The Rent Gap

         The rent gap is based on theories first published by Neil Smith in 1979. It is essentially a measure of the difference in a site's actual value and its potential value at 'best use.' When the overall rent gap in an area is determined to be great, it is suggested that the area will undergo gentrification as developers identify this difference as an economic opportunity on which to capitalize (Smith 1987). It is therefore a causal and not a consequential measure of gentrification. However, rent gap as an overall theory includes further time depth in the processes at work on the site than those mentioned above. Clark (1995) includes the initial economic pressures to disinvest in a site, causing the rent gap to form as the site's use moves away from its best use, until the site's use is so "inappropriate" that it is "doomed" to be "redeveloped to a higher density and use." He also emphasizes that the rent gap does not determine property development, but only reflects one aspect of the capitalist space economy.
     The rent gap has been criticized by a number of authors for a number of reasons. Two of these criticisms deal directly with our application of the theory to the downtown eastside and so will be examined. The first criticism is the difficulty in applying the theory to any real world examples. This comes from the fact that it is based, in part, on the abstract concept of best use that is exceedingly difficult to measure (Bourassa 1990). This is reflected in the fact that it has actually been applied to very few examples. At the very best, determining the best use will be a subjective process. The second criticism of the theory is based on the observation that it does not accurately reflect what occurs in the areas in question. This is particularly evident in Vancouver (Ley 1996). Based purely on the context of the downtown eastside, its rent gap should be large. Portions of it are known as "no flyer zones to most direct marketers as some of the poorest areas in all of Canada" (McCullough 1994). This is in contrast to its location directly adjacent to the downtown core, represented as "one of the most functional North American central cities in existence" and an example of an urban centre that works (Bula and Ward 2000). However, if this is the case, than the rent gap holds that land in this area should be undergoing massive development, but this is not evident. (Ley 1996). This sediment is echoed by a City of Vancouver planner, who has his own measure of the potential for gentrification in the downtown eastside. He keeps track of land available for development in the entire city core. When all this land is filled, the potential for gentrification is determined to be critical. This method reflects the assumption that the downtown eastside is the least attractive area for development despite its large rent gap, and will therefore be developed last.

Method and Data
         Despite these criticisms, an attempt was made to determine the rent gap in the downtown eastside. It should be noted that the method used here is not based on any current literature, as no method was found acceptable for this study. Instead, it was measured as a function of the change, frequency and location of vacant lots in the downtown eastside. Though this is not how the rent gap is expressed or defined in the literature, it is suggested that it reflects the rent gap well, as there are few examples of a greater disparity between actual and best use than in a vacant lot. More directly, vacant lots do represent disinvestment in a site, referred to by Clark (1995) as the initial process in the rent gap theory. The method also has the added ability of measuring the process of reinvestment predicted by the rent gap theory as a decrease in the number of vacant lots in an area. Therefore extreme values of increase or decrease in vacant lots in an area would represent the different processes of disinvestment and redevelopment in an area, while marginal values would indicate no gentrification.
         The analysis of vacant lots was based on the same two data sets compiled from 1996 and 2000 of urban amenities in the downtown eastside. Therefore, it is only a measures commercial lots, and is not particularly relevant to Strathcona or Hastings North. The change in lot vacancy between 1996 and 2000 was calculated and displayed at the lot level
(figure 7.1). The data was then aggregated to the block level (figure 7.2) and sub-area level (figure 7.3) and displayed as percentage increase / decrease of vacant lots, showing trends at two different scales.

         All the sub-areas in the downtown eastside showed an increase in number of vacant lots
(figure 7.2). However, all the sub-areas except Oppenheimer, Thorton Park and Victory Square had their percentage of lots vacant increase by less than 5%. Thorton Park and Oppenheimer had the greatest increase of vacant lots. At the block level (figure 7.3), 10 blocks showed a decrease in lot vacant by 5% or greater, while only one, in the east end of Gastown, showed a decrease in lot vacancy of greater than 20%. Conversely, 26 blocks showed an increase in lot vacancy of 5% or greater, with six extreme cases of 20% or greater. As of February 2000, Oppenheimer has the greatest number of vacant lots (figure 7.4), while Victory Square and Thorton Park have the greatest percentage of vacant lots (figure 7.5).

         At the block scale
(figure 7.2), blocks with a decrease in vacant lots are distributed fairly evenly throughout the downtown eastside. They can only be interpreted as redevelopment at the block level. However, there are some spatial trends within the blocks experiencing an increase in lot vacancy. Though the Woodwards block shows a decrease in vacant lots (due to its limited sample size), a number of the blocks around it show a substantial increase in lot vacancy. It is possible to conclude that the Woodwards block is therefore acting as a catalyst for further disinvestment rather than attracting development. Similarly, most of the blocks in Oppenheimer show a substantial increase in lot vacancy, and no blocks in Oppeheimer show a net loss of lot vacancy. This would suggest that the rent gap is greatest in this area. Chinatown, interestingly shows a general trend toward stability in most of its blocks despite the blocks with extreme values that surround it - an indication of little to no gentrification or perhaps just commercial stability.
         At the sub-area level (figure 7.3), only Oppenheimer, Thorton Park and Victory Square show extreme values of lot vacancy increase indicating economic disinvestment and perhaps a large rent gap. Therefore, the rent gap theory would suggest that these areas have the greatest potential for gentrification. However, the theory can not be applied blindly in a vacuum. As already mentioned, Ley (1996) points out that this is does not appear to be occurring in downtown eastside, particularly in the Oppenheimer district. However, there are other factors at work. In this sub-area, the city regulations in place that act to discourage commercial investment and prevent conversion of certain types of business. A report prepared for the city on the conversion and demolition of Single Resident Occupancy hotels for downtown Vancouver calculates the optimum use for some of these SROs, taking into consideration the restraints imposed by the city (Colliers International 1999). Despite the fact that SROs are generally considered to be at the bottom of the spectrum of profit making businesses, the report concludes that some of the SROs optimum use is as an SRO. This illustrates well how city regulations and zoning laws act in opposition to the economic factors on which the rent gap is based. Therefore, though it is concluded that the rent gap is indeed high in certain sub-areas, these sub-areas are unlikely to undergo rapid gentrification

Sources of Error
         The lot vacancy calculations and coverage were based on the same data sets used in section 6 (Urban Amenities), and so have the same sources of error. However, the recording of vacant lots has a further source of error associated with it, which stems from the fact that at the time of recording, lot vacancy was no the intended use for the data sets. Therefore, vacant lots were represented ambiguously. That is, only the lots that were completely vacant of commercial enterprise were marked vacant. However, most commercial lots have a number of commercial spaces. Therefore, any lot that had a vacant space but also included a commercial enterprise would not be recorded as vacant. Therefore the absolute vacancy of commercial spaces is under represented. However, because this method was used throughout the entire downtown eastside, the relative vacancy rates between sub-areas and blocks have a higher degree of accurate representation.