Competitiveness VS. Social Balance: Gentrification as Urban Policy in Cases in Budapest and Vienna.

Johannes Riegler

Relation between Public Policy and Gentrification

By the mid-1990s, a significant speedup and a major transformation of the process linking gentrification to powerful instruments of urban policy occurred. Thus, a remarkable and broad change was underway as more and more stakeholders in public policy began to develop programs to push gentrification. From now on, it has become important what people in charge for shaping policies believe in, how they act towards gentrification and what kind of actions they take. Often Gentrification in governmental policies is disguises in terms like urban renewal, revitalisation or regeneration (Lees, Slater and Wyly, 2010: 447-448).
From the 1990s onwards, a number of circumstances brought what Lees, Slater and Wyly (2010: 448) called ʻthe perfect stormʼ to set up a completely new affiliation between gentrification and policy. Firstly, people and economic activities continued to centralise in metropolitan areas. Secondly, changes in social, political and economic strategies increased the gap between social and economic policy resulting in a more competitive and entrepreneurial behaviour of states, provinces, regions and cities. Thirdly, expenditures on social welfare decreased in order to favour tax cuts and subsidies for wealthier households, investors and companies. Fourthly, hosting mega-events such as Olympic Games and World Exhibitions became more important for city regions. And finally, imbalances of import/export between the global northern and East Asian countries widened and resulted in a flooding of the U.S. with investment capital.
These five points can be seen as important for understanding the morphosis gentrification has gone through since the 1990s. This shift from embedded liberalism to neoliberalism has had tremendous influence on urban policies. The result of these policies is that fostering gentrification became more important than softening its effects. For more on the shift towards neoliberalisation see Harvey (2005) and for an overview on gentrification theory and how it developed over time find more information in Lees, Slater and Wyly (2008, 2010).

Neil Smithʼs Concept of New Globalism and Urbanism

Neil Smith (2002) brought up the probably most prominent Marxist theory on how globalisation is influencing local environments in terms of gentrification. Smith (2002:438) argues that gentrification has become a global urban strategy. Whereas Ruth Glass in her 1964 essay on the exchange of people in Londonʼs borough
Islington describes gentrification as a sporadic process, it can be seen that gentrification has found its way into urban policies and occurs on much larger scale at the end of the 20th century. Smith reports that the rapidity and the dimension increased enormously. Especially large cities have to face an influx of global capital
into city centres, which foster gentrification.

Richard Florida, the Creative Class and Gentrification

One of the best examples for the promotion of policies leading to gentrification is Richard Floridaʼs work ʻThe Rise of the Creative Classʼ (2002). Summed up to its very central idea, Floridaʼs theory is based on the notion that attracting creative people to
a city will strengthen its economic performance. In order to pull skilled, creative people to a city, Florida (2002) argues, it is essential for a metropolitan area to provide the three Ts: Talent, tolerance and technology. Although Floridaʼs thesis is opposed for a large variety of aspects by numerous authors (e.g. Markusen (2006),
Reese and Sands (2008), Scott (2006), a ʻFloridarisationʼ of urban policies can be observed in cities around the globe in recent years.
In Floridaʼs (2002) view, the creative class is seeking for cool, urban, bohemian neighbourhoods with cafés, galleries, bars and music venues. Thus, he promotes an urban renaissance in disinvested neighbourhoods without using the ʻdirty wordʼ (Smith, 2002) of gentrification. Instead, gentrification is sugar coated in terms like urban renewal, urban regeneration, etc. Policy makers can hide behind Floridaʼs theory and promote an environment in neighbourhoods, which will be favouring a young, urban, creative elite but completely leaves out the actual local residents of the area.

Gentrification, Competitiveness and Inner-Józsefváros/Budapest

Gentrification is depending on its geography (Lees, 2000) and Budapestʼs past and the ways the transition from a socialist to a capitalist city took place make gentrification appear in a different manner compared to western European cities (see Kovács, 1998, 2000 and 2009).
For the case study in Budapest, the neighbourhood of Inner-Józsefváros was chosen. Inner-Józsefváros is the area in the 8th district (Józsefváros) closest to the city centre. Inner-Józsefváros has always been a better situated neighbourhood thanks to the location near to the city centre, the vicinity to museums and universities and the fact that in the past the aristocracy built their palaces there while other neighbourhoods in Józsefváros, located farther away from the city centre, has suffered from massive deprivation. In interviews conducted for this study, it was
stated that without a concrete redevelopment or rehabilitation project initiated by the local governments nothing is going to change since dynamics in the housing market only began to develop around the beginning of the 2000s and decreased again once the economic crises kicked in. Thus, the private housing market is too weak to start revalorisation and gentrification of certain neighbourhoods without public support.
Rév8, the local urban renewal agency responsible for the district of Józsefváros was founded in 1997 and is responsible for redevelopment plans in the area. On of the first actions taking place in Inner-Józsefváros was to redevelop the public space including Mikszáth Kalman Ter, which is a central square with a vibrant gastronomic scene today. The renovation of public space can be understood as the first governmental action leading towards gentrification.
With the “Budapest – The Downtown of Europe” programme (Rév8, 2007), a project massively contributing to gentrification in the area was decided upon in 2007. The aims of the project are on the one hand to attract tourists to the area and on the other hand to create an innovative milieu for drawing creative industries. The plan
focuses on creating a young, bohemian quarter and creative quarter. Thus, links to Neil Smithʼs (2002) concept on how gentrification is used as a neoliberal policy today and to Richard Floridaʼs (2002) concept of the creative class can be made. Rév8 planned to include the areas of the 6th, 7th and 8th district in the centre near locations to the planning. This practise would have been very welcome since the lack of cooperation between the local governments of central Budapest is a known problem for a coherent urban planning. However, the local governments of the 6th and 7th
district decided to drop out of the project. Thus, it is another plan developed for a single neighbourhood without taking into account the surrounding areas, which have to be seen as one whole area facing the same challenges. The “Budapest - the Downtown of Europe” project is a clear attempt to change the appearance of the
neighbourhood by attracting capital, new residents and tourists.
The plans clearly encompass ideas and strategies targeting gentrification for increasing the competitiveness of the district and the whole city. Although it was stated (Alföldi, personal interview, 10-02-2011; Tomay, personal interview, 07-02-2011) that the future development of the neighbourhood is unforeseeable because of the recent economic crises, if the plans are realised fully gentrification is expected to continue.
In Inner-Józsefváros, the urban development of recent years can clearly be termed gentrification. The exchange of the shop structure and the opening of new shops serving mainly young people and students are indicators for such a process. Furthermore, with the opening of pubs and cafés an environment for such a clientele is provided. Because of the high number of owner occupations, one cannot speak of a displacement caused by rising rents. However, as sale prices of apartments rise, lower classes are excluded from the neighbourhood.
The strategy to use gentrification in one single neighbourhood to increase the competitiveness of a city like Budapest is problematic for a coherent and socially balanced urban development. A program for developing a relative small neighbourhood to a touristic and student centre boosts a fragmented urban development. A collaboration, as it was planned, with the 6th and the 7th district would have softened this argument and would have set important impulses for the collaboration between local governments in the inner-city since the unconnected urban development is major problem in Budapest. The governmental strategy to use
gentrification to increase the cityʼs competitiveness is a questionable tactic. Although direct displacement is a minor problem, sales prices are increasing further and exclude socioeconomic worse situated people. If the trend continues, Inner Józsefváros is expected to become an upper class residential area in the long term. Thus, this development contributes to segregation and polarisation.

Gentrification, Social Balance and Brunnenviertel/Vienna

Brunnenviertel is located in the district of Ottakring and is its innermost neighbourhood bordering the western beltway, the street with the heaviest traffic in Vienna. It adjoins the hip more centre-near districts where the sale and rent prices are very high. The share of the population having a migration background is 41%.
The reason for the high percentage of migrants in the area is the fact that, as other neighbourhoods outside of the beltway, Brunnenviertel served as ʻmigration cityʼ, as Hatz (2008:319) calls areas where low-income migrants find places to live. Brunnenviertel was a working class neighbourhood with rather low living conditions
until the 1960s and 1970s. From that time, Austrians tended to move to new social housing estates in the city fringe, and thus gave place to poorer segments of society and the downward spiral in which the neighbourhood has been in started (Hatz, 2008).
Until the 1990s, the areas in vicinity of the beltway were known as a space, which was better to be avoided due to safety reasons. It was, and to a minor extend still is, a red light district and criminal activities were widely spread. Thus, the beltway and the bordering neighbourhoods, especially on the exterior side of the beltway,
where Brunnenviertel is located, have been connoted with a bad reputation. (Hatz, 2008).
Today, Brunnenviertel is a prime example for gentrification in Vienna. Although direct displacement by rising rents is not possible due to the Viennese rent regulations, an upgrading in built, shop and social structure is notable.
There are a variety of reasons why Brunnenviertel faces a period of reinvestment and upgrading resulting in gentrification. Until the end of the 1990s, the neighbourhood suffered from underinvestment and a downward trend in the economic structure. The negative connotation of the neighbourhoods in vicinity of the beltway amplified the situation even more. Consequently, before an upgrading process could start, the image and perception of the area needed to be changed.
URBION was the first project initiated to counteract the negative image of the western-belt. Measures, apart from some physical constructions, included the use of the arches below the elevated metro line for nightlife amenities, art and culture. Thus, a young crowd was attracted to the area and the beltway was opened up to the exterior districts in peopleʼs perception. Although this project did not include measures in Brunnenviertel directly, it is important since it targeted the change of the negative image of the greater belt-area. VIEW, the applied project of the last Viennese strategic plan (Magistrat der Stadt Wien, 2005) takes a comparable line
although areas crossing district borders are in the focus. Nevertheless, an upgrade of the perception of the area in which Brunnenviertel is located in is more a side effect than an aim.
The art festivals of Soho in Ottakring contributed significantly to a changing perception and image directly in Brunnenviertel. Only a few years after its foundation in 1999, Soho in Ottakring was an established art festival very well known by people all over the city and has been attracting people to the area who would not visit
Brunnenviertel without such amenities. Soho in Ottakring is a grassroots movement
initiated by artists, thus, it does not target a revalorisation or gentrifying process and is not project led by the politics. Nevertheless, the festival contributed to the changing
perception of the neighbourhood and influenced the upgrading.
Another point leading to a gentrifying Brunnenviertel is the renewal of the housing stock. 72% of the renovated houses since 2000 were subsidised which means a set of strict rules apply to them. However, 28% of the projects were completely privately financed. Although the strict tenant laws and the regulations, which come with the access to subsidies, rents of renovated apartments are expected to be on the rise in the long term. The redevelopment of the housing stock provides the kind of housing for middle and upper classes, which amplifies the gentrification process in the area.
Coupled with the shops and gastronomy, which mainly opened in the last five years targeting middle and upper class people, the charm of the authentic ethnic shops and market stalls, and the still relatively cheap rents the mix is ideal for an environment needed for triggering off gentrification. The Plaza on Yppenplatz, an area where mainly middle class people hang out in cafés was renovated in the
course of the renovation of Brunnengasse with the aim of becoming such a centre.
As the local renewal office promotes a social mix, also the rise in rents are seen as a natural outcome of the renewal practises (Smetana, personal interview, 19-07-2011). Therewith, gentrification is fostered by the actions of the urban renewal office.
The local renewal office does not expect the complete exchange the lower socioeconomic segments of the population in Brunnenviertel because of strong ties within the ethnic groups (Smetana, personal interview, 19-07-2011). However, it is
expected that the exchange of residents is going to continue although some segments of the ethnic groups can afford buying houses in the area now.
Thus, it is not the ethic background the residents which runs risk of changing completely but the socio-economic background. In these terms, it may take longer time due to the regulations but gentrification and the further exchange of the society in the area is expected. After analysing the governmental projects on a citywide as well as on a local scale, and after evaluating the performance of the local urban renewal office, it has shown that gentrification, although disguised by terms as urban renewal and revalorisation, is a governmental strategy for creating social balance in Brunnenviertel. Governmental projects and initiatives were needed to work against the downward trend. The governmental strategy chosen was appropriate to do so as it brought important impulses and improvements. Nevertheless, the peak of the desired development is already reached. Further gentrification is expected to result in a development towards an island of middle and upper classes.
Therefore, the local renewal office must not draw out of the neighbourhood and has to take actions for softening and stopping gentrification. Furthermore, although the population is mixed (at the moment) and a social balance is created on first sight, it appears that the different social groups do not intermingle and mix in public space since both, ethnic groups and the newly arriving people have different places and corners to meet. The next step has to be to connect the groups and to foster integration. Such actions are
of a tremendous importance to strengthen the social mix, and thus, inevitably for the success of the whole revalorisation which targets to increase the social conditions. Otherwise the governmental tool of gentrification would have failed, as an upper class neighbourhood would be the result.
In total, although the right strategies where chosen to renew and develop the district towards a socially mixed neighbourhood, the local urban renewal office, as the most local governmental body seems to underestimate the negative aspects and risks that come with the revalorisation. Furthermore, to succeeding with the strategy
of using gentrification as a governmental tool, actions have to be taken to foster interaction between the different groups of society. Otherwise a central part of the strategy, namely to create a social-mix, would not have been fulfilled and an important chance would be missed.

Conclusion and Comparison

Gentrification in Inner-Józsefváros and Brunnenviertel is greatly boosted by governmental interventions, although the kind of programs is different. In the case of Brunnenviertel, a number of projects and practises with various aims were conducted. URBION, an initiative partly financed by the European Union, was
realised in 1998 and targeted to change the bad reputation of the area along the western beltway, in which Brunnenviertel is located. Beside physical renovations in the public space, amenities especially for young people, such as bars, pubs and
concert venues were installed beneath the tracks of the elevated subway. VIEW (Visionen Entwicklung Westgürtel), the applied project of the strategic development plan, takes a comparable line although the focus is different as urban development
crossing district borders are fostered and upgrading the reputation is not a central goal but a side effect. Amplified by the privately initiated art festival Soho in Ottakring, the reputation of Brunnenviertel was sustainably improved. The soft urban renewal practise, a city wide public-private partnership model for renovating apartments of the worst categories, is another important
governmentally initiated program that has significantly contributed to gentrification in Brunnenviertel and made it the neighbourhood with the highest quote of renovated buildings using this kind of subsidy. By renovating the existing housing stock and the generation of class A apartments, dwellings suitable for middle and upper classes are created. Although strict regulations and laws accompany the soft urban renewal, rents and housing prices are increasing and gentrification is fostered in the long term.
The physical renovation of Yppenplatz and Brunnengasse has been targeting the revitalisation of Brunnenviertel. By redeveloping the market area and the public space and having the aim to attract businesses, this project contributes to gentrification by enhancing the visual and physical appearance as well as the living
conditions in the neighbourhood. Before the constructions started, a public participation process encompassing representatives of various stakeholders and local residents was initiated and planning for this project was made according to the needs and problems of the people living, working and using the neighbourhood.
In contrast to Brunnenviertel, in Inner-Józsefváros, no incentives to increase the neighbourhoodʼs image were needed. Although the rest of the district suffers from a very bad reputation, Inner-Józsefváros has always been a better and socially more stable neighbourhood. Nevertheless, upgrading and gentrification would not have occurred without governmental inducements due to the very low dynamics in Budapestʼs housing market.
Like in Brunnenviertel, in Inner-Józsefváros public space was renovated, some parts were declared to pedestrian zones and Mikszáth Kalman Ter was developed to a central square with a vibrant gastronomic scene. The renovation of public space is
one of the first, very important governmental initiatives boosting revalorisation and gentrification. Further private and public investments and the opening of new businesses depend on it.
The most current project in Inner-Józsefváros “Budapest – The Downtown of Europe” is also the most ambitious one. The main objective of this program is to improve the competitiveness of the district and the whole city. This goal should be reached, firstly, by attracting tourists to the area, and secondly, by establishing an
innovative milieu to draw creative industries. If ever fully realised, the project will contribute massively to the gentrification in Inner-Józsefváros, which runs risk of becoming an upper class enclave just a stoneʼs throw away from Budapestʼs slum areas. Nevertheless, stakeholders and local residents in the area are included in the process and meeting are held on a regular basis for the exchange of ideas, problems and solutions.
Although gentrification is used as a governmental strategy in both case studies, the aims are completely different. In Brunnenviertel, projects leading towards gentrification are initiated to create a social balance in the neighbourhood. Projects have aimed at counteracting a decaying trend of the 1990s. Trying to create a social mix is a central part of this strategy. While the actions taken can be evaluated as well chosen and right to stop the downward spiral, there is a risk that it might have worked too well. Of course, negative side effects of gentrification as rising rents, an
exchanging business structure (negative if it reaches a state where the original population is not served anymore by the local shops) and the exchange of the resident population are partly required to reach the goal of a socially balanced neighbourhood. The local renewal office, the body responsible for planning and
executing urban projects in the area, is well aware of these facts and see it as natural and partly desired. No direct displace of the tenants by rising rents is possible because of laws and regulations, but if the current trend continues, Brunnenviertel could become a destination of the upper classes and the complete exchange of the population could be possible in the long-term. Beside some small projects, the local urban renewal office, as the most local governmental element, drew out of Brunnenviertel and left it to its dynamics as no new interventions are needed to push the revalorisation process. Actions and measures for softening and counteracting gentrification have to be taken by governmental bodies for preventing of a development towards a middle and upper class enclave. Gentrification is expected to continue resulting in a progressing change of shops and gastronomic structure and a further exchange of the resident population.
In Inner-Józsefváros, on the other hand, gentrification as a governmental strategy mainly targets to increase the competitiveness of the district, as well as of whole Budapest. The physical renovations of the streets and squares can be seen as
paving the way towards the “Budapest – The Downtown of Europe” project, which aims at attracting foreign capital by tourism, developing a unique business structure, including amenities for young people as cafés, bars and pubs, and building an innovative milieu to attract creative industries. This strategy can be directly linked to Neil Smithʼs (2002) article on how gentrification today is used as a liberal urban strategy for persisting in a global competition for attracting capital. Furthermore, although denied in interviews with executing bodies (Alföldi, personal interview, 10-02-2011), this policy can also be categorised as an application of Richard Floridaʼs (2002) model on how the creative class contributes to increasing the
competitiveness. The “Budapest – The Downtown of Europe” project initiated by Rév8 has the potential to push gentrification further to a great extend. It is expected that the functional change is going to continue once the economy has recovered from the latest crises. The pressure will increase since more and more people want to live in the neighbourhood, and thus prices of the dwellings are going to increase.
Although the strategy to use gentrification in Inner-Józsefváros will be accompanied by attracting capital and generating jobs to the area (mainly in creative industries which most likely will be staffed by people from outside the district), it will have negative effects on the social development on district and city level. Even though direct displacement by rising rents is expected to happen on a very small
scale only because of the extremely high share of owner occupation in the district, the sales prices of the dwellings are rising. Thus, lower socioeconomic classes are excluded from the neighbourhood. Budapest is a highly fragmented and socially polarised city and such a strategy contributes to amplify both.

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