Starbucks Patrons May Be the Reason for Some Housing Prices Rising

According to a new Harvard study, after a Starbucks pops up in town, house prices tend to creep upwards.

It seems having a watering hole for coffee and tee enthusiasts, hipsters, writers, and anyone else who likes the ambiance of Starbucks, is connected to housing prices rising.

A Harvard Business School paper has used Yelp data to find that the entry of each Starbucks into a ZIP code is correlated with a 0.5 percent increase in housing prices within a year.

The paper wrote, “The presence of a Starbucks is far less important than whether the community has people who consume Starbucks.”

It’s not however clear if housing prices are rising due to the Starbucks opening itself or simply because more
affluent customers who like the coffee chain are moving into the area.

According to Harvard economics professor Edward Glaeser, it may be the affluent customers responsible.

The study revealed that each 10-unit increase in the number of reviews is associated with a 1.4 percent increase in housing prices in the ZIP code.

“The most natural hypothesis to us is that restaurants respond to exogenous changes in neighborhood composition, not that restaurant availability is driving neighborhood change,” the paper also wrote.

“Government data from statistical agencies such as the Bureau of Labor Statistics and Census Bureau have long been used by economists for analyzing policy and the economy — these data sources are invaluable but come with important limitations,” said Michael Luca, an associate professor at HBS.

“Yelp data has the advantage of being more up to date than most official government statistics,” he said. “It also contains metrics on things like cuisine, prices, and ratings that can be difficult to observe otherwise.”

Professor Glaeser wrote, “Yet, it seems true that Yelp establishments from 2007-2011 predict changes in education levels over the next five years, but education from 2007 to 2011 does not predict increases in the number of Yelp establishments, once we control for the initial level of Yelp establishments.”

“The presence of a Starbucks is far less important than whether the community has people who consume Starbucks. Consequently, we think that this variable is likely to be a proxy for gentrification itself.”

The study is the first of its kind using Yelp data.

Disclaimer: We have no position in Starbucks Corporation (NASDAQ: SBUX) and have not been compensated for this article.