Gentrification Is Bad: Discuss! An Economist and a Millennial in Conversation

A VIEW FROM THE TOP

As cities grow richer, their character changes, to the advantage of some and the disadvantage of others. More jobs, better restaurants, smarter buildings, safer streets and better schools are popular. But for those whose communities change, who are priced out of housing and schools, or who simply feel the dislocation of watching their area change beyond recognition, gentrification can be painful and harmful.

Finding the balance is complex and can involve clashes between communities and developers, councils and residents, and sometimes even the political left and right.

In this conversation, Sahar Rezazadeh, a chartered surveyor on CBRE’s Central London retail team, argues that gentrification is a problem when development leaves people behind. Richard Barkham, CBRE’s global chief economist, argues that whatever you do in the property sector, you have to embrace the market. Their conversation covers whether gentrification really can benefit the whole community, whether there are viable solutions for affordable housing, and whether gentrification is a cause or a consequence of rising prosperity.

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The Cereal Killer Cafe in London’s Shoreditch raised concerns of the impact of gentrification in this East End neighborhood.

Sahar Rezazadeh: Cities across the globe are experiencing a new epidemic: gentrification, or the creation of what sociologist Ruth Glass called “upper-class ghettos.” Writing in the 1960s, she described how “shabby, modest mews and cottages have been taken over, when their leases have expired, and have become elegant, expensive residences … until most of the original working-class occupiers are displaced and the whole social character of the district is changed.” It’s happening wholescale now!

Far from being a negative effect, gentrification represents reinvestment and revival. 

Today, the increase in rents across many urban areas is forcing out families who have lived there for generations. In 2016, for example, activists in London’s Shoreditch attacked the Cereal Killer Cafe in protest against the gentrification of the East End. At the cafe, you can pick up a single bowl of cereal for £2.60. The protesters argued that “we don’t want luxury flats that no one can afford, we want genuinely affordable housing … we don’t want pop-up gin bars or brioche buns, we want a community.” And they have a point: All too often, gentrification means a loss of local identity, community and authenticity.

Richard Barkham: But are you sure these activists are genuine locals and not just hipsters protesting that the local vibe is “not authentic?” Often it is not actually upper-class people who move in, but academics, media people and artists, at least at first. Far from being squeezed out, the working class have often already left and moved to the suburbs.

Far from being a negative effect, gentrification represents reinvestment and revival. Many of the areas that have been brought back to life were in a long cycle of decay and decline. Cities used to be vast manufacturing centers, but factories moved out and workers moved to the suburbs. As the service sector developed from the 1960s onwards—especially in the 1980s—more jobs arrived and people moved back in. Aging housing stock was refurbished and cities became livable again. So I think gentrification represents success, rather than an evil to be fought.

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A typical scene along Regent’s Canal in Shoreditch, with its mix of industrial and modern structures.

Good for all?

SR: Some urban regeneration can be good for the area, I accept that. But it is often not good for all the people in the area. The people who lose out are often people who have lived there their whole lives. Can placemaking be implemented in everyone’s interest? Or is there a better way of redeveloping the spaces we live and work in?

I would draw a distinction between natural gentrification, which occurs organically over time, and artificial gentrification, which is forced. In Chicago, for example, the mayor has pledged to “build a new Chicago,” but many there feel that they already have Chicago, and don’t need a “new” one. Many of the residents feel that what they need is more affordable housing, not more luxury flats and hotels to attract tourists. That’s an example of artificial gentrification, where the mayor is forcing change. So, yes, gentrification isn’t always bad, but to assess it you have to dig deeper and understand the impact on every individual in the locality.

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Old Street Roundabout, also known as Silicon Roundabout, is surrounded by tech startups where once stood low-rise housing.

Affordable Housing

RB: It’s true that there is a shortage of housing in many of the world’s leading cities, but that is not due to gentrification; it’s due to lack of housing development, often due to planning policies. Providing more affordable housing means vastly expanding the housing supply. But in cities across the U.K., and in other countries, too, we want too much. We want cities that don’t sprawl, so there are greenbelt policies which mean we can’t build outward. We want to preserve the historic urban form and low-rise dwellings, so we can’t build upward. The result is a housing shortage.

The solution is to increase density. I would rather have a medium-density city, but high-rise might also work. Either way, we would have to be much more willing to demolish old stock, which might look nice but is not fit for purpose, and densify our cities. Increase supply and houses would become more affordable. If we are really clever, we will build new stock which is really nice to look at as well!

SR: Of course sometimes there is the need for new housing, but all too often it is forced.

In general, I wouldn’t deny the economic benefits of gentrification. 

For example, Hackney Council abolished offices in Old Street, which had been occupied by startups full of young entrepreneurial people, and replaced them with residential luxury flats, which are not occupied year-round. That’s a knee-jerk reaction from political decision-makers, not a natural market process.

For me, the solution is to make sure that people are engaged in the process. If the council have plans, they should ensure that there is adequate consultation and engagement with the community and focus groups, local people and young people, to understand what they want from it.

One economic idea which deserves more attention is land taxation. That would mean that when a developer moves into the area, they pay an effective amount to the local authority to use in the interests of the whole community. It’s been supported both by Adam Smith and Milton Friedman.

In general, I wouldn’t deny the economic benefits of gentrification. Vintage shops, craft-ale bars and even cereal cafes generate wealth and create jobs. Local councils spend the tax paid by these businesses on improving the area and reducing crime. But development needs to be done in a way that brings everyone with it, and benefits everyone.

Cause and effect

RB: I think we need to correctly identify cause and effect. In general, the process of gentrification is due to the revival of the cities as job generators, particularly in banking and finance but also business services.

Gentrification is the consequence of cities getting richer.

The traditional family no longer really exists; it’s more likely a working couple with one or no children. In terms of time, the cost of travel to the suburbs is too high, and the modern family does not need the space. So there is a strong demand for downtown living. If we attack this, we may prevent the supply of labor into the industries that have led to the city revival.

Gentrification is the consequence of cities getting richer. And it has brought a lot of investment. It’s created many jobs, many of them high-paying. And in the end, nobody can deny that our cities are better places now than they were 20 or 30 years ago.

SR: The continued geo-political changes and challenges to the status quo shine light on today’s globalized, dislocated and discontented world, and we as property professionals need to be very sensitive to the needs of the communities we come into contact with in the course of our business.

Sahar Rezazadeh is a chartered surveyor on the CBRE Central London retail team, offering advisory and transactions services to clients. She advises retailers on their store portfolios including new entrants to the U.K. and London market and specializes in fashion and lifestyle brands. She’s a former finalist of the Network of Aspiring Women Young Entrepreneurs, and in 2014/15 won the RICS Young Surveyor of the Year Award.

Richard Barkham is the global chief economist at CBRE. He is a former director of research for the Grosvenor Group, and a visiting professor in the Department of Construction and Project Management at University College London. He taught at the University of Reading between 1987 and 1998. He is the author of Real Estate and Globalisation, which explains the impact on real estate markets of the rise of emerging markets such as China and Brazil, as well as numerous academic and industry papers.

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