What’s wrong with gentrification?

Refugees from the Sixties counter-culture in San Francisco have been blockading ‘Google buses’ in protest at ‘gentrification’. What’s their beef? Simon Wilson investigates.

What’s going on in San Francisco?

The city has been making headlines globally as a high-profile example of how income inequality and ‘gentrification’ – where richer folk moving into areas push out or marginalise the poorer ones who already live there – are fuelling popular discontent, with protestors regularly blockading ‘Google buses’ – private buses that take well-paid technology company staff from their homes in the city to Silicon Valley, 40 miles to the south.

The city itself is thriving – the unemployment rate is 4.8%, versus 8.3% for California as a whole. Median household income is $73,000 a year; the city of 825,000 has more billionaires per head than London. Some 1,800 tech firms have made San Francisco their home, attracting thousands of young, college-educated, affluent tech workers.

But this influx has led to soaring rents and house prices and a good deal of community anger at rapid gentrification – especially because until fairly recently San Francisco wasn’t much of a business centre at all, but famed as the home of counter-cultures from the Beat Generation writers of North Beach to the hippies of Haight-Ashbury to the gay-rights pioneers of the Castro ‘gayborhood’.

Are fears over gentrification new?

The issue of rapid gentrification and displacement (or, looked at another way, whether living for a long time in a place confers a right to carry on living there) is scarcely a new one. Even in San Francisco itself, controversies around gentrification have raged for decades.

The bus-blockades are a more intense expression of anger that surfaced during the first dotcom boom of the late 1990s, when a wave of newcomers in the city’s Mission district led some long-term residents to create what they called a “Yuppie Eradication Project”.

But according to Fred Turner, a cultural history professor at Stanford, gentrification driven by middle-class incomers goes back far further than that – and indeed even underpinned the city’s counter-cultural heyday.

Thus in North Beach, the bohemians displaced working-class Italians; the hippies pushed out long-term residents in Haight-Ashbury; Castro’s large Irish working-class population disappeared as it morphed into a gay Mecca.

Do these changes reflect broader trends?

Yes, in that they highlight an interesting tension within US liberalism: the most progressive parts of the country, such as San Francisco and New York, are also its most economically unequal. And yes – in that they also reflect the fact that more and more highly educated young people are choosing to live in cities.

In 2011, population growth in cities exceeded that in their suburbs for the first time since 1920, according to the US census. Cities also grew five times more quickly than their ‘exurb’ commuter towns.

In Europe, gentrification is a particularly hot political issue in Germany, where the collapse of the GDR in 1989-1990 led to particularly rapid change in the east, including Berlin, where rich Westerners bought up working-class housing stock and gentrification is ongoing. In Hamburg, anger at rapid gentrification sparked serious riots two months ago.

Is this happening in London too?

The term ‘gentrification’ was coined for London, in a 1964 study of working-class Islington by sociologist Ruth Glass. Some parts of prime central London are currently undergoing what academics have dubbed ‘super-gentrification’ – ie, only an elite of super-wealthy finance professionals can afford to buy houses there.

Meanwhile, even as the ‘white British’ population of London has fallen fast (by 620,000 between 2001 and 2011), there are large areas of pleasant-enough inner London (eg, Brixton, Dalston, large parts of Islington, Wandworth and Camden) where the white British population is surging and the signs of gentrification have been marked.

Sourdough pizza and 1950s tea shop chic in Brixton market? No problem. Cocktails overlooking Peckham? Lovely.

What’s causing these changes?

Significant ‘push’ factors mean cities are ever more popular with bright young millenials, according to The Economist. The number of young people going to university has shot up since the 1990s. The economy is creating lots of skilled jobs in major cities, whether London, New York, or San Francisco.

Fewer young people drive cars – a trend that boosts urban living. And yuppies are waiting longer to pair off and procreate, so they can cope with a one-bedroom flat for much longer.  All these factors have led to an intensification of the essential paradox of gentrification.

According to Richard Florida, author of the book The Rise of the Creative Class, the more diverse and tolerant a city, the more likely it is to attract educated and enterprising people and grow faster – which in turn is likely to spur inequality, push prices beyond the reach of the less well-off, and ultimately erode the conditions that made it so attractive in the first place.

In defence of incomers

A flow of migrants into a city can be disruptive, says John Gapper in the FT. But skilled migrants (64% of Silicon Valley engineers are foreign-born) boost their host cities by encouraging economic activity and job creation.

Yes, cities get more expensive as more people want to live in them – but isn’t that better than the alternative? Take a look at Detroit. The San Francisco protestors romanticise their struggle as defending 1960s-style counter-culture. What they are actually saying to migrant workers is: go back where you came from.

“That does not sound quite so idealistic, does it? Nor, for its own good, is it the attitude that a thriving city ought to adopt”.

• Stay up to date with MoneyWeek: Follow us on TwitterFacebook and Google+

MoneyWeek magazine

Latest issue:

Magazine cover
Heading higher?

Or are house prices set to fall?

The UK's best-selling financial magazine. Take a FREE trial today.
Claim 4 FREE Issues

'Would you rather upset God, or have Him just ignore you?'

In the first of three interviews with Merryn Somerset Webb, Hugh Hendry, manager of the Eclectica Fund, talks about what it takes to be a good hedge fund manager – and how he learned to stop worrying and love central banks.


Which investment platform?

When it comes to buying shares and funds, there are several investment platforms and brokers to choose from. They all offer various fee structures to suit individual investing habits.
Find out which one is best for you.


21 November 1969: The first permanent Arpanet link

A milestone in the formation of the internet, the first permanent Arpanet link was established on this day in 1969 between researchers in the United States.