Can Yelp Pinpoint the Next Big Neighborhood?

February 21, 2018

Yelp reviews may be used as a tool to help find neighborhoods where gentrification and, thus, higher home prices are on the horizon. Yelp is a directory website that posts information about local businesses and allows users to rate them.

Current tools for predicting gentrification are limited. But new research from Harvard researchers Edward Glaeser, Hyunjin Kim, and Michael Luca shows that Yelp reviews can offer earlier clues when a neighborhood is on the brink of a transition.

For example, the researchers found that an uptick in the number of Starbucks locations is usually linked with higher price growth in neighborhoods. The opening of a new coffee shop in a neighborhood tends to lead to an average increase of one-half of a percentage point in home prices in the given year above and beyond similar neighborhoods without them. Researchers also found that an increase in grocery stores, laundromats, and bars can serve as strong predictors of rises in the arrival of college-educated residents to an area. 

“Yelp measures of local business activity provide leading indicators for housing price changes and help to forecast which neighborhoods are gentrifying,” the researchers write in their paper.

Researchers, however, did not find any evidence that gentrification pushed certain types of businesses out of neighborhoods.

They also note that one main limitation to the data is that it categorizes businesses but it does not distinguish between, say, a more traditional shop versus a new hipster location.

Source: “Using Yelp to Find the Next Hot Neighborhood,” The Wall Street Journal (Feb. 20, 2018) [Log-in required.] and “Nowcasting Gentrification: Using Yelp Data to Quantify Neighborhood Change,” Harvard Business School (Feb. 19, 2018