What are the forces moving the Minnesota economy? Adam Belz tries to identify the trends and show the connections between Minnesota and the larger U.S. and global economies. You can connect with him on Twitter: @adambelz

Cleveland Fed: Minneapolis among U.S. cities gentrifying the fastest

Posted by: Adam Belz under Business trends, Economics Updated: July 28, 2014 - 11:24 AM

Minneapolis is gentrifying as fast as any city in the country.

In a trend that started during the housing boom and continued after the recession hit, incomes in Minneapolis neighborhoods are growing at a faster pace relative to the city's suburbs than in any center city/metropolitan area other than the Portland, Ore. metro area, according to analysis of Census data by economists at the Cleveland Fed.

Gentrification, economists Daniel Hartley and Daniel Kolliner point out, was on the rise pretty much everywhere in the run-up to the financial crisis. “Looser lending standards, which were prevalent at the time, may have contributed to the trend,” they write.

Here’s how they measured gentrification, which is a bit complicated but worth pasting in its entirety here: We selected a set of 59 large cities, all of which had a population above 250,000 in the year 2000 and the largest population of their respective metropolitan area (many metro areas include more than one city). Then we ranked the census tracts of each metropolitan area by the average income of residents in the tracts. The rankings are percentiles, running from 1 to 100. Finally, we took the mean of these rankings for the tracts that are located in the largest city of the metropolitan area (referred to as the principal city in the charts below). This mean gives a sense of where the tracts of the largest city as a whole fall in the income distribution of the metropolitan area. For example, the average tract in the city of Virginia Beach was at the 66th percentile of all of the tracts in the Virginia Beach-Norfolk-Newport News metropolitan statistical area, while the average tract in the city of Newark was at the 18th percentile in the Newark, NJ-PA metropolitan division. This means that the average tract in Virginia Beach is higher income than the average suburban tract, while the opposite is true in Newark.

The city that gentrified the most up until 2007 was Atlanta, followed by Washington, D.C., St. Louis, Denver, Seattle, Portland and Minneapolis.

But from 2007 to 2010, Atlanta stopped gentrifying, and Portland, Minneapolis, Seattle and Denver took the top four spots.

It's interesting that the top four cities include Minneapolis and the three cities that economic development leaders most often compare the Twin Cities to. Gentrification can be a dirty word, but the cities with the fastest rate of it are among the healthiest in the country, economically.

I'm trying to get the neighborhood-specific data for Minneapolis, which should offer detail on which neighborhoods are seeing the fastest average income growth.

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