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THE INC. LIFE

A Harvard Study Says Starbucks Moving Into a Neighborhood Is Associated With Rising House Prices

Could it be that people crave simple things? Or could it be something e

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BY Chris Matyszczyk - 07 Sep 2018

starbucks neighborhood

PHOTO CREDIT: Getty Images

Absurdly Driven looks at the world of business with a skeptical eye and a firmly rooted tongue in cheek.

 

They're a source of small comfort, aren't they?

Yes, it's a chain and some of the food isn't exactly delightful.

But the coffee is palatable and, if we're talking about my local Starbucks, the staff can sometimes be delightful.

We've come to accept that there'll always be a Starbucks not too far away.

I've never considered, though, that the mere presence of one of these morning psychological microdoses might be a predictor of house prices.

Some Harvard researchers did.

Their main intellectual aim was to see how Yelp data can offer numbers defining how a neighborhood changes. In real time, that is.

After all, public statistics can be as slow as some public other things.

Phenomena such as gentrification can happen quite quickly, as, well, people are sheep.

This includes hipsters.

These researchers were moved to scientific action by a New York Magazine quote that suggested gentrification begins the minute coffee shops open.

So they grasped at real-time numbers and found something quite moving:

Combining Census data with Yelp data for the United States, we test this hypothesis and find that the entry of new Starbucks stores into a ZIP code is in fact a predictor of housing price growth.

In essence, then -- or so it seems -- the minute a Starbucks moves into your ZIP code, the value of housing goes up.

Now, of course, this doesn't mean that the Starbucks actually causes the housing price growth.

This is merely joy by association, but what an association. Say the researchers:

The entry of each additional Starbucks into an area is associated with a 0.5 percent increase in local housing prices.

Could it be that Starbucks is the Grande Midas that comes along, touches your walls and makes them look just a little more golden?

Oh, I don't know.

You know these are clever researchers.

I'm guessing, then, that they surely knew separating Starbucks out would generate a little attention for their work.

You see, there was another sentence that followed the golden revelation:

We find similar results when looking at coffee shops as a whole.

Ah. Oh.

So Starbucks doesn't quite have extraordinary powers. It's more akin to Austin Powers.

Indeed, dig deeper into the research and it all becomes a touch painful.

Grocery stores and wine bars have a greater association than Starbucks with respect to house prices.

So, sadly, do barbers.

The most lamentable larger association with house prices is generated by, gasp, vegetarian restaurants.

Oh, and did I mention the research here was only based on New York? Which is about as representative of America as, well, your average New Yorker.

And then I ask you to consider chickens and eggs.

Is Starbucks so prescient and powerful that the minute it arrives, the young and the affluent insist: "We must move there"?

Or could it be that the Y&A move to a new bolthole and some fine executive at Starbucks screeches: "They have a Dingbat Foot-Stomped Coffee there! We must go there too!"

Actually, dig even deeper in this paper and you might think it merely a rather hearty ad for Yelp. Sample:

Housing price increases at the ZIP-code level are correlated with increases in the number of Yelp establishments, and more strongly related to changes in the number of Yelp reviews.

Ah, so Yelp is the one that's driving this influx of the young, the hip and the moneyed into neighborhoods?

But then my mind drifted further.

Could it be that former Starbucks chairman Howard Schultz will run for President on the slogan: "I know how to raise the price of everyone's house!"?

Naturally, I asked Starbucks. I was offered a venti refusal to comment.

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