Lessons From Amsterdam: Reclaiming Your City

Several decades ago I was traveling to Amsterdam every year. Each time, I rented a houseboat that was moored on the one of the outermost canals, in a neighborhood that was pretty much devoid of hotels, lurching tour groups, and popular destinations with long queues. I loved staying there as it seemed authentically Dutch. A couple of times I even participated in Queen’s Day, a 24-hour period in which the entire city transforms into a combination of a street party, a flea market, and outdoor concerts. It was always glorious to step outside the floating home into the high-spirited melee.

One year, my stays in these unique lodgings came to an abrupt end. As a foreigner, I was no longer permitted to rent a houseboat on a short-term basis. The city government had discovered that many if not most of the houseboats and former barges had become floating hotel rooms, owned by corporations located far from the Netherlands. Few Dutch citizens could afford to purchase or rent them, as their high prices reflected the international demand for this unique water-borne style of living. Reluctantly I switched back to small hotels. 

Flash forward 20 years and I witnessed a disturbing phenomenon in Venice during several visits to that island city. Gradually, year by year, many of that city’s restaurants, cafes, markets, and shops were disappearing, replaced by popular destinations for tourists. Even storefronts off the beaten track were becoming empty storefronts or were selling cheap knock-offs of Murano glass that were produced in China. Not long after, long-time Venetian families were fleeing to Mestre, on the mainland, where rents and food and clothing were still affordable.

Many buildings containing apartments for Venetian working families were now owned by investors and converted to airbnbs. This was especially apparent during the pandemic when tourism to the island city stopped. Riding one of the ferries along the Grand Canal at night, I saw few upper story windows with lights on and people moving about. In little more than a decade, Venice had become a ghost of its previous self.

So, it’s not without some sympathy that I read about the City of Amsterdam’s recent attempts to limit the extent of real estate holdings by outside investors. Similarly, Venice and other cities here in Italy are taking various measures to either curb short term rentals or impose ”entry fees” on tourists. Most cities in America do this through a more subtle means, via taxes on hotel rooms and rental cars aimed specifically at tourists. But the more direct policy of restricting outside investment seems to some people off-putting if not punitive.

Arguments can be made on both sides of this controversy. Those in favor of foreign spending note that investors from outside a country bring in new money that energizes the economy. In theory, this leads to higher employment, as well as enhancing property values that can add to local tax revenues. Filling city coffers can translate into funding public services at a higher level.

By contrast, it can be argued that these same dynamics elevate prices beyond what local residents can afford thus driving away small, family-owned businesses and, further, force older people on limited fixed incomes out of their homes. Some landlords hold out for an eventual windfall sale, meaning storefronts remain vacant for years. Any disruption in the local economy (such as caused by a pandemic) can result in streets stripped of the vitality of continuous commerce. 

Another economic driver is tourism. Before the pandemic hit, there was a lot discussions of “over-touristed” cities. Here in Italy, Venice, Rome, and Florence were high on the list. Indeed, in one of our forays into Rome, the eternal city was shockingly empty and quiet, as I had never before seen it. To be sure, it was immensely more enjoyable. The big question then becomes: How does a city attract enough tourism to make the gears of its financial engine turn without pushing out local residents that give it its soul?

A wise economist colleague once told me that in order to achieve public objectives, there must be at least ten programs going simultaneously. That’s because half of them won’t be effective. Unfortunately, elected officials lust after silver bullets — a single action or project that will solve all the problems and that they can take credit for. Meanwhile, urban economies are not that simple. Changing directions requires multiple actions – aimed at different sectors and populations. 

If an objective is to tip the scales in favor of local interests and away from international ones, then some control on the type and location of outside investment is going to be necessary. Limiting the location and number of airbnbs owned by a single person or company is one method.

Amsterdam is apparently looking at requiring short-term rental buildings to be lived in by their owners – precisely the form that most earlier versions of Bed and Breakfasts embraced. This would still allow people with modest resources to supplement their income while eliminating corporate or multiple ownerships. This method requires monitoring and enforcement, presumably with permit fees calibrated to offset administrative costs.

Some actions by local governments are weak or ineffective as people find clever work-arounds and exceptions. Directing investments to meet community objectives requires actions at all levels of government.

At the federal level, tax policy can be employed to discourage foreign investment in certain sectors of the economy, such as housing, making the conversion of livable dwellings into hotel rooms unattractive financially. States can direct resources to help strengthen local business districts, with tools like the Main Street program and retrofitting urban arterial streets with traffic-calming devices, allowing them to become thriving centers of commerce largely serving the neighborhoods flanking them.

Cities can couple their own powers of land use regulation with State resources to create more diverse and vibrant neighborhood centers – weighting regulations in favor of small, family-owned businesses and away from national chains. Both are important but often small local businesses have been left to twist in the wind with onslaughts of mentally ill homeless people, myriad regulations, and taxation. Stimulating small businesses should be at the top of the list of methods for recovering from the pandemic, for “building back better.”   

Meanwhile cities throughout Europe are using the present covid-caused pause in mass tourism to assess whether their past actions to attract foreign investment have actually benefited their citizenry. It’s perhaps one of the few positive aspects of the pandemic.