How to reduce the damage done by gentrification
Cities are now home to more than half of the global population, a share that will rise to two-thirds by 2050. That means the forces shaping life in cities now also shape our world as a whole. Cities throughout history have been the great incubators of human progress, through their power to bring us closer together – something we need now more than ever. Many of the answers to our greatest challenges are to be found in reforming our cities, but if we fail to take action, cities will magnify the perils that lie ahead.
The populist politics of recent years has been tinged with resentment against global metropolises such as London and New York. These cities have boomed while others have struggled. But while the gulf between thriving cities and everywhere else has widened, so too has the disparity within these cities. Inequality has risen in most metropolitan areas in the US since 1980, but it has risen fastest in large, thriving cities such as New York, San Francisco and Chicago, where it is now much higher than the national average. Wages for high-skilled knowledge workers in these places have soared, but pay for the low-skilled service workers supporting them has languished, a gulf that is compounded by the rapidly rising cost of living in these cities.
These global metropolises have increasingly come to resemble ivory towers, with a highly concentrated core of prosperity served by a sprawling periphery of disadvantage. Urban centres have seen increasing employment, falling crime and significant improvements in the performance of public services. Warehouses and factories from Kings Cross in London to Brooklyn in New York have been converted into upmarket apartments for welleducated (and typically white) professionals. Former working-class housing has been renovated or redeveloped. Trendy cafes and bars have appeared, along with high-end fitness studios and organic food stores.
Formerly affordable, working-class areas have seen significant gentrification. To be clear, the growth in the population size of inner cities has been modest compared to suburbanisation. In fact, a new ring of sprawl dubbed the “exurb” has emerged. What has changed is the socioeconomic makeup of the concentric circles of cities. Whereas once the well-off fled for suburbia, today in many cities they are heading back to the urban core, while poverty is increasingly moving out to the suburbs. The journalist Alan Ehrenhalt has aptly described this process as “the great inversion”.
The increased attractiveness of many urban centres can be seen in the shifting profile of house prices within the concentric circles of cities. One study of the top 20 cities in the US over time found a major shift in recent decades in the relationship between house prices and distance from the city centre: while in 1980 house prices increased the further away a property was from the central business district, by 2010, that relationship had inverted. The premium on housing in urban centres has further increased since then: median home prices in the five inner boroughs of New York City increased at four times the rate of the rest of the metropolitan area between the start of 2010 and the start of 2020. The faster growth of suburban house prices during the pandemic has already tapered off, leaving the long-term picture largely unchanged.
What has led highly paid professionals to swap a freestanding house and garden in the suburbs for high-density living in urban centres?
Multiple factors have been at work. The reduction in urban pollution in rich countries in the latter decades of the 20th century, thanks to increasing regulation and the decline of dirty industries, is one reason. The River Thames, which runs through the heart of London, was long a source of revulsion for the city’s residents. In 1858, industrial, human and animal waste combined with hot weather to produce such a horrible smell that it was named “the Great Stink”. Despite subsequent efforts to improve the condition of the Thames, it remained abhorrently polluted, to the extent that it was declared “biologically dead” by the Natural History Museum in 1957. Thanks, however, to a multi-decade programme of cleaning and treatment, the river has made an impressive recovery.
Cities such as Chicago have experienced a similar reversal. The removal of lead from fuel and other environmental regulations have contributed to significant improvements in air quality in cities in rich countries, though there is still much to do. Air quality in London has come a long way since the great smog of 1952, which claimed thousands of lives.
A fundamental reconfiguration in lifestyle preferences has also been under way in recent decades, contributing to the growing desirability of living in urban centres. From the 1960s onwards, urban centres became especially attractive for those whose lives fell outside the conventional social mores. The LGBTQ+ community embraced the inner city as a place where they could escape the judgment of middle-class suburbanites. Amid rising immigration in the latter half of the 20th century, inner cities brought ethnic minorities together into diaspora communities, in contrast to the overwhelmingly white suburbs. As a result, inner cities developed a spirit of tolerance and openness that has been conspicuously absent from suburbia.
For an emerging educated elite that blended the aesthetic of the counterculture with the economic advantages bestowed on them by the transition to a knowledge economy, the mark of success is not a double-garage home in the suburbs, but a home in an inner-city neighbourhood surrounded by creativity, culture and convenience. Indeed, the lifecycle of gentrification in recent decades has tended to follow a predictable pattern: first come the artists, then the real estate developers and then the professionals. This same story has played out everywhere from London’s Shoreditch to New York’s SoHo to Sydney’s Surry Hills.
The process of gentrification is not exactly new. In recent decades, however, the process has accelerated and extended into many neighbourhoods that once provided affordable homes to those on lower incomes, leaving large parts of the city out of their reach. We cannot let our cities descend into islands of privilege amid seas of disadvantage. Thankfully, with the right policies and investments, a better, more inclusive and sustainable future is possible.
The growing demand for inner-city living has coincided with the arrival of the millennial generation into adulthood. Urban centres have a magnetic pull for those just setting out on their careers, curious about the world and hungry for experiences. This is the time in a person’s life when they may have achieved financial independence – or something close to it – but are not yet constrained by the need for a larger space to accommodate a family. Unbounded by such constraints, these individuals head to the city and all the excitement it has to offer.
The role of inner cities as marriage markets reinforces this. Even in an age of meeting online, very few couples choose to conduct their relationships entirely in the virtual realm, at least after the first few encounters. And the further one gets from busy urban centres, the lower the likelihood of finding a good match. As singles couple up and start a family, the pressure for more space increases, while time available for enjoying big-city life shrinks. The result is an exodus from cities for parents with young children.
We can see this lifecycle pattern clearly in the net migration flows in and out of the inner boroughs of London. While many teenagers leave the city after graduating from school to attend university, they return after their degrees are completed, and bring with them many more young adults from across the country. As a result, net migration into inner London flips from negative to positive for adults in their early 20s, and continues rising into the mid-20s. After that, it begins to taper off and eventually turns negative again as many adults have children and leave for the outer suburbs and commuter towns.
Over the past two decades, however, that story has evolved in two important ways. First, the amount of net migration into inner London by adults in their mid-20s has nearly tripled. Second, the age at which net migration flips direction – with more adults exiting than entering – has shifted by a full decade, from 34 to 44. The reason for this lies in changing demography. The average age of marriage has increased significantly in the past few decades. When Prince Charles and Lady Diana married in 1981, the average age of first marriage in the UK for women was 22 and for men 24; when Prince Harry and Meghan Markle married in 2018, these figures had risen to 30 and 32 respectively. Over the same time period, the average age of women at childbirth in the UK has risen from 27 to 31. As young people couple up and start families later, if at all, the pull of the urban lifestyle remains for longer. And while increasingly unaffordable housing in cities such as London is now pushing out a growing number of young people, many would rather stay.
The great inversion has taken an immense toll on many of society’s most disadvantaged. As wealthy urbanites move in, the existing poor residents are pushed away. For those who happen to own their properties in gentrifying neighbourhoods, this process can create a windfall financial gain. Unfortunately, the most disadvantaged in these areas tend to be renters, who find themselves confronted with rapidly rising housing costs. While the effects of gentrification may be more muted in cases where the neighbourhood in question was once made up primarily of industrial and commercial real estate, the stock of such property has rapidly been exhausted in New York, Chicago and London. The result is a combination of increasingly concentrated disadvantage in a small number of inner-city neighbourhoods – such as the Bronx in New York or Englewood in Chicago – and a general outward movement of poorer people into the suburbs.
Often, those who are pushed out by gentrification end up far out in the exurbs, where property is cheap but jobs are sparse and commute times to the urban centre are oppressive, especially for those who cannot afford a car and rely on public transport. Sheila James, a public health worker, told the New York Times that property prices in San Francisco had forced her so far out of the city that she faced a 2.15am start on a normal working day. Between 2000 and 2015, the share of neighbourhoods in exurban areas with a poverty rate above 20% more than doubled in the US. And while commute times in the US have been rising across the board, they have been rising far more rapidly for Black and Hispanic workers. Whereas the truly disadvantaged were previously those trapped in poor, inner-city neighbourhoods, they are increasingly those trapped in low-density areas on the periphery of cities.
The takeover of inner-city areas by educated professionals has come at a great price, but it is unclear whether the alternative is any more appealing. The ability of cities to attract high-skill knowledge workers is essential for their success in today’s economy. And these workers now want to live in trendy urban centres into their late 30s and beyond. The fact that gentrification has been slower or absent in struggling cities such as Detroit and Cleveland is not a coincidence.
What should be done about this? Making today’s cities work for all their inhabitants, not just a lucky minority, will require three pillars: fairer housing, fairer public transport and fairer schooling. To start with schooling, it is again instructive to look at rich countries that have succeeded in achieving relatively equal outcomes for students irrespective of their socioeconomic background. Japan’s schooling system is perhaps best known for the demanding pressures it places on pupils, but it is also one of the most egalitarian systems in the world.
The approach to education in Japan offers a number of useful lessons. The first is to decouple the financing of schools from local revenue streams. In the US, nearly half of school funding comes from local government revenues, which vary heavily depending on the affluence of an area. By contrast, in Japan funding for teacher salaries, school buildings and other expenses primarily comes from national and prefectural governments. The fact that very few primary and lower secondary school students attend private schools in Japan also means that everybody participates in the same education system during these pivotal years.
The second lesson from Japan is to move away from the direct hiring of teachers by schools. Teachers in Japan are hired by prefectures – analogous to states – and typically rotate through multiple schools over the course of their career, especially early on. This allows the government to direct highperforming teachers to disadvantaged areas, rather than teacher quality acting as a mechanism for further widening the socioeconomic gap in school performance.
Many other ideas exist for reducing educational inequality – some easier, others harder. Research by Roland Fryer of Harvard has demonstrated that simply providing increased training for public school principals can have a meaningful impact on student achievement. In Britain, the teachers’ union has advocated for a certain number of
places in high-performing schools to be ringfenced for disadvantaged students from outside the catchment area. A similar concept exists in the US in the shape of “magnet schools”, which focus on drawing together gifted students irrespective of background, though the impact on the disadvantaged students who are not fortunate enough to make the cutoff is unclear. Perhaps the most powerful mechanism for reducing disparities in educational outcomes within cities is to tackle the challenge of affordable housing, which prevents poorer families from accessing better schools in wealthier neighbourhoods.
In the early decades of the 20th century, as public concern continued to grow over the quality of life for the working poor in overcrowded and ramshackle inner-city housing, many rich countries began major efforts to clear such areas and replace them with social housing, a process that accelerated in the aftermath of the second world war. Britain was a particularly enthusiastic adopter, building more than 4m social houses between the end of the war and the start of the 1980s. Such initiatives were not without their critics. For example, in the 60s the urbanist Jane Jacobs argued forcefully against the prevailing approach in New York City of bulldozing slums and replacing them with lifeless, poorly designed housing projects that undermined local communities.
But social housing has played an important role in reducing inequality in cities by ensuring that all residents can have their basic need for shelter met. When interspersed through a city, it has also helped to combat the tendency towards socioeconomic segregation.
In London, for example, social housing was also incorporated into wealthy areas such as Chelsea or Primrose Hill in postwar decades, with the notable benefit of disadvantaged families gaining access to the same schools and local services as their wealthy neighbours. In the 80s, amid the freemarket fundamentalism championed by Thatcher and Reagan, social housing fell out of favour in many countries. In Britain, Thatcher’s right to buy policy led to millions of properties being sold to tenants, crippling the state’s capacity in the following years to house people in need.
Economists began to advocate a more market-friendly model of providing direct financial support in the form of housing vouchers for poor families. As a result, socioeconomic segregation increased in many cities, as low-income households consolidated around low-income areas where rent is cheap. In recent years, Britain has sought to remedy this issue by requiring new residential developments above a certain size to incorporate a number of housing units that are rented out below market rates. Even including these homes, however, the combined supply of social and discounted housing in Britain has been in steady decline since the 1980s.
Cities such as Vienna illustrate the alternative. More than 60% of the inhabitants of the city live in subsidised rental housing – compared to around 20% in London and just over 5% in New York – roughly half of which is owned by the municipal government and the other half by subsidised nonprofit cooperatives. A relatively liberal upper limit on the household income that qualifies for subsidised housing in Vienna – €53,340 (£46,125) for a single person or €79,490 (£68,738) for a couple – means these housing blocks bring together people across a relatively broad swathe of the socioeconomic spectrum.
The rapid increase in house prices in many major cities has made home ownership – and the wealth creation it brings – increasingly unattainable for many. House prices in London, Paris, New York and Sydney have grown much faster than median incomes in recent decades, making it hard to accumulate the savings needed to transition from renting to owning.
There are two main culprits behind the decline in housing affordability. The first is years of low interest rates, which until very recently made debt unusually cheap. That made it possible for those who already had the initial capital for a deposit to pay more for a home, either for themselves or as a rental investment, pushing up prices and making it harder for those without a deposit to get on the property ladder. The recent surge in interest rates has not helped, as the cost of home loans has risen by more than house prices have fallen. The second is the long-term deceleration in the building of new houses. Adjusting for population size, rich countries are now building fewer than half as many houses as they did in 1970. The problem is particularly acute in inner cities, many of which have seen very little growth in the housing supply in recent decades, with construction activity skewed towards refreshing the existing stock. Between 2010 and 2019, total housing units in New York City’s five boroughs increased by just 6%, compared with job growth of 21%.
Cities need to stop growing outwards and start increasing density. This need not imply endless high-rise buildings and the destruction of heritage architecture – much could be achieved through greater use of midrise development and faster conversion of former offices and industrial spaces. As populations in rich countries age and as young people live alone for longer, accelerating the conversion of family homes into single units can also help.
The final pillar for fairer cities is fairer public transport. Access to cheap transportation has long been essential in giving the disadvantaged inhabitants of cities the means to access gainful employment. Yet the systems of public transport that exist in many major cities were often designed and built more than a century ago, at a time when the geography of poverty was very different. As inner-city areas become gentrified and poverty shifts outwards, the risk is that transit systems in many cities end up subsidising the population that least needs it. For instance, in London, the cost of a monthly travel pass is highest for those who need to commute from outer zones into the inner city, yet these areas are exactly where poverty is growing the fastest.
Questions also need to be answered around the financing of public transport. In London, tickets fund more than 70% of public transport income, twice the share in Paris. A monthly travel pass in London for zones 1 to 3 – which loosely corresponds to the inner boroughs – at the time of writing costs £184 (or €211). That compares to just €84 (£73) in Paris for an all-zones metro system pass that covers a similar distance.
Transit systems like London’s, which rely on ticket revenue more than general taxation, place a greater financial burden on the poorest inhabitants of the city and increase the risk of them being trapped inside struggling neighbourhoods. Still, for all its flaws, the London system is far superior to carcentric cities in the US such as Los Angeles or Atlanta, where a distinct lack of public transit options acts as a poverty trap for any resident unable to afford a car.
Three years on from the pandemic-induced surge in remote working, a clearer picture is emerging of its impact on cities. Dire predictions of a widespread abandonment of inner-city neighbourhoods have not come true, with residents valuing more than just their commute time. Still, the drop in commuting into central business districts is taking a heavy toll, with offices left vacant, public transport systems left underutilised, and the ecosystem of businesses from retailers to restaurants that service commuters left struggling. The deteriorating state of downtown San Francisco, already burdened by a long-running homelessness problem exacerbated by wildly unaffordable housing, highlights the risks. Now is the time for bold action, based on fresh vision.
Cities are the source of dynamism in all societies. For 5,000 years they have been our engines of progress, spurring the cooperation, specialisation and creativity that have been the driving forces for human development. Today, more people live in them than at any time in history. It is imperative that we learn how to make cities sustainable, and ensure they work for all, not just a fortunate few.
This is an edited extract fromAge of the City: Why Our Future Will Be Won or Lost Togetherby Ian Goldin and Tom Lee-Devlin, published by Bloomsbury and available at guardianbookshop.com.
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