low-income neighborhoods dysfunctional. They ignore the structure of self-policing and community that often exists. Pulling from the same 2008 article, consider these two quotes from seminal books in urban studies, as they relate to gentrification. The first is from Jane Jacobs’ 1961 classic, The Death and Life of Great American Cities:

“There is a quality meaner than outright ugliness or disorder, and this meaner quality is the dishonest mask of pretended order, achieved by ignoring or suppressing the real order that is struggling to exist and to be served.

In his excellent book Sidewalk, Mitchell Duneier makes a similar claim:

“Only by understanding the rich social organization of the sidewalk, in all its complexity, might citizens and politicians appreciate how much is lost when we accept the idea that the presence of a few broken windows justifies tearing down the whole informal structure.”

These seminal pieces of urban wisdom directly relate to Skid Row in Downtown Los Angeles. “Central City East,” as it is euphemistically called, is gentrifying rapidly. High end residential and retail projects are popping up all over Downtown, on the edge of Skid Row, as well as inside its boundaries…

The relentless focus on Skid Row’s negatives — and the attendant police scrutiny — is counterproductive. It stifles “the real order that is struggling to exist and to be served.” I suggest a policy of broken windows-in-reverse. The city of LA should decriminalize low-level drug offenses, crosswalk violations, curb sitting, and other slight or nuisance crimes in Skid Row. Enforcing them to the point of harassment has done nothing to benefit the neighborhood. If we ignore “broken windows” in favor of a policy of nurturing the positive that exists in Skid Row, I see the potential for a grassroots approach where the Skid Row community regulates itself. Positivity breeds positivity. Given the failure of establishment led interventions in Skid Row, it is time to reinvent the wheel from the ground up.

Everybody from activists to politicians to the police (especially politicians and the police) continue to miss opportunities in Skid Row and across Los Angeles. They’re programmed to start from the perspective that poor neighborhoods are problems we need to clear. If we imagine a new flavor of gentrification that begins by acknowledging and harnessing the community that does exist in these places, we’d all be better off — current residents, future residents, the poor, our cities, society.

I write a fair bit about my neighborhood. It’s part of East Hollywood in the heart of Los Angeles, a 10-to-15-minute drive (without traffic) from Downtown and Skid Row. And it’s gentrifying quickly. Like much of Los Angeles, mostly luxury (some affordable), mixed-use apartment buildings continue to rise nearly everywhere in my stomping grounds. The pandemic doesn’t appear to have slowed construction.

The image with the pretty leaves and grand houses illustrates two things — yeah, we have fall in Los Angeles and my neighborhood appears fancy:

My neighborhood is unique — classic and beautiful Los Angeles Craftsman homes sit in a relative oasis over a couple blocks, surrounded by gritty East Hollywood and its mainly multi-unit apartment buildings. These houses, including the one that’s on the market, have skyrocketed in value over the last decade.

The aforementioned apartment development also surrounds these Craftsman homes. Within just a few blocks of where I live, at least five mixed-use apartment complexes — at varying stages of completion — have replaced everything from strip malls to single-family homes or duplexes. One is low-income veterans housing. The others are market rate or a mix of market rate and affordable housing.

I don’t have a problem with this. In fact, there’s credible research, particularly from Columbia University’s Lance Freeman, that illustrates a more nuanced view of gentrification.

Indigenous residents of gentrifying communities sometimes perceive gentrification as favorable, in part because of the increased amenities neighborhood redevelopment tends to bring. While this is great, we can’t let the positive effects of gentrification simply trickle down and just randomly happen to benefit residents who not only face potential displacement, but witness their neighborhoods undergo profound practical and cultural change.

I’m all about ideas to flip the gentrification dynamic around. To start with the existing community and “the real order that is struggling to exist and to be served” and use it to fuel positive — and inclusive — neighborhood change.

So my first dumb, idealistic, and unrealistic idea.

As it stands, when new development happens one of the few considerations politicians, planners, and policymakers make for the gentrifying community’s existing residents are developer incentives. For example, a city will allow a developer to build at increased densities in exchange for affordable housing on-site or at another location in the same city.

While this is great, it doesn’t address keeping current residents in the community while ensuring they can thrive in what ends up being their new neighborhood.

I propose developer incentives — increased density, building a floor or two higher than typically allowed — that would require significant considerations for existing residents:

  • Reserve the equivalent of an entire floor of new development for low-income residents who live in the neighborhood.
  • Allow only residents of the gentrifying neighborhood (not the entire city) to enter a lottery to rent these units at affordable rates.
  • Maintain the apartments they vacate at affordable rates for the next tenant.
  • Subsidize landlords to help facilitate this form of rent stabilization.
  • Provide residents who move into the new, affordable units with a one-time cash stipend of ($10,000, $25,000, $50,000?) under the condition that they meet with a personal finance counselor to help assess their personal financial situation and suggest how to best direct these funds.

As I write this — and, again, this is a rough sketch designed to get ideas flowing — I realize the shortcomings.

First, it appears I make the assumption that existing residents would welcome the idea of leaving their current home in exchange for a brand new luxury apartment. For several reasons (cultural and historical among them), this might not be the case.

This said, some residents would jump at the opportunity. To that end, it’s a better ending than being displaced with no place to go. Or, at least, a significant struggle to figure out where and how you’re going to live next.

Second, it feels top down to give somebody money and assume they need help managing it.

There must be a strong community focus. Organizers need to go in and target residents not only with need, but who willingly and happily opt into this type of program. Place focus on empowering people along several lines by:

  • Allowing them to actively take part in the change their neighborhood is undergoing.
  • Acknowledging the financial implications of a gentrifying neighborhood, particularly for existing, low-income residents, and working to mitigate the potential detrimental impacts.
  • Providing low-income residents with something we tend to completely ignore — financial education usually only accessible to middle and upper middle class people.

Gentrification happens whether we like it or not. As it stands, we act like we care about what happens to low-income neighborhoods in the process. But we don’t. We pay lip service to social concerns. We placate existing residents. Or worse, we do nothing. We bulldoze neighborhoods and force people to fend for themselves.

Under my plan (which is back of the envelope at this point), we target people who need protection from displacement and attendant financial assistance most. We preserve affordable housing not just in the new development, but in the existing housing stock. And, most importantly, we actually put people on the ground in these neighborhoods to figure out who needs and wants what, with a focus on neighborhood preservation — to the greatest, most realistic extent possible — and economic empowerment.

Let’s digest this and continue the conversation with an extension of this idea and others in future articles. My broad approach looks to connect the things I care about most — personal finance, inequality, neighborhood development, and well-being. I aim to use these articles to help flesh out the connections and make them come alive.

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Rocco Pendola

Written by

I write about doing life and personal finance, focusing on the psychology of our relationships with other people and money. I’m anti-guru, pro-empowerment.

The Innovation

A place for a variety of stories from different backgrounds

Rocco Pendola

Written by

I write about doing life and personal finance, focusing on the psychology of our relationships with other people and money. I’m anti-guru, pro-empowerment.

The Innovation

A place for a variety of stories from different backgrounds

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