Gentrification is composed of two competing factors: the market of the city and the personal sense of domain of residents. Gentrification was a term defined to describe how a community can find working and laboring families priced-out of an environment by "gentry", the non-working gentlemen and their families. The term has since been applied to any general increase in property values due to changes in local economics.
The notion of a free-market city needs little explanation, other than to reaffirm that the value of any land, in a real estate-as-commodity system, is subject to the desirability of a city. As a city becomes a greater opportunity, it attracts capital which the limited real estate resource experiences as an increase in demand. Lacking an ever-increasing supply of housing, this will lead to inflation of value with a lagging increase in quality.
Existing residents’ sense of domain is a combination of work and labors routinely practiced in a specific set of spaces. This is as close as we can come to the definition of "neighborhood", as this domain's range is different for every person. There can be a certain number of shared rituals that residents agree to equate to a sense of place, which they will then brand with a neighborhood name. This phenomenon is meaningless in the context of a city, but is very useful for people who live in cities.
The lack of neighborhood meaning to a city is due to the lack of definition of individual neighborhoods that would definitively establish a voting population that could affect city policy. This isn't to suggest a group who self-identify with a neighborhood can't organize and campaign to effect city policy, but a neighborhood does not elect a representative who then has a distinct policy role at City Hall.
Districts, which do elect representatives, are typically the smallest formal representational body in a city. Most districts are composed of many self-identified neighborhoods. Those neighborhoods may well have neighborhood associations, which are an important group in a community, but who ultimately can be over-born even by their own district leadership.
Neighborhoods, being unquantifiable in extent and membership, are a critical scale of human habitation. Domain must be possessed regularly. The downtown opera may be frequented once a year, nominally making downtown part of a theater-goer’s sense of domain. But the degree of association leaves the theater-goer unwilling to challenge the will of others who live downtown when policy issues for downtown are debated. The same wouldn’t be true of a restaurant that the theater-goer visits every Sunday with friends. That restaurant is part of that person’s weekly identity and shapes that narrow time horizon and sense of community.
Gentrification is best addressed not from a neighborhood or sense of domain because both are inconsistently applied by the public. Rent controls are an ineffective tool that addresses only the symptom of gentrification, not the cause. Rent controls provide immediate relief to the community under siege from too much money, but the result is a stagnation. Residents in controlled spaces usually lose their fixed rate as soon as they move out of their initial home. This results in a kind of "rent control trap" that causes residents to over-value the "bird in the hand" (a low cost of living) when evaluating life-changes that may be desirable or necessary (such as getting a better job elsewhere, starting a family, or planning for retirement).
Though not a "business as usual" permanent solution, there are a variety of building-by-building regulations that can relieve the pressure on a community.
The first and easy step is a massive increase in real-estate tax across the board that an owner is exempt from if they prove they have someone living long-term in 95% of their facility (rounded up). The added tax should go straight into low-income housing funding. This creates a one-for-one tax that mandates high-occupancy rates. People are the fundamental life-blood of a city, and any owner who harms that metric should pay a multiple of taxation in penalty for harming the public good. Sitting and holding onto property is an investment scheme which assumes others are not doing the same, increasing the value of your empty property as others work to increase the value around you. That can be abated with enough taxation.
The second step would be to institute a minimum life-span of every new building of seventy years (approximately two generations). The building codes would need to be adjusted to effect the correct choice of materials and (most importantly) adaptability of the space to allow minor renovations in the future to accommodate changing needs.
Lastly, all demolition permits for residential properties must prove an imminent threat to public safety by the property. This will drastically reduce demolition of existing properties to make way for new market-rate construction.
Jane Jacobs, in her 1961 text, The Death and Life of Great American Cities, describes the healthy neighborhood as one which is composed of a mix of old and new buildings (side by side). This allows for the normal filtering of residents from new, high-income spaces to older, low income spaces as residents reduce their earning potential. Force owners to keep buildings full and keep buildings functional and the properties will be allowed to age in place creating a variety of rent prices. The neighborhood is allowed to continue to benefit from the increased affluence of the city, but not a forced exclusion of low-income residents by the powers of speculative real estate.
However, demand can overcome aesthetics. Jacobs’ (1961) own New York City is a prime example: rents today for astonishingly small efficiencies are extortionist compared to other cities like Chicago or Dallas. Cities are drivers of growth through the sheer number of people who live there. More people, more innovation, more opportunities — all lead to capital influx and desirability by high-wage earners. Measures that restrict this process stymie the process. Growth always begets more growth, particularly in fundamental costs like food, housing, and transportation.
The apparent truth is that many would prefer to live in a village, but are lured by the opportunity of the city. The neighborhood has arisen as a simulacrum of the village. Villages have greatly reduced gentrification (usually) as a result of failing to be centers of innovation and associated influxes of capital. As a result, a modest or fixed income will allow a family to persist in the same village provided they are shrewd and prudent with their money. A successful and vibrant city is a machine unto itself, one that increases in value with increased population. We can reduce over-night gentrification, but we cannot stop it.