Menus Subscribe Search

Follow us


The Future of Money

brooklyn-rowhouses

Landmark 19th-century rowhouses on tree-lined Kent Street in Greenpoint Historic District. (Photo: Public Domain)

Do We Need to Force People to Live in the Homes They Own?

• March 19, 2014 • 2:00 AM

Landmark 19th-century rowhouses on tree-lined Kent Street in Greenpoint Historic District. (Photo: Public Domain)

With more and more individual investors looking to real estate as just another money-making commodity to add to their portfolio, rents are being driven to unreachable heights for all but the wealthiest among us.

Chances are it’s happened to you: A lease runs out or a roommate situation changes and you’re forced to find a new place. All of a sudden the neighborhood that you’ve been living in for the past five years starts to feel foreign. Looking at the rental listings, it’s clear your neighbors are paying twice what you’re used to, prices you can’t possibly afford. It’s time to start searching further afield. But where?

Trying to make rent in New York City, and, these days, Brooklyn, might be a cliché, but it’s one I’ve certainly suffered through. When I began looking for a new apartment last year, I knew that my East Williamsburg neighborhood in north Brooklyn (even the name is tailor-made to sell real estate) had changed and I likely wouldn’t be able to find another affordable place there. What I didn’t expect to feel as I browsed endless Craigslist postings was the gnawing feeling that the city had turned against me.

Rent around my old place was too high. So were prices to the east in Bushwick. Park Slope was out of the question. Hip Williamsburg—maybe it would have worked a decade ago? Bed Stuy was a possibility, but it was already being labeled the next great neighborhood. On the L subway line, where I’ve lived since I moved to New York, the cheapest place borders an enormous graveyard. Cheap Brooklyn real estate is moving ever farther south, down into Flatbush and Sunset Park, far enough from Manhattan that it would have been faster at times to take the commuter rail in from Connecticut.

A real estate broker told the New York Times that she thought 70 percent of sales in Brooklyn were to hedge funds and investors rather than “end users or first-time buyers.”

Real estate has always been a precious commodity—the wealthy live closer to the river, or inside the castle walls, or in a house that gets better sunlight. But lately, urban property is becoming more like a stock traded on the NASDAQ. Gentrification turns buildings into investment goldmines seemingly overnight. Apartments are bought and sold before they’re even lived in. In Manhattan, skinny skyscrapers are designed to maximize luxury prices. And in London, entire streets of mansions sit empty because the owners simply choose not to live there.

An op-ed in the New York Times by Ben Judah, the author of Fragile Empire: How Russia Fell In and Out of Love With Vladimir Putin, noted that “the capital’s poshest districts are empty; they have been sold to Russian oligarchs and Qatari princes.” As much as 37 percent of property in the most expensive central London neighborhoods are not primary residences, a Savills report found.

Judah points to The Shard, London’s tallest building and a property jointly owned by the U.K. Sellar Property Group and the state of Qatar, as the epitome of his argument. There, the penthouse mansion has a price tag of $83,000,000. A recent report estimated the market for London penthouses at $1.6 billion, noting that the apartments existed separately from the realm of normal real estate and could fetch as much as $233 million. The report also found that half of penthouse purchases are made by “Russian and Middle Eastern billionaires.”

The proliferation of unused real estate is a waste, according to Michael Kwartler, the president of the Environmental Simulation Center in New York, a firm that consults on the environmental impact of urban architecture. Speaking to the new generation of ultra-skinny skyscrapers that are due to pop up around New York’s Central Park over the next decade (like 111 West 57th Street), Kwartler says, “the technology allows you to do it, and enough wealthy people want to park their money if not their asses there.”

The empty mansions and skyscrapers that are tall enough to cast shadows on the public space of Central Park are a drain on space—space that no one lives in. “It’s an issue of who gets to monopolize a resource,” Kwartler says. “If you’re opting for the views, which is what developers are, you’re buying a fabulous view. But at what expense?”

One motivation of the real-estate-as-commodity phenomenon is that real estate is a good investment, particularly if bought in bulk, and if the supply of properties is as scarce as it is in Brooklyn, Manhattan, or London, so much the better. In 2013, a real estate broker told the New York Times that she thought 70 percent of sales in Brooklyn were to hedge funds and investors rather than “end users or first-time buyers.”

Those investments will likely turn a profit, given that Brooklyn’s real estate value is growing, much faster even than Manhattan’s. A 2014 report from the real estate firm Douglas Elliman found that monthly rents in Brooklyn grew 11.6 percent in February, averaging $2,890, while in Manhattan they fell 2.8 percent to $3,100, suggesting that Brooklyn is still undervalued while the island might just be losing its cool.

While gentrification is pointed at as a driver of urban change, the term doesn’t really begin to describe what’s actually going on. When real estate is looked at simply as a way to make money rather than homes, new communities aren’t being created. Properties flip and rents rise too quickly for tenants to stay long. As corner dry cleaners are swapped out for clothing boutiques, rents rise exponentially, and owners are motivated to swap out their renters for a higher-paying batch. Meanwhile, empty buildings are traded like cattle.

The problem suggests less rent control than residency requirements, forcing owners or tenants to actually occupy buildings rather than use them as commodities. In a time when AirBnB is forcing up property rates even in rural Marfa, Texas, by turning full-time residencies into vacation homes, maybe it’s time to rethink how we approach real estate ownership.

In Brooklyn, the cool new neighborhood was supposed to be Bed Stuy, but it turned out to be Crown Heights, south of Manhattan, not too far from Prospect Park. As for me, I moved to another neighborhood a little farther east of my previous apartment. I found a larger space with more roommates and reasonable rent. I count myself lucky to have found it and grateful to make it my home—for now.

Kyle Chayka
Kyle Chayka is a freelance technology and culture writer living in Brooklyn. Follow him on Twitter @chaykak.

More From Kyle Chayka

A weekly roundup of the best of Pacific Standard and PSmag.com, delivered straight to your inbox.

Recent Posts

October 21 • 4:00 PM

Why the Number of Reported Sexual Offenses Is Skyrocketing at Occidental College

When you make it easier to report assault, people will come forward.


October 21 • 2:00 PM

Private Donors Are Supplying Spy Gear to Cops Across the Country Without Any Oversight

There’s little public scrutiny when private donors pay to give police controversial technology and weapons. Sometimes, companies are donors to the same foundations that purchase their products for police.


October 21 • 12:00 PM

How Clever Do You Think Your Dog Is?

Maybe as smart as a four-year-old child?


October 21 • 10:00 AM

Converting the Climate Change Non-Believers

When hard science isn’t enough, what can be done?



October 21 • 8:00 AM

Education Policy Is Stuck in the Manufacturing Age

Refining our policies and teaching social and emotional skills will help us to generate sustained prosperity.


October 21 • 7:13 AM

That Cigarette Would Make a Great Water Filter

Clean out the ashtray, add some aluminum oxide, and you’ve (almost) got yourself a low-cost way to remove arsenic from drinking water.


October 21 • 6:00 AM

Fruits and Vegetables Are About to Enter a Flavor Renaissance

Chefs are teaming up with plant breeders to revitalize bland produce with robust flavors and exotic beauty—qualities long neglected by industrial agriculture.


October 21 • 4:00 AM

She’s Cheating on Him, You Can Tell Just by Watching Them

New research suggests telltale signs of infidelity emerge even in a three- to five-minute video.


October 21 • 2:00 AM

Cheating Demographic Doom: Pittsburgh Exceptionalism and Japan’s Surprising Economic Resilience

Don’t judge a metro or a nation-state by its population numbers.


October 20 • 4:00 PM

The Bird Hat Craze That Sparked a Preservation Movement

How a fashion statement at the turn of the 19th century led to the creation of the first Audubon societies.


October 20 • 2:00 PM

The Risk of Getting Killed by the Police If You Are White, and If You Are Black

An analysis of killings by police shows outsize risk for young black males.


October 20 • 12:00 PM

Love and Hate in Israel and Palestine

Psychologists find that parties to a conflict think they’re motivated by love while their enemies are motivated by hate.


October 20 • 11:00 AM

My Dog Comes First: The Importance of Pets to Homeless Youth

Dogs and cats have both advantages and disadvantages for street-involved youth.


October 20 • 10:00 AM

Homophobia Is Not a Thing of the Past

Despite growing support for LGBT rights and recent decisions from the Supreme Court regarding the legality of same-sex marriage, the battle for acceptance has not yet been decided.


October 20 • 8:00 AM

Big Boobs Matter Most

Medical mnemonics are often scandalous and sexist, but they help the student to both remember important facts and cope with challenging new experiences.


October 20 • 6:00 AM

When Disease Becomes Political: The Likely Electoral Fallout From Ebola

Will voters blame President Obama—and punish Democrats in the upcoming mid-term elections—for a climate of fear?


October 20 • 4:00 AM

Coming Soon: The Anatomy of Ignorance


October 17 • 4:00 PM

What All Military Families Need to Know About High-Cost Lenders

Lessons from over a year on the beat.


October 17 • 2:00 PM

The Majority of Languages Do Not Have Gendered Pronouns

A world without “he.” Or “she.”


October 17 • 11:01 AM

How to Water a Farm in Sandy Ground

Physicists investigate how to grow food more efficiently in fine-grained soil.


October 17 • 10:00 AM

Can Science Fiction Spur Science Innovation?

Without proper funding, the answer might not even matter.


October 17 • 8:00 AM

Seattle, the Incredible Shrinking City

Seattle is leading the way in the micro-housing movement as an affordable alternative to high-cost city living.


October 17 • 6:00 AM

‘Voodoo Death’ and How the Mind Harms the Body

Can an intense belief that you’re about to die actually kill you? Researchers are learning more about “voodoo death” and how it isn’t limited to superstitious, foreign cultures.


October 17 • 4:00 AM

That Arts Degree Is Paying Off

A survey of people who have earned degrees in the arts find they are doing relatively well, although their education didn’t provide much guidance on managing a career.


Follow us


That Cigarette Would Make a Great Water Filter

Clean out the ashtray, add some aluminum oxide, and you've (almost) got yourself a low-cost way to remove arsenic from drinking water.

Love and Hate in Israel and Palestine

Psychologists find that parties to a conflict think they're motivated by love while their enemies are motivated by hate.

How to Water a Farm in Sandy Ground

Physicists investigate how to grow food more efficiently in fine-grained soil.

Unlocking Consciousness

A study of vegetative patients closes in on the nature of consciousness.

Advice for Emergency Alert Systems: Don’t Cry Wolf

A survey finds college students don't always take alerts seriously.

The Big One

One company, Amazon, controls 67 percent of the e-book market in the United States—down from 90 percent five years ago. September/October 2014 new-big-one-5

Copyright © 2014 by Pacific Standard and The Miller-McCune Center for Research, Media, and Public Policy. All Rights Reserved.