RENTAL YIELD & GENTRIFICATION
What do you think of your city?
Well,it has many small streets and charming spots. It's cozy, but sometimes not safe. I love its diversity, though there's not much of a community feel. It's complicated, yet...
Bro, stop with the details!
This article clearly states that the "rental yields" in your city are 6.4%. That means your city is quite appealing.
What...?
We can all agree that cities are complex socio-economic entities. Therefore, we all know that improving the quality of a city requires a holistic approach and profound knowledge.
However, did you know that in financial terms, the complexity of cities is often simplified with a single formula called "rental yields"? This formula provides a percentage value that resembles a rating system for making real estate investments.
The equation for "rental yields" is very simple. First, calculate the total rental income you would collect in one year. Then divide this amount by the amount you spent purchasing the property you are renting out. Finally, multiply this result by 100. There you have it: the city's complexity is reduced, and you have a relevant percentage number that can serve as a reference for making investments. The higher the percentage, the better the profits! It works like a charm.
While this mathematical calculation is quite helpful to some extent, it is a great tool for effectively conducting gentrification.
Why?
There is a wide range of high-income people eagerly looking for profitable investments. These real estate investors can make investments from abroad and purchase properties in other countries by simply following this rating system.
What is the problem?
There are two major problems.
This percentage rating system called "rental yield" can often be manipulated, tweaked, or even used as propaganda by real estate agencies, corporations, or governments to artificially enhance the reputation of a city. Additionally, this artificial rating can eventually cause an influx of investments that improve a city's financial standing but reflect a distorted image of the real-time economy.
Moreover, studies suggest that investors who make investments by following this rating system do not care at all about the socio-economic issues of the city or its local dynamics. All they care about is a quick return on profits.
These patterns pose a severe threat to local citizens, especially those living in gentrifiable neighborhoods.
Why?
Because the nuanced problems of the locals are nonchalantly neglected by the "remote" investors who have only one motivation: follow the rating system and accumulate more wealth!
In this way, we can openly recognize the social injustice in our cities and societies. While for the most vulnerable groups, gentrification means displacement and a harder life, for those who are financially well-situated, gentrification resembles tax evasion, a real estate game, and opportunities.
Finally, urban life is heavily based on the multilayered personal experiences of the locals. Replacing these experiences with a rating system in the form of a percentage to attract foreign investors is an offensive, disrespectful, and arrogant strategy that does not offer long-term solutions.