The rent-gap theory was developed in 1979 by the geographer Neil Smith as an economic explanation for the process of

gentrification Gentrification is the process of changing the character of a neighborhood through the influx of more affluent residents and businesses. It is a common and controversial topic in urban politics and planning. Gentrification often increases the ...

. It describes the disparity between the current

rental Renting, also known as hiring or letting, is an agreement where a payment is made for the temporary use of a good, service or property owned by another. A gross lease is when the tenant pays a flat rental amount and the landlord pays for ...

income of a property and the potentially achievable rental income. Only from this difference arises the interest of

investors An investor is a person who allocates financial capital with the expectation of a future return (profit) or to gain an advantage (interest). Through this allocated capital most of the time the investor purchases some species of property. Type ...

, to renovate a particular object (to entire neighborhoods), resulting in an increase in rents and also the value of the property. Investment in the property market will therefore only be made if a rent gap exists. Thus, it is contrary to other explanations for gentrification related to cultural and consumption preferences and housing preferences. The rent-gap theory is a purely economic approach. While the processes described with the rent-gap theory can be observed especially in North America , the theory is being adapted for the

global south The concept of Global North and Global South (or North–South divide in a global context) is used to describe a grouping of countries along socio-economic and political characteristics. The Global South is a term often used to identify regio ...

, including Chile, Lebanon, and Korea.

Application

The theory has been used in

agent-based model An agent-based model (ABM) is a computational model for simulating the actions and interactions of autonomous agents (both individual or collective entities such as organizations or groups) in order to understand the behavior of a system and what ...

ling of the effects of gentrification on real estate markets.

References

External Link

* Jürgen Friedrichs, Robert Kecskes, Michael Wagner, Christof Wolf: Applied Sociology . Publisher of Social Science, Wiesbaden 2004, {{ISBN, 3-8100-4117-3, page 26 ff * Gentrification and the rent gap. N Smith - Annals of the

Association of American Geographers The American Association of Geographers (AAG) is a non-profit scientific and educational society aimed at advancing the understanding, study, and importance of geography and related fields. Its headquarters is located in Washington, D.C. The ...

, 1987 Economic theories Urban geography