Impact of public investment on residential gentrification: Individual-level evidence from Shanghai’s rail transit expansion

Abstract

Increasing concerns have been raised about rail transit acting as a catalyst for gentrification because of mass rail transit investments around the world. The evidence, however, is mixed regarding transit-induced gentrification. This article addresses this issue by examining two key features of gentrification-style neighbourhood change, namely, whether housing costs rise as a result of the opening of new rail stations and whether this has resulted in the displacement of low-income residents. Our method relies on a difference-in-differences model and a unique dataset of individual-level housing rental records collected in Shanghai, China. According to the results, housing rents within 1.8 km from the new station have increased significantly in the year following its opening. In contrast to those living outside the station catchment area, housing renters living inside are more likely to move to locations that are more distant from rail stations, the city centre and their workplace and to be displaced by better educated, older and wealthier newcomers. Rent increases and the exodus of low-income renters together provide further evidence of transit-induced gentrification, which calls for the attention of urban planners and policymakers.