A tale of three cities

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By David Harvey*

In this century housing has become an instrument of capital accumulation and speculative gain. Credit and liquidity flooded real estate markets, shifting the focus from real estate to land

A house is a very simple thing. But it is also a commodity, which means that it abounds in “metaphysical subtleties and theological squeamishness,” as Marx once put it. I grew up in a house in a safe, secure and respectable working-class neighborhood in post-1945 Britain. The house was a use-value – 'apathetic in its banality'. It constituted a safe, albeit rather repressive, space where one could eat, sleep, socialize, read stories, do homework or listen to the radio; a place where the family, with all its inner complexities and tensions, could dwell and relate without too much outside interference. Relations with neighbors were cordial and supportive, but not intimate. This was the city of use value.

I remember, however, the day the mortgage was paid off. There was a small celebration. I realized then that the house had an exchange value that could be passed on to future generations (like me). But that was never a topic of conversation. Not far from there, there were social housing properties. They seemed ok to me, but when I dated a girl there my mother strongly disapproved – they were good-for-nothings who couldn't be trusted, she said. But they also seemed to have secure housing in a not-so-bad - if a little tasteless - living environment.

We listened to the same radio programs and children played the same games in the street. But at election time they supported Labour. In my neighborhood there were some posters, some Labor, but also some Tory. Working-class home ownership, promoted from the 1890s onwards in Britain, had always been an instrument of social control and defense against Bolshevism. In the United States, it is often said: "homeowners burdened with debt do not go on strike".

In the 1980s, the emphasis shifted. Margaret Thatcher liquidated the social housing program and people became more deeply concerned about the exchange value of their homes. Mortgage credit unions that promoted housing shifted from local working-class institutions to more like banks. In 1981 nearly a third of all homes in Britain were owned by the public sector, but by 2016 that percentage had fallen to less than 7%. In an ideal neoliberal world there should be no social housing.

As Colin Crouch argues, “social housing tenants are the unwanted residue of a pre-neoliberal past”. We were defined to be a democracy of owners. Dwellings were put up for rent or arranged. So maybe people could move to a neighborhood with a status higher social. Emphasis was on improving the home as an exchange value, as a form of savings, and as a place to increase personal wealth. Individual wealth in the form of housing was a common topic of conversation. The unwanted (such as people of color or immigrants) would be kept away to protect neighborhood real estate values. Segregation intensified and gated communities flourished. Spaces have been curtailed and common urban areas have shrunk.

By the end of the century, the emphasis had shifted again. Housing was seen as an instrument of capital accumulation and speculative gain. It became an ATM from which people could extract wealth by refinancing their mortgages. Credit and liquidity flooded the housing markets, driving house prices up and down. But behind this change emerged a far more monstrous power.

The focus was not on the property, but on the terrain on which it stood. The difference between the current value of the land and the value that could have been used to its maximum and optimum extent attracted investors. To realize this speculative gain either existing uses had to be displaced and occupants evicted, or residents had to pay higher land rents for the privilege of staying there.

Dramatic examples can be found in every major metropolitan region in the world. Take the case of China. Land prices quintupled in China between 2004 and 2015. Prior to 2008, land values ​​averaged 37% of housing prices in Beijing. After 2010, this figure rose to 60%. Low-income populations everywhere were either forced out or saddled with skyrocketing rents. “Millions,” Dinny McMahon wrote in his book China's Great Wall of Debt [China's Great Debt Wall], “have been shut out of housing markets in the cities they live in, and the situation is only going to get worse”.

Marx would not have been surprised. “Poverty is a more fruitful source for renting houses than the Potosi mines were for their owners,” he said. “A tremendous power” accumulates in land holdings, which allows “to exclude workers involved in a struggle for wages from the land itself as their place of residence”. It is, he went on to observe, "the lease of land and not the house that is the subject of speculation."

In many neighborhoods, low-income populations have been evicted to make way for high-end investment opportunities, expensive condos and conversions to new uses, such as Airbnb. It was no longer mere exchange value that drove activity in the real estate market, but the pursuit of capital accumulation through its manipulation. The rapid increase in property prices seems to benefit homeowners, but the main beneficiaries are, in fact, banks, credit institutions and large conglomerates and hedge funds who joined the speculative game.

This became evident when the crash. Banks were bailed out and homeowners were thrown to the stock exchange sharks. In the US, millions lost their homes to foreclosures in 2007-10, while in the rental sector the pace of evictions from low-income populations accelerated everywhere, with devastating social consequences. You hedge funds and the companies of private equity bought foreclosed homes at flash sale prices and are now making a hefty sum from their operations. In what is left of the public sector, austerity has led to poor maintenance and deterioration of the housing stock, to the point where, as we were told, only privatization would improve things.

Privatizers proved to be experts in evictions, so the conversion of affordable housing for low-income populations into profitable market-based housing was accelerated. This is the city of speculative gain: occupation becomes unstable and ephemeral, social solidarities and neighborhood ties disintegrate, and real estate people advertise sophisticated neighborhoods, usually closed, with fictitious qualities of superior life. It even became a full-time profession: “urban imaginer”, as it is called.

The reality is the erosion of social relations, with terrifying results. Glyn Robbins says of the crime wave sweeping London: “Neoliberal and for-profit urban politics have produced cities in which many young people literally feel they have no place. They find it almost impossible to find an affordable home in the communities where they were born, thwarting their ability to develop independent lives.

Their social attachments, sense of belonging, and sense of respect for the adult world have been pushed to the breaking point. Nothing could be more perfectly calculated to create a situation in which young people care neither for the lives of others nor for their own.” This is a different world than the one I was raised in. But the house is still a house.

Different forms of value have always coexisted, uncomfortably, with the commodity form. Its co-evolution in the recent history of real estate markets culminated in the current impasse, in which speculative valuation determines that more than half of the population of planet Earth cannot find a decent place to live in a decent living environment due to the hegemonic power of capital over the land and property markets. It doesn't have to be like that.

As I recently finished my study, I came across a pamphlet published by the "Metropolitan Housing Board of New York" in 1978. The title was "Housing under the Public Domain: The Only Solution”. In 1978, the US "Department of Housing and Urban Development" had a budget of $83 billion to help pursue this solution. Limited-equity cooperatives and even community land trusts were springing up in most major cities to offer off-market solutions. In 1983, the Department's budget had been reduced to 18 billion dollars, until it was abolished in the 1990s during the Clinton years. Forty years later, I find myself reflecting on the disastrous consequences around the world of not resolutely pursuing the obvious solution: public housing. Use value must come first.

*David Harvey is a teacher at Graduate Center of the City University of New York (CUNY).

Translation: André Campos Rocha and Carlos Pissardo

Article originally published on Tribune Magazine.

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