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Starbucks May Have This to Do with Rising Home Costs

According to a Harvard study, when a Starbucks (NASDAQ:SBUX) pops up in town, housing prices tend to move higher.

Using Yelp data, in a first of its kind study, the Harvard Business School paper has found that the entry of each Starbucks into a ZIP code is associated with a 0.5 percent increase in housing prices within a year.

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

According to economists, the study is the first of its kind to track gentrification using Yelp, which could be a new tool to monitor housing prices.

The paper has no determined whether housing prices tend to rise due to the Starbucks itself or because of the affluent customers that choose to go to the Starbucks in the area.

Edward Glaeser, a Harvard economics professor, has said Yelp data reveals it may be the latter and that affluent customers may have something to do with the rise in housing prices.

The study had determined 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,” said the paper.

“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,” remarked Michael Luca to CNBC via email. Luca is an associate professor at HBS.

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

Glaeser added, “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,” Glaeser wrote. “Consequently, we think that this variable is likely to be a proxy for gentrification itself.”

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