By Elin Brimheim Heinesen
Gentrification is a process of change occurring in numerous cities worldwide, where old, often rundown and neglected neighbourhoods are renovated and revitalised. But is this development always beneficial? This is the question, as gentrification often leads to conflicts between long-term residents—sometimes spanning several generations—and newer, more affluent arrivals.
In this presentation, I aim to address the questions: What does gentrification specifically entail? Is gentrification good or bad, particularly for a city like Tórshavn? But first, I will discuss the overall situation in the global housing market.
People Are Moving From the Countryside to the Cities
More and more people are choosing to relocate from the countryside and smaller villages to the big cities. This trend is visible not only here, but worldwide. In 2011, we reached a milestone where more people now live in cities than in smaller towns and villages. Consequently, cities are experiencing a high demand for housing, which is growing faster than they can accommodate. The result is clear:
Increased demand and limited supply are causing both house prices and rent to rise – despite the fact that the average income level of ordinary people has remained stagnant compared to the price index for decades. Moreover, we have recently faced significant inflation, which has substantially increased the prices of food, oil, and other essentials – impacting those with the least the hardest.
Poverty Worsens Worldwide
Economic inequality is a significant issue for the housing market. According to the UN, individuals who spend more than 30 per cent of their income on housing costs are considered to be particularly ‘burdened’—meaning they may struggle to afford necessities such as food, clothing, and more. This issue especially affects pensioners and single mothers with children.
Additionally, the lack of affordable housing is a primary reason for the worsening of poverty, sometimes directly leading to homelessness. In the future, we can expect an increase in the number of poor individuals, as demographic trends show a rising elderly population promised costly benefits and care, coupled with a decreasing working-age population to fund these services.
There is also a global trend of declining economic mobility up the social ladder.
The Gap Between Rich and Poor is Widening
This is a major economic challenge for societies worldwide, including in the Faroe Islands. In many cities, the difference between wealthy high-income residents congregating in certain areas and low-income residents in other areas continues to grow.
If we do not take action to prevent this, we will see the same trend in the Faroe Islands. What can we do to avoid such unfortunate urban development?
Affordable Housing Attracts
As mentioned, the term “gentrification” describes the process when older, rundown urban areas are renovated and more affluent people move in. (“Gentry” in English means the upper middle class, which is where the term “gentrification” comes from.) This is seen in many cities, often in neighbourhoods where workers and other low-income residents used to live.
Municipal urban development policies also often cause or accelerate gentrification. I will return to this point later.
What often lays the initial groundwork for the gentrification of a neighbourhood is that the housing in a dilapidated and decaying area is cheaper than elsewhere. This attracts less affluent people – for example, students and artists who need to have low living costs. These residents are often talented and dynamic individuals who bring life and vitality to where they live. This helps to make the area appear “cool” and “charming”.
This, in turn, attracts others – often well-educated and more affluent people who then buy houses or flats in the area. Some do this simply to have an extra home and to be close to the amenities the area offers.
Property speculators also notice the opportunity to buy buildings at relatively low prices to profit from these properties – for example, by renting them out through Airbnb – or simply as investment objects to sell later at a profit. This means that many houses remain empty in gentrified neighbourhoods, which frustrates many of the remaining local residents.
Local Authorities Support Gentrification
What often happens concurrently is that the city councils also see opportunities in the area and begin making changes, such as allowing outsiders to buy houses in the neighbourhood on favourable terms without any residency requirements. The authorities know that this often results in the new wealthy homeowners starting to invest in the buildings. Old houses are renovated or demolished to make way for new ones, making the district more presentable.
They are also aware that when wealthier people move in, the average income in the area increases, which boosts the council’s tax revenues.
The council might also be interested in privatising and selling its own buildings in the area to cut maintenance costs and avoid responsibility for the activities those buildings house. Therefore, the council frequently promotes and supports gentrification, as it is interested in the benefits for the area – new investments in buildings, halting decay, higher tax revenues, a greater and more varied supply of shops, fewer crimes in a “nicer” neighbourhood, and so on.
Debate on Gentrification
While the benefits can be significant, there is often a lively debate about whether gentrification is good or bad—for whom, and whether it should be embraced or resisted.
The original residents of the area are not always pleased with the “improvements” made by new homeowners, as sometimes these newcomers have plans for their properties that conflict with the existing residents’ vision for the neighbourhood.
The worst drawback of neighbourhood renewal is that original residents may feel pressured or even forced to move out. Gentrification can, for example, trigger notable increases in house prices. In some areas, property taxes rise significantly, putting pressure on current homeowners. Rental prices in the neighbourhood also increase sharply.
This puts pressure on current low-income residents and families who rent, as they can no longer afford the market rates. The increased house prices might also tempt less affluent homeowners to sell their houses at a profit and move to less expensive neighbourhoods.
Less Affluent Residents are Being Pushed Out
Older shops, restaurants, or community centres in the neighbourhood may also be forced out as they can no longer afford the market price for the premises. This allows space for other businesses and new, upscale shops, restaurants, and other services—businesses that can better afford to buy or rent, but which sell more expensive goods and services, further increasing living costs for residents.
The benefits of gentrification are thus unevenly distributed.
The changed culture in the neighbourhood, which often accompanies urban renewal, can also make it difficult for original residents to adapt to the new conditions. Gentrification therefore often stirs strong emotions among the original residents, as they feel they are losing what they know and love about their neighbourhood. They may also fear all that is new—all that feels foreign to them, perhaps entirely different people with another culture, which they know nothing about, and that the special charm and possibly centuries-old culture and community in the neighbourhood will disappear.
Disappointment with the Authorities
Residents who do not feel they benefit from gentrification become dissatisfied. This includes those already disillusioned with the authorities, feeling neglected for a long time. They may have had to endure poor service from the council for years and are saddened by the loss of their old neighbours. This can lead to intense political debates, causing not just them but others to fear gentrification in general.
Moreover, there is a significant risk that the diverse and affordable services and activities in the neighbourhood, previously ensured by the council, will disappear when the council privatises and sells its buildings. These spaces are then taken over by private entities.
Private speculators primarily aim to make a profit and have no vested interest in providing public services that are unprofitable. Experiences in other areas show how privatisation often kills grassroots activities in neighbourhoods that are not immediately economically viable. However, these local services benefit residents and are worth preserving and supporting because they help people thrive and remain in the community.
Speculators Have No Interest in Providing Public Service
Only the council can ensure a wide range of affordable options for residents. However, when everything is privatised, no one feels obligated to take responsibility for the smaller or “niche” services because they are not financially profitable. The result is that only a few, larger commercial services survive, which may attract many outsiders but might not interest local residents – and they probably can’t afford to use them.
This might make it seem as if gentrification is entirely negative. BUT… most observers and researchers believe that the benefits of urban renewal and renovating old, dilapidated buildings can still be positive, PROVIDED certain conditions are met.
With Proper Management, Everyone Can Benefit
According to a research report by Freeman and Braconi from 2002, there are many instances where the advantages of gentrification can benefit all residents. Experiences so far in cities that maintain close communication with citizens show that it is possible to find ways of improvement that benefit both the original and new residents, economically, environmentally, and socially.
But only if the city council ensures that local democracy functions, meaning that citizens are involved in the decision-making process from the beginning, and changes are implemented thoughtfully.
It’s likely unavoidable to stop gentrification, but it is possible to influence developments so that as many people as possible benefit from them. It is merely a matter of good planning.
Need for Transparency
The City Council of Tórshavn has undoubtedly made many commendable decisions and significant strides in recent years that have enhanced the quality of life and well-being in the city centre. They deserve praise for this. However, some decisions appear somewhat random and occasionally poorly thought out—likely due to a lack of transparency. People simply do not understand why these decisions are made.
There is a need for a well-reasoned urban development plan grounded in the community, which most people can understand and support. If we are to avoid the significant divides seen in many other countries between rich and poor—where the wealthy are concentrated in one area and the poor in another, forming their own ghettos—we need to manage urban development with a holistic approach. Plans should be developed for different districts so that everything is interconnected and mutually supportive rather than contradictory.
It is also essential to consider diversity—how to make space for all social groups in every district, ensuring access to affordable housing for people with low or moderate incomes, such as workers, students, and artists. These groups also contribute to the well-being of the community and make neighbourhoods desirable places to live.
What values can be added to neighbourhoods?
There is a need to assess what values – beyond housing itself – can be added to neighbourhoods. Values that foster a sense of community and belonging among residents and ensure historical continuity, such as local social and cultural values, architectural values, commercial values, and mixed offers and facilities in the vicinity. It is important to consider and reassess whether the planned changes in various neighbourhoods genuinely benefit both current and future residents. It is also essential to think about creating vibrancy and amenities not just in the city centre, but also in the surrounding areas, which in many places are almost lifeless.
It is possible to gather research findings – also from other locations, so we can learn from others’ experiences – and collect data that shows the actual needs of different groups in the city, including what ordinary people can afford to live on, and how this aligns with what is available.
Additionally, political tools should be considered to ensure that the actual needs are met. For instance, is it possible to assist low- or middle-income households that risk being pushed out of their neighbourhood? For example, by providing housing support to tenants and/or subsidies to landlords – such as tax breaks that have already proven effective.
What Should Govern Urban Development?
A crucial question to ask before making any plans is:
Who owns the city? Who owns Tórshavn? Who should the city centre primarily serve? The local residents? Or everyone across the Faroe Islands? After all, it is a capital city.
I believe that the needs of those who spend the most time in the city and use it the most deserve the greatest attention, rather than focusing on prestige construction projects of city council politicians or what they and city planners merely imagine the citizens need.
The real needs of the local citizens must be identified so that we can carry out well-founded and robust urban development and avoid half-baked solutions that later cause significant dissatisfaction among residents.
Last but not least: It is crucial that the neighbourhoods affected by urban development plans are involved in the decision-making process from the beginning – and not just consulted when the plans are already set – so their wishes are taken into account.
THAT is a sustainable and future-proof way to conduct urban development.
Sources:
Managing Gentrification, Intercultural Cities Policy Study May 2020
Gentrification and Displacement: New York City in the 1990’s, Lance Freeman and Frank Braconi 2004
