A new Harvard Business School paper concluded that each new Starbucks boosts the value of housing prices in a neighborhood significantly. Yelp assisted in the study by providing data that shows each Starbucks in the ZIP-code area correlates to a 0.5 percent increase in housing prices.
The data point revealed through Yelp, opened a broader study on gentrification by the Harvard Business School. A new Starbucks added into a ZIP code is associated with a 0.5 percent increase in housing prices within a year, according to the paper’s discovery.
Although, there is an increase when a Starbucks is added into the community, it’s not clear whether housing prices are rising due to the coffee store opening or because more wealthy customers that visit the coffee chain moved closer into the area.
Harvard economics professor Edward Glaeser says, Yelp data may be the latter, considering the study found that each 10-unit increase in the number of reviews is correlated with a 1.4 percent increase in housing prices within 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.
The study’s main point was to provide insight that gentrification is “strongly associated” with increases in the number of grocery stores, cafes, fast food, restaurants and bars. Gentrification is defined as “the process of rebuilding homes and businesses accompanied by an influx of middle-class or affluent people at the expense of earlier, often poorer residents,” according to CNBC.
The Harvard economists stated their study is the first of its kind using Yelp-data. With its new Yelp-data, economists are able to provide more accurate ways to analyze the emotional issues.
Michael Luca, an associate professor at HBS, told CNBC in an email: “Government data from statistical agencies such as the Bureau of Labor Statistics and Census Bureau have long been used by economists for analyzing policy and the economy — these data sources are invaluable but come with important limitations.”
Luca added, the use of Yelp applauds the existing data by providing real-time updates on local marketplaces as well as insight on how neighborhoods change during gentrification. “Yelp data has the advantage of being more up to date than most official government statistics,” the economist continued, “It also contains metrics on things like cuisine, prices, and ratings that can be difficult to observe otherwise.”
Glaeser mentioned, although there is evidence of gentrification through Yelp, what remains unknown is any idea of causality. “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.”
Glaeser concluded the paper by writing: “The presence of a Starbucks is far less important than whether the community has people who consume Starbucks. Consequently, we think that this variable is likely to be a proxy for gentrification itself.”