Dalia Fahmy et al., Bloomberg, December 17, 2014

The diplomats, lawyers and celebrities living on the priciest street in Germany’s wealthiest city aren’t thrilled about their new neighbors.

Refugees fleeing war zones are moving into the empty office building around the corner from their lakefront road, Harvestehuder Weg, in Hamburg. The four-story building being transformed by borough Mayor Torsten Sevecke sits on a leafy plot abutting a luxury development where apartments cost as much as 7 million euros ($9 million). Locals are suing the city because they’re worried their properties will lose value.

“Where will these people buy their groceries? The cheaper supermarkets are far away,” said Barbara, a 70-year-old pensioner who lives in the area but spends most of the year in Spain. She asked that her last name not be published because it would be “embarrassing.” “I’d prefer if the government invests the money in a new building somewhere else.”

Record numbers of refugees are arriving in Europe, roiling regional politics and leaving local officials struggling to provide shelter while managing their constituents’ unhappiness. Most displaced people head to Germany and Sweden, where lodgings are being created any place there’s space: in empty schools, campgrounds, a boat on the River Elbe, even purpose-built aluminum crates that resemble shipping containers. In France and Italy, many end up on the street.

About 345,000 people applied for asylum in European Union nations in the first nine months of 2014, 23 percent more than a year earlier and the most since 2001. Germany, Sweden, France and Italy accounted for almost three-quarters of the total; Germany’s 113,000 exceeded the asylum applications in the U.S.

‘Foreigners Out’

The rising tide of refugees has fueled support for extremist politicians and protest movements. The Swedish government fell this month over the Sweden Democrats’ opposition to any legislation promoting immigration–in that case the nation’s 2015 budget. Neo-Nazis have joined demonstrations in Berlin chanting “Foreigners Out” and are suspected of torching three refugee homes outside Nuremberg last week.

In Hamburg, the protests are more genteel, although a town hall meeting erupted into its “liveliest” discussion ever when the plan to convert the office building into a refugee home in mid-2015 was announced, borough Mayor Sevecke said.

“Of course there’s a social gulf between millionaires and refugees, but this is also where Hamburg’s politically engaged upper-middle class live and they have the resources to help,” he said. “We’re not talking about social-welfare recipients here. These are businessmen from Kabul and lawyers from Syria.”

Container villages

With housing already in tight supply, officials say they’re doing their best. Berlin’s government will have spent 130 million euros to house refugees in 2014, after budgeting 40 million euros. About 43 million euros will be spent on new “container villages” in six districts around the city.

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Hundreds of refugees live in such structures in the German capital: aluminum corrugated boxes stacked on top of each other and fitted with drywall, windows, kitchens and nurseries. The structures in the new villages have 15 square meters (161 square feet) of living space.

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In France, the government lacks accommodation for about a third of asylum seekers, meaning that more than 20,000 people are forced to find housing with relatives or in shelters, said Laurent Delbos, advocacy manager at Forum Refugies-Cosi. Many end up in illegal squats or on the street.

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