7 Cities That Are Playgrounds for the Rich and Terrors for the Poor
Seven years after Wall Street’s near total collapse, housing markets in the world’s major cities are surging once again, driven by megadevelopers and superrich individuals flush with cash. Financial Times reports that investors spent $1.2 trillion on “high-end commercial properties in 2013,” an 80 percent increase from 2010. The seeds of the buying boom was planted in the wake of the 2008 financial crisis, when the Federal Reserve cut interest rates and pumped commercial banks with cash in exchange for toxic assets (known as quantitative easing), relieving affluent buyers of risk in global property markets.
In many of the world’s major metropolitan areas, private capital investment in real estate has become a central component of urban planning, and following market logic, these cities compete with each other for developers’ money. That means that urban planners in a global capitalist hub, like New York, will bend over backwards to accommodate developers and investors so that their money doesn't go to London instead.
This jousting for capital in real estate is having an increasingly obvious side effect: Diverting attention from the growing ranks of the desperately poor. Ironically, in nearly all global cities where housing markets are booming, there is also a concurrent rise or entrenchment of homelessness.
Using a recent survey from Knight Frank on global property markets, we can glimpse at this grotesque urban duality. If anything, it captures the essence of our gilded age. Here’s a list of just 7 cities in the US and abroad that best illustrate this phenomenon.
1. New York City
There are about 3,357 unsheltered people living on New York’s streets, a 6% rise from 2013 to 2014, continuing a trend that began a few years ago. But the vast majority of New York’s homeless live in shelters across the city, and at 53,615, there are more people living in shelters than ever before.
At the same time, overall property values rose 10.4% across New York, continuing a now familiar, decades-long trend. The luxury condos cropping up in Manhattan and parts of Brooklyn show no signs of abating, but their presence has another effect: bringing in more rich people.
Between 2003 and 2013, the number of inhabitants with a net-worth of over 30 million dollars (known in wealthy circles as “ultra high net worth individuals,” or UHNWI) rose higher in New York than any other city in the world besides Singapore and Hong Kong, and their population is expected to grow 31% over the next decade.
2. Los Angeles
Overall homelessness—including sheltered and otherwise—across Los Angeles County rose last year by nearly 8,000 people, bringing the total to 57,737. Concurrently, the price of luxury properties in the city rose 14%, and it’s population of UHNWI is expected to rise by the same percentage point by 2023.
The sharp rise in LA homelessness was due in part to a sequester-related cut of nearly $10 million to programs that provided support for the homeless, including a program that gave rent vouchers to families earning less than $13,000 a year. While the city left the hole unfilled, it has gone to great lengths to attract rich developers to pour capital into the area, sometimes offering tax incentives. For example, after Korea Air proposed building a skyscraper and luxury hotel in Downtown LA, the city offered the developer a reduced tax rate for the billion-dollar project.
3. San Francisco
The overall number of homeless in the tiny urban area was roughly 7,000 in 2013, representing a 3% increase since 2005. Meanwhile, the ranks of UHNWI’s are expected to rise 11% by 2023.
Like New York, the price of luxury property rose 10.4% last year, and is expected to rise. Median rent for a one-bedroom apartment is above $3,000 a month. Between April and June, homes and condos sold for over $1 million accounted for one quarter of all property sales in the Bay Area—which may partially explain why evictions are at their highest level in more than a decade. That isn’t to imply that most people evicted end up on the street, but it is a revealing nonetheless.
But this is trend is not strictly American; we can observe it in “globalized” cities across the globe, where, as one newspaper in Dublin put it, “Housing boom[s] fuel [a] surge in homelessness.”
There has been little construction of new homes in Dublin since 2008. Austerity has ravaged public housing programs. As a result, many of the city’s properties are being bought up by private investors from around the globe, igniting a real estate boom even as the number of homeless reaches its highest point since the city began surveying.
According to the Wealth Report, Dublin experienced one of the world’s highest increases in property values in 2013. As with the aforementioned American cities, much of the investment is coming from abroad. The Wealth Report describes this growth in property markets as a “rebound,” but as the Guardian noted, housing prices are rising so quickly in Dublin that there is likely a housing bubble forming in the market. That has happened before: in the 90’s and 2000’s, parts of Dublin constituted some of the most expensive real estate in the world. And like the last bubble, the people who will likely be most hurt following the pop will be the city’s most vulnerable, after the social programs they depend on are eviscerated by austerity.
London is a lot like New York City: a playground for the rich and a terror for the poor.
There were 57,350 Londoners without homes in 2013, an astounding 60% increase since 2011. At the same time, Knight Frank forecasts that 5,000 people worth over 30 million dollars will live in London by 2023.
One reason London has become so attractive for the world’s rich is because former tax havens, like Swiss bank accounts, are no longer as safe from regulators as they were in the past. Like New York, London is a place for investors to park their money because they know that real estate will remain profitable for them as values continue to rise in the future. Knight Frank notes that London was the most popular city for the elite of China, Russia, and much of Europe to park their assets.
Inequality is more extreme in real estate powerhouses outside of the Western world, where vast swaths of people live in unincorporated slums. The line between housed, slum dweller, and homeless is much more porous in Nairobi, Kenya than it is in most parts of the United States and Europe.
Half of the residents in Nairobi live in slums, and they’re being forcibly removed to make way for construction efforts ignited by a white-hot property market and a corresponding influx of rich residents, tourists and business people. Luxury real estate prices rose higher there than anywhere else in Africa, and swanky hotels and bars are proliferating like mad. Knight Frank expects a 77% increase in the number of UHNWI in Nairobi by 2023.
To clear the way for these developments, the poor are being evicted at an unprecedented rate, with developers even burning decades-old slums to force out residents. Thousands are descending from semi-homelessness literally having nothing but the clothes on their back—all for the sake of property prices.
Real estate prices rose higher in Jakarta than anywhere else in the last two years, and the number of UHNWI will soar over the next decade. At the same time, 40 percent of the country’s 250 million people still live on less than 2 dollars a day.
For over a decade, the state has forcibly evicted slum dwellers out of places with potential for real-estate development. The clearing campaigns are even more salient today, as the gulf between rich and poor is deeper and wider in Indonesia than it has ever been. And with the specter of climate change on the horizon—50,000 Indonesians were rendered homeless by flooding in 2013—it’s likely that social tensions will rupture more deeply in the future.