Gentrification by ground rent dispossession: the shadows cast by large-scale urban renewal in Santiago de Chile

Abstract

The rent gap theory, a consistent explanation of gentrification in inner-city spaces, sees a growing disparity between capitalized ground rent (CGR) and potential ground rent (PGR) as a catalyst for large-scale property reinvestment and thence gentrification. In historical working-class Santiago’s peri-centre (inner city), not only is there a measurable rent gap, but a state-subsidized market in high-density urban renewal based on the accumulation of increased CGR by a few large-scale developers. This article focuses on a low-income municipality of Santiago, which has a local government that aims to attract this market via the liberalization of its local building regulations (seeking to increase the PGR), and deliberate underperformance in a national programme for housing upgrading (seeking to devalue the CGR in spaces previously targeted for renewal). It is observed how, in this city, two forms of ground rent exist, a lower one capitalized by current owner-occupiers (CGR-1) and a higher one capitalized by the market agents of renewal (CGR-2). This is seen as a form of social dispossession of the ground rent and a necessary condition for gentrification. It is concluded that the state-led strategy of urban renewal in Santiago needs to be refocused on more participative forms of distribution of the rent gap.