What on earth is the rent gap theory?

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  • NC
    Lv 7
    1 decade ago
    Best Answer

    Rent gap theory was proposed by Neil Smith in 1987 to explain gentrification (displacement of lower-income residents in a neighborhood by higher-income residents). Rent gap is a gap between the rent a property currently earns and the rent that property can earn if put to its best use. Smith argued that when the rent gap is wide enough, developers and landlords would see the potential profit to be had in reinvesting in inner-city properties and redeveloping them for new inhabitants. Such redevelopment effectively closes the rent gap and leads to higher rent, mortgage and lease rates.

    Source(s): Smith, N. (1987) "Gentrification and the rent-gap", Annals of the Association of American Geographers 77 (3) pp. 462–465.
  • 1 decade ago

    "The disparity between the actual capitalised ground rent (land value) of a plot of land given its present use and the potential ground rent that might be gleaned under a 'higher and better' use" (Neil Smith)

    In other words, or as I understand it, it is the difference between the actual rent of a land and the potential of this land for profit. The largest the rent-gap is, the more money can be made of that land, cause you pay a relatively low rent and have a big income of the use you are doing

  • 3 years ago

    Define Gap Theory

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