Rent gap theory
The rent gap theory or rent gap theory was formulated in 1979 by the geographer Neil Smith as an economic explanation for the process of gentrification (social restructuring and upgrading of a district). The processes described with the rent gap theory can mainly be observed in North America.
theory
Neil Smith developed the rent gap theory based on ideas from David Harvey, in which the capital cycles of the economic system are divided into two areas:
- a primary capital cycle that is directly linked to industrial production processes and
- a secondary capital cycle consisting of investments in the built environment in the form of buildings, infrastructure, etc.
The core idea is that the trigger of sub- or reurbanization always preceded an accumulation crisis in the primary cycle of capital. As a result, an overflow effect occurs, so to speak, in which the excess capital flows into the secondary capital cycle and manifests itself in the form of massive investments in the built environment.
Due to the overflow effect, there is an increased willingness to take risks with the alternative form of investment in the secondary capital cycle, which manifests itself in the speculative development of previously neglected inner-city peripheral areas, because this is where the highest rent gap is. The rent gap describes the disparity between the rental income currently realized on a property and the rental income that can potentially be achieved. It is only from this difference that investors become interested in renovating a specific property (including entire city districts), which leads to an increase in rents and an increase in the value of residential property.
criticism
The theory goes further that investments in the real estate market are only made when there is a rent gap. In doing so, she contradicts other explanatory approaches that tend to rely on changed lifestyles and living preferences as a justification.
In later publications, Neil Smith relativized the purely economic approach, in which he also recognized cultural factors as a secondary consideration, with which the theory lost its brilliance.
literature
- Jürgen Friedrichs, Robert Kecskes, Michael Wagner, Christof Wolf: Applied sociology . Verlag für Sozialwissenschaft, Wiesbaden 2004, ISBN 3-8100-4117-3 , page 26 ff.
- Ilse Helbrecht (1996): The return of the inner cities. On the role of culture, capital and consumption in the process of gentrification in: Geographische Zeitschrift 84, issue 1, pp. 1–15, also online (PDF file, 143 kB, 3rd chapter, pages 7–14).