What is the rent gap theory?

A question from Yahoo! Answers:

What on earth is the rent gap theory?

Rent gap theory was proposed by Neil Smith in 1987 to explain gentrification (displacement of lower-income residents in a neighborhood by higher-income residents). Rent gap is a gap between the rent a property currently earns and the rent that property can earn if put to its best use. Smith argued that when the rent gap is wide enough, developers and landlords would see the potential profit to be had in reinvesting in inner-city properties and redeveloping them for new inhabitants. Such redevelopment effectively closes the rent gap and leads to higher rent, mortgage and lease rates.


Smith, N. (1987) “Gentrification and the rent-gap”, Annals of the Association of American Geographers 77 (3) pp. 462-465.

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