Gentrification is an urban policy problem in need of a theory. Instead of theory, we have the geographic illusion of local: The current landscape is the result of community decisions. Gentrifiers, outsiders who move into a neighborhood, cause real estate prices to appreciate and displace more tenured residents. One way to make housing more affordable is to increase supply in the gentrifying neighborhood. Rising demand is a market signal to build. To make the market model more sophisticated, we can consider household income. The quantity of people seeking to live in a certain neighborhood isn't appreciably greater than previous years. But the quality of income migrating into a neighborhood may be much greater than most residents earn. Regardless, supply and demand is still local. Conceivably, poorer residents could access better paying jobs in order to compete with newcomers for housing.

What if the demand wasn't local? To date, I've discussed how wages untethered from regional job markets can wreak havoc on neighborhoods in shrinking cities with tons of excess supply. If an employer offers work in a growing (i.e. economically diverging) tradable sector of the economy, then a global labor market sets the wage. Local supply and demand is irrelevant. The same logic applies to the housing market. Geographer David Ley explains Vancouver's housing affordability problem:

The data that Ley collected over decades shows Metro Vancouver has become similar to other Pacific Rim "gateway" cities in the way housing costs have been fueled by high immigration-driven population growth and foreign investors.

As he works on extensive new studies of housing prices in Metro Vancouver, Hong Kong, Singapore, London and Sydney, Ley says, "In every one of these cities the market is being driven by something other than owner-occupiers. Not just new immigrants, but investors, including offshore investment."

Politicians in Hong Kong, London, Singapore and Sydney are responding in more proactive ways to their housing dilemmas than the elected officials responsible for Metro Vancouver, Ley said in an interview.

Ley discovered almost a one-to-one correlation over a 25-year period between Metro Vancouver becoming one of the most unaffordable real estate markets in the world and a surge of international immigration and offshore investing.

University of Waterloo geographer Markus Moos and Queen's University planner Andrejs Skaburskis back up Ley's analysis. They say Metro Vancouver is an "exceptional" example of how "globalization" can affect a local housing market.

Moos and Skaburskis found, beginning in the 2000s, "immigrants, particularly from Asia, increasingly arrived with established wealth, and many were known to continue earning income outside the country. This led to a decoupling of housing from local labour market participation."

The Metro Vancouver regional district has released data showing almost nine of 10 newcomers in the past 20 years were born outside the country, mostly in Asia. Many are "circulatory migrants" who invest in property in Canada while working elsewhere.

Emphasis added. I've argued that local global jobs for local residents will undermine the efficacy of less restrictions on building new housing. Ley, Moos, and Skaburskis map the impact of wealth that neither resides nor earns money in a local real estate market. I don't see how greater density will help actual residents when a fuller picture of demand is painted that includes foreign direct investment in apartments that remain vacant.

Introducing the "Stash Pad":

"A decade ago, it was just a small number of elite investors," says Andrea Fiocchi, a lawyer at Reinhardt LLP, which caters to an international clientele. But now the market is broad and diversified: Fiocchi's firm handled not only two of the ten most expensive residential sales in the city last year, but also a large volume of transactions at more mainstream prices. Buildings around Times Square and the Financial District are being marketed heavily overseas. One development project on John Street is "crowdfunding" $50,000 financing shares via the Prodigy Network, a marketing firm with offices in New York and Bogota. The Related Companies is using a federal program that promises green cards to foreign investors to raise cheap capital for its Hudson Yards project. (A website features a rendering and the slogan "Your Gateway to the U.S.A.") Shortly before departing on a road show to Monte Carlo and other redoubts of European wealth a couple of months ago, one broker told me about his most adventurous strategy: buying, emptying, and renovating brownstones in Crown Heights. An Australian investment fund has done something similar in Bushwick.

And so New Yorkers with garden-variety affluence—the kind of buyers who require mortgages—are facing disheartening price wars as they compete for scarce inventory with investors who may seldom even turn on a light switch. The Census Bureau estimates that 30 percent of all apartments in the quadrant from 49th to 70th Streets between Fifth and Park are vacant at least ten months a year.

Emphasis added. "Emptying" brownstones is the definition of gentrification. The displaced residents move somewhere else in the city while their former addresses remain vacant. This isn't the "gentrification" of sociologist Ruth Glass (PDF). I'm not convinced that this is the "gentrification" of geographer Neil Smith. The "decoupling of housing from local labour market participation" is about a decade old. The diffusion to urban core neighborhoods in the Rust Belt from immigrant gateway cities is even younger. Most distressing is the real estate development aimed at investors looking not for shelter, but a place to park cash. Greater density for whom, Russian oligarchs?

Different political geographies be damned, housing affordability is a national crisis. Seattle builds way more than San Francisco. Both markets suffer from about the same rise in rents, fastest rate increases in the entire country. Income change is flat. Rents keep rising. Ironic gentrification:

In the Raleigh-Durham, N.C., metro area, rents rose 1.2% in the second quarter, the seventh-largest rent increase in a metro market, according to Reis. Rents have risen 3.3% in the past year.

Raleigh resident Abbie Swank, 23 years old, began looking for a one-bedroom apartment last August. Ms. Swank, who works as a bartender at P.F. Chang's China Bistro, was surprised by the prices and realized she would have to make sacrifices.

"I went to some that were in the $700 to $800 range, but they were the size of my living room now, or the area was tucked back in the woods," she said. "I didn't want to come home at 2 o'clock in the morning" to a home located in an isolated area.

In January, Ms. Swank settled on an apartment 15 minutes outside of downtown with a monthly rent around $900. "I like where I'm living now, but it's not really where I wanted to be completely," she said. "I really wanted to live downtown. I just can't afford it."

Ms. Karol of IHS said such elevated rents are leaving many households struggling. "When you compare that kind of growth to what we've seen in wages and salaries, you start to see, wow some of these costs are just out of this world for a lot of people," she said.

What's the problem in Raleigh-Durham? The stock answer has been "supply constraints." Our default scale of analysis is local. Upzoning will work in New York City. Upzoning will work in Raleigh-Durham. Upzoning will save Vancouver. The only reason upzoning in New York City under Mayor Bloomberg didn't work is all the stealth downzoning elsewhere. We keep fudging the facts in order to maintain the preferred narrative of greater density. Let's sweep David Ley's research under the rug.

The housing affordability crisis isn't only national. It's global:

In Toronto, the post-1980s renaissance moved further and further along Queen Street West, then took over the once-industrial Junction. Berlin's teeming creative hub after 1989 was the dense immigrant district of Kreuzberg. It became too expensive for actual artists, who moved further east to places like Wedding.

The past few years have seen that pattern fall apart. The average house price in Hackney – a near-slum on the far fringes of London a decade ago – just passed $900,000 after rising 17 per cent in a year, with rent following suit. Brooklyn is now the second-most expensive place to live in the United States (after Manhattan). Good luck finding a semi-detached house in even the grottiest parts of central Toronto for less than $600,000, or a one-bedroom apartment below $2,000 a month. Forget living anywhere urban in the San Francisco Bay area if you don't make a six-figure salary. This isn't just a problem in the West: In cities such as Beijing and Istanbul, once-storied artistic districts are now antiseptic luxury zones.

Emphasis added. I have a hard time swallowing that supply is artificially constrained in Beijing as it is in Toronto. Yet that's exactly what journalist Doug Saunders concludes when he writes, "Big cities need higher population densities, zoning rules that encourage taller apartments on shopping streets and laneway developments behind houses."

A problem defined locally ("zoning rules") is applied generically ("big cities"). The same pattern of gentrification in London and Berlin (as well as Raleigh-Durham) does not suggest a local real estate market distortion that can be addressed locally. It's like blaming unions for the economic convergence of manufacturing. Upzoning will be about as useful policy tool as right-to-work legislation. Manufacturing jobs as a share of regional employment will continue to shrink. It's a global trend. The same thing is happening in regions with low (or no) union participation.

Gentrification is an urban policy problem in need of a theory. Try to explain why the gentrification happening in your town is also happening in Beijing. Taking a cue from Karl Marx, I think most local trends are the result of global forces. Theories of international political economy (IPE) provide powerful models of observed urban change. Upzoning is fine as long as a local real estate market model does a better job than IPE in explaining what is going on in a neighborhood. Evidence, such as the disconnect between the local labor market and the local real estate market, suggests otherwise.