Minneapolis is a leader in trend toward gentrification

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

Incomes are rising in Minneapolis neighborhoods at a faster pace than the city's suburbs, according to an analysis of census data by economists at the Federal Reserve Bank of Cleveland, and the shift toward higher-income neighborhoods in the city has been more dramatic after the recession than in any U.S. metropolitan area other than Portland, Ore.

Gentrification was on the rise in much of the country in the run-up to the financial crisis, economists Daniel Hartley and Daniel Kolliner said, as relatively affluent residents moved into and began to overtake urban neighborhoods.

"Looser lending standards, which were prevalent at the time, may have contributed to the trend," they wrote.

Atlanta gentrified the fastest, with Washington, D.C., St. Louis, Denver, Seattle, Portland and Minneapolis not far behind. But from 2007 to 2010, neighborhoods inside Portland, Minneapolis, Seattle and Denver continued to see their average incomes rise compared with the suburbs, while the trend slowed or reversed in other parts of the country.

"For the city's experience, this is a great transfer, both of the tax potential they could be getting and the multiplier effects," said Daniel Trudeau, a geographer at Macalester College in St. Paul.

In Minneapolis, the rise in average income from 2007 to 2010 was spread across the city, according to the Cleveland Fed's data.

One part of the city, on Lake Street just west of Hiawatha Avenue, showed both extremes. The blocks immediately north of Lake Street fell in the metro area's income rankings, while blocks south of Lake Street rose.

Other neighborhoods, like the Mill District and a tract in the middle of Near North, were among the quickest to gentrify before the recession, but have since seen average income fall relative to the rest of the Twin Cities.

The growing contrast between the city and its suburbs is likely the result of both increased prosperity near the core of Minneapolis and the spread of poverty to first-ring suburbs, said Louis Johnston, an economist at the College of St. Benedict and St. John's University.

"The latter would make the closer-in tracts look better even if they aren't gentrifying much at all," Johnston said.

Gentrification is often defined as a "class transformation" in which wealthier people push poorer residents out of their homes, but most of what's happening in Minneapolis doesn't fit into that category, said Trudeau. The rapid rise in average income in the North Loop, for instance, has mostly happened without displacing anyone.

Still, for people without much income, a high-income center of the city might not be good news, especially when most new housing is for people who can pay high rents.

"To some extent, there can be people who lose out on this in subtle and indirect ways," Trudeau said. "It's not that they're being displaced, but the opportunity for them to live close to downtown Minneapolis is significantly decreased."