Menus Subscribe Search

Follow us

The Future of Money


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, delivered straight to your inbox.

Recent Posts

October 31 • 4:00 PM

Should the Victims of the War on Drugs Receive Reparations?

A drug war Truth and Reconciliation Commission along the lines of post-apartheid South Africa is a radical idea proposed by the Green Party. asks their candidates for New York State’s gubernatorial election to tell us more.

October 31 • 2:00 PM

India’s Struggle to Get Reliable Power to Hundreds of Millions of People

India’s new Prime Minister Narendra Modi is known as a “big thinker” when it comes to energy. But in his country’s case, could thinking big be a huge mistake?

October 31 • 12:00 PM

In the Picture: SNAP Food Benefits, Birthday Cake, and Walmart

In every issue, we fix our gaze on an everyday photograph and chase down facts about details in the frame.

October 31 • 10:15 AM

Levels of Depression Could Be Evaluated Through Measurements of Acoustic Speech

Engineers find tell-tale signs in speech patterns of the depressed.

October 31 • 8:00 AM

Who Wants a Cute Congressman?

You probably do—even if you won’t admit it. In politics, looks aren’t everything, but they’re definitely something.

October 31 • 7:00 AM

Why Scientists Make Promises They Can’t Keep

A research proposal that is totally upfront about the uncertainty of the scientific process and its potential benefits might never pass governmental muster.

October 31 • 6:12 AM

The Psychology of a Horror Movie Fan

Scientists have tried to figure out the appeal of axe murderers and creepy dolls, but it mostly remains a spooky mystery.

October 31 • 4:00 AM

The Power of Third Person Plural on Support for Public Policies

Researchers find citizens react differently to policy proposals when they’re framed as impacting “people,” as opposed to “you.”

October 30 • 4:00 PM

I Should Have Told My High School Students About My Struggle With Drinking

As a teacher, my students confided in me about many harrowing aspects of their lives. I never crossed the line and shared my biggest problem with them—but now I wish I had.

October 30 • 2:00 PM

How Dark Money Got a Mining Company Everything It Wanted

An accidentally released court filing reveals how one company secretly gave money to a non-profit that helped get favorable mining legislation passed.

October 30 • 12:00 PM

The Halloween Industrial Complex

The scariest thing about Halloween might be just how seriously we take it. For this week’s holiday, Americans of all ages will spend more than $5 billion on disposable costumes and bite-size candy.

October 30 • 10:00 AM

Sky’s the Limit: The Case for Selling Air Rights

Lower taxes and debt, increased revenue for the city, and a much better use of space in already dense environments: Selling air rights and encouraging upward growth seem like no-brainers, but NIMBY resistance and philosophical barriers remain.

October 30 • 9:00 AM

Cycles of Fear and Bias in the Criminal Justice System

Exploring the psychological roots of racial disparity in U.S. prisons.

October 30 • 8:00 AM

How Do You Make a Living, Email Newsletter Writer?

Noah Davis talks to Wait But Why writer Tim Urban about the newsletter concept, the research process, and escaping “money-flushing toilet” status.

October 30 • 6:00 AM

Dreamers of the Carbon-Free Dream

Can California go full-renewable?

October 30 • 5:08 AM

We’re Not So Great at Rejecting Each Other

And it’s probably something we should work on.

October 30 • 4:00 AM

He’s Definitely a Liberal—Just Check Out His Brain Scan

New research finds political ideology can be easily determined by examining how one’s brain reacts to disgusting images.

October 29 • 4:00 PM

Should We Prosecute Climate Change Protesters Who Break the Law?

A conversation with Bristol County, Massachusetts, District Attorney Sam Sutter, who dropped steep charges against two climate change protesters.

October 29 • 2:23 PM

Innovation Geography: The Beginning of the End for Silicon Valley

Will a lack of affordable housing hinder the growth of creative start-ups?

October 29 • 2:00 PM

Trapped in the Tobacco Debt Trap

A refinance of Niagara County, New York’s tobacco bonds was good news—but for investors, not taxpayers.

October 29 • 12:00 PM

Purity and Self-Mutilation in Thailand

During the nine-day Phuket Vegetarian Festival, a group of chosen ones known as the mah song torture themselves in order to redirect bad luck and misfortune away from their communities and ensure a year of prosperity.

October 29 • 10:00 AM

Can Proposition 47 Solve California’s Problem With Mass Incarceration?

Reducing penalties for low-level felonies could be the next step in rolling back draconian sentencing laws and addressing the criminal justice system’s long legacy of racism.

October 29 • 9:00 AM

Chronic Fatigue Syndrome and the Brain

Neuroscientists find less—but potentially stronger—white matter in the brains of patients with CFS.

October 29 • 8:00 AM

America’s Bathrooms Are a Total Failure

No matter which American bathroom is crowned in this year’s America’s Best Restroom contest, it will still have a host of terrible flaws.

Follow us

Levels of Depression Could Be Evaluated Through Measurements of Acoustic Speech

Engineers find tell-tale signs in speech patterns of the depressed.

We’re Not So Great at Rejecting Each Other

And it's probably something we should work on.

Chronic Fatigue Syndrome and the Brain

Neuroscientists find less—but potentially stronger—white matter in the brains of patients with CFS.

Incumbents, Pray for Rain

Come next Tuesday, rain could push voters toward safer, more predictable candidates.

Could Economics Benefit From Computer Science Thinking?

Computational complexity could offer new insight into old ideas in biology and, yes, even the dismal science.

The Big One

One town, Champlain, New York, was the source of nearly half the scams targeting small businesses in the United States last year. November/December 2014

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