Urban Segregation, Deprivation, and Gentrification

Urban segregation is the spatial separation of social groups (by income, ethnicity, religion or other characteristics) within a city, deprivation is a lack of the resources and opportunities needed for a decent standard of living, and gentrification is the process in which wealthier residents move into a low-income neighborhood, raising prices and often displacing existing residents. In brief: segregation can be measured with the index of dissimilarity, which shows the share of a group that would have to move to achieve an even distribution. Deprivation is measured by indices that combine income, employment, health, education and housing. Gentrification can improve buildings and services but may drive out poorer households.

These processes shape who lives where, and affect access to jobs, schools, health care and safety. This guide explains how segregation and deprivation arise and are measured, how gentrification works, what policies are used, compares the concepts in a table, works through calculations, outlines the history and corrects common mistakes.

What causes urban segregation?

Segregation results from a mix of market forces (income differences and house prices sort people into neighborhoods they can afford), discrimination (in housing and lending), policy (zoning rules that limit cheap housing in rich areas, the location of public housing), choice (people often prefer to live near others of the same background for culture, language, support and safety) and history. Legal and institutional forms have been extreme: in the United States, the practice of redlining in the 1930s, in which federal agencies marked mostly Black and immigrant neighborhoods as hazardous for lending, shaped investment for decades, and in South Africa, the apartheid Group Areas Act of 1950 forced residents of different racial groups into separate areas. Today, income segregation is growing in many cities, and the divide between rich and poor neighborhoods is increasing. In the global South, gated communities and informal settlements can lie side by side.

The economist Thomas Schelling showed in 1971 that even mild preferences for neighbors like oneself can produce strong segregation: if each household moves when fewer than about one third of neighbors are similar, a mixed neighborhood can become almost completely segregated. Segregation matters because it can concentrate poverty, limit access to good schools and jobs, affect health and reduce social mixing.

What is urban deprivation and how is it measured?

Deprivation is wider than poverty of income. It includes poor housing, unemployment, low education, poor health, crime, a poor environment and limited services. The UK’s Index of Multiple Deprivation combines seven domains, with different weights: income, employment, health and disability, education and skills, crime, barriers to housing and services, and living environment, and ranks small areas from most to least deprived. Similar indices exist in other countries and for the global South, such as the Multidimensional Poverty Index. Deprived areas are often found in inner cities and on peripheral estates, and they can form a cycle of deprivation: poor schools, few jobs, poor health and stigma reinforce each other. Planners use maps of deprivation to target funds and services.

What is gentrification?

The British sociologist Ruth Glass coined the term in 1964 to describe how middle-class people were moving into working-class districts of London and replacing the former residents. In gentrification, investment, renovation and new businesses (cafés, galleries, boutiques) transform the neighborhood, and rents and prices rise. Neil Smith’s rent gap theory (1979) explains it as an opportunity for profit: where the actual land rent is far below the potential rent after redevelopment, investors have an incentive to buy and renovate. Gentrification is driven by the preferences of young professionals for central locations, by changes in the economy (growth of services), by planning and public investment, by the work of developers and by tourism and short-term rentals. Examples include Brooklyn and Harlem in New York, Shoreditch and Hackney in London, Kreuzberg in Berlin and Lisbon’s old quarters.

Benefits can include renovated buildings, reduced crime, new services and jobs, a higher tax base and more diversity of incomes. Costs include displacement (direct eviction or the pressure of rising rents on long-term residents), loss of affordable housing, loss of local businesses and cultural character, and tension between old and new residents. Research shows that the effects vary, and that displacement is real in many places, though it is not always easy to measure.

What policy responses exist?

• Mixed-income housing and inclusionary zoning: requiring that a share of new homes are affordable.
• Rent control and tenant protection: limiting rent increases and evictions, though debated for their effect on supply.
• Public and social housing, and community land trusts: keeping housing permanently affordable.
• Investment in deprived areas: improving schools, transport, health and jobs without displacing residents.
• Fair lending and anti-discrimination law: such as the US Fair Housing Act (1968).
• Regulating short-term rentals and speculation.
• Participation: involving residents in the planning of regeneration.

The concepts compared

Worked example: the dissimilarity index

The index of dissimilarity is D = ½ × Σ |a_i ÷ A − b_i ÷ B|, where a_i and b_i are the numbers of two groups in neighborhood i, and A and B are the totals in the city. D ranges from 0 (even distribution) to 1 (complete segregation). The data are hypothetical.

1. Totals: A = 4,000 + 3,000 + 2,000 + 1,000 = 10,000. B = 500 + 1,000 + 3,000 + 5,500 = 10,000.
2. Shares in each neighborhood: North: 0.40 and 0.05, a difference of 0.35. East: 0.30 and 0.10, a difference of 0.20. South: 0.20 and 0.30, a difference of 0.10. West: 0.10 and 0.55, a difference of 0.45.
3. Sum of absolute differences: 0.35 + 0.20 + 0.10 + 0.45 = 1.10.
4. Index: D = ½ × 1.10 = 0.55. This means that 55% of one group would have to move to another neighborhood to get an even distribution. A value above 0.6 is usually considered high segregation, 0.3 to 0.6 moderate and below 0.3 low.
5. Gentrification and rents: a neighborhood’s average rent rises from 900 to 1,350 in 8 years. That is an increase of 450, or 450 ÷ 900 = 50%, an annual rate of 1.5^1/8 − 1 = 5.2%. If incomes of long-term residents rise by only 2% a year (1.02⁸ = 1.17, or 17%), the rent burden increases: a household with an income of 2,500 per month paid 900 ÷ 2,500 = 36% of its income for rent and now pays 1,350 ÷ (2,500 × 1.17) = 1,350 ÷ 2,925 = 46%.

How have these issues developed?

Segregation by class and ethnicity has long been part of cities, from the ghettos of medieval Europe to colonial cities with separate “native” and European quarters. The Chicago School of the 1920s described the sorting of groups in cities. In the United States, the Fair Housing Act of 1968 made housing discrimination illegal after the civil rights movement, but patterns persist. Apartheid ended in 1994, though its spatial legacy remains. Gentrification became prominent from the 1960s and 1970s in London and New York and spread to cities worldwide, helped by the return of investment to city centers and, more recently, by global capital and tourism. Contemporary research focuses on the role of housing markets, the effects of displacement and the possibilities of inclusive urban renewal.

Which mistakes are common?

Mistake 1: Reading segregation only as a result of free choice

Choice matters, but income, discrimination, policy and history shape the options that people have.

Mistake 2: Equating deprivation with low income

Deprivation is multidimensional and includes health, education, housing, environment and access to services.

Mistake 3: Assuming that gentrification is only good or only bad

It can improve neighborhoods and also cause displacement. The balance depends on who gains and who is displaced.

Mistake 4: Interpreting the dissimilarity index as the share of mixed neighborhoods

D measures how unevenly two groups are distributed. It does not describe the size of each group or the quality of neighborhoods.