Housing redevelopment is a key source of new housing supply, but it is often associated with neighborhood gentrification. This paper examines the interaction between redevelopment and gentrification, as well as the effect of a teardown tax policy intended to curb both. Using a spatial difference-in-differences approach, we estimate that a $15,000 teardown tax implemented in two Chicago neighborhoods reduced demolitions by 58% within the treated areas. We complement this result with evidence that redevelopment activity substantially increased neighborhood average income. Motivated by these findings, we develop a general equilibrium model featuring forward-looking landlords and heterogeneous households with varying willingness to pay for housing quality. Landlords decide when to redevelop and how many housing units to build, with new housing being of high quality that depreciates over time and filters to low-income households. Counterfactual results reveal that an expanded $60,000 teardown tax targeted at five neighborhoods in Chicago significantly shifts redevelopment and gentrification to other parts of the city, particularly neighborhoods with a more affordable housing stock. These findings have important implications for local governments considering anti-gentrification policies.