Urban overcrowding is becoming an increasingly serious problem across the world. Major cities such as Seoul, Hong Kong and London suffer from problems ranging from housing price inflation, road congestion, and rural depopulation of surrounding areas. Although there have been many attempts during the past decade to solve the issue of urban overcrowding, these have rarely been successful. For instance, the relocation of the South Korean government’s central administrative agencies has not solved the housing price inflation of Seoul.
Urban revitalization of nearby cities presents itself as a potential panacea to the problem of urban overcrowding. Urban revitalization is defined as a set of schemes put in place in order to revamp a city’s structure and economy. These schemes may be performed in both a private and public capacity but are usually spearheaded by the government (on both national and local levels). Aspects of urban revitalization may include a clearing out of the entire city to start from scratch, real estate redevelopment and investment in the instalment of infrastructure like schools or highways.
However, in order to be able to ascertain how urban revitalization of neighbouring areas may cure cities afflicted by urban overcrowding, it is compulsory to identify the agents involved in the process and determine a metric by which the success may be measured.
In addition to this, it will also be pertinent to investigate how impact investing, a controlled and socially conscious method of financial investment that aims to generate both an operating profit and social return, plays a role in select successful cases of urban revitalization and see how this method of investment can aid the revitalization initiative and be applied elsewhere.
Brooklyn, a borough of New York City, may provide us clues as to how effective impact investing may be when applied to successfully tackle the problem of urban overcrowding. Development of Brooklyn has exploded in the past decade or so, with over 41 million square feet of residential, commercial and institutional space being added in the downtown area since 2004. During the same period, start-ups and small ventures that would not have been able to afford the sky-high rent prices of Manhattan were able to move into office areas in Brooklyn and still enjoy the benefits of being geographically close to the city’s financial centre.
The high level of involvement from both the private sector and public sector had a huge impact on the amount of investment and subsequent development of Brooklyn. This was due in part to the local government’s implementation of the “Downtown Brooklyn Development Plan.” This initiative made it much easier for developers to build with rezoning of the area and contributed $1.5 billion USD in investments, along with private investments pouring more than $10 billion USD into the area as well, kick-starting the whole process and triggering other organisations to follow suit.
As a result of such actions, the population of the Greater Downtown Brooklyn area grew by 17 percent between 2000 and 2013 and the population of millennials (18-44) rose by 29 percent. The percentage of all residents of the area having at least a four-year college degree rose from 35 to 55 percent. Also, the rate for serious crime went down by 84% between 1990 and 2014. There were 1,908 robberies reported in 1990 as opposed to only 142 in 2014.
The case study of Brooklyn solving urban overcrowding with impact investing and urban revitalization of nearby cities may provide potential solutions to cities like Seoul facing problems similar to those that New York City had. Although urban revitalization has been a concept that has existed for the past couple of decades, due to financial challenges from fiscal policies, capital markets have not been able to keep up with the need for the amount of capital needed to make it successful. But the growing sector of impact investing presents itself as the perfect antidote.