Against the Commodification of Housing
On January 16, 2015, a limited liability corporation named P89-90 bought a
single penthouse apartment in Midtown Manhattan for $100,471,452.77. The
name of the actual buyer was kept secret, as were the identities of those who
control the array of shell companies from around the world that own much of
the rest of the building. It hardly matters, as the luxury tower that it tops,
branded as One57, is not likely to be a particularly sociable environment.
Chances are that none of the building’s ninety-two condominium units will be
their owner’s sole residence. In fact, many of the apartments in One57 will
remain empty. They will be held as investments or as vanity homes for people
who do not lack for places to live. One57 is not high-rise housing so much as
1
As One57 was constructed, across town in Bushwick, Brooklyn, residents
of a vinyl-sided tenement building at 98 Linden Street saw their home being
destroyed. Carlos Calero and five family members paid $706 per month for
apartment 1L, a rent-stabilized two-bedroom apartment where they have lived
for twenty years alongside friends and relatives. In 2012, the building was
purchased in the name of Linden Ventures LLC. On the morning of June 4,
2013, the new owners allegedly hired a contractor to take a sledgehammer to
the family’s kitchen, bathroom, and floors. The apartment was left in ruins,
and a campaign of harassment followed. According to New York City’s
Tenant Protection Unit, the landlords’ purposeful destruction of their own
building was part of an effort to drive out the Caleros and raise the rent, a
strategy they have used in properties throughout the gentrifying Brooklyn
2
In every corner of New York City, real estate is attacking housing. In some places it is evident in the weathering steel or blue glass that clads luxury towers. Elsewhere it can be seen in the shoddy materials used to subdivide apartments into tiny, fire-prone warrens. Sometimes the tactic is tenant harassment. Other times it is the state’s power of eminent domain drafted into the service of developers. These are all perverse manifestations of the same basic phenomenon: the subordination of the social use of housing to its
global wealth congealed into tower form.
neighborhoods of Bushwick, Williamsburg, and Greenpoint.
economic value.
What is happening in New York is happening around the country and around the world. The form that the housing crisis takes is different in Manhattan than in the foreclosed suburbs of the American southwest, the bulldozed shacklands of South Africa, the decanted council blocks of Great Britain, and the demolished favelas of Brazil. But they have a common root: they are all situations where the pursuit of profit in housing is coming into conflict with its use for living.
Commodification is the name for the general process by which the economic value of a thing comes to dominate its other uses. Products “are only commodities because they have a dual nature, because they are at the
same time objects of utility and bearers of value.”3 The commodification of
housing means that a structure’s function as real estate takes precedence over
its usefulness as a place to live. When this happens, housing’s role as an
investment outweighs all other claims upon it, whether they are based upon
right, need, tradition, legal precedent, cultural habit, or the ethical and
4
Our economic system is predicated on the idea that there is no conflict between the economic value-form of housing and its lived form. But across the world, we see those who exploit dwelling space for profit coming into conflict with those who seek to use housing as their home.
The Making of a Commodity
In the contemporary era it may be difficult to conceive of a housing system that is not ruled by the commodity form. Yet in the history of human
5
Historically, housing was not an independent sector of the economy. Rather, it was a by-product of broader social and economic relationships. When peasants were tied to the land, housing and work together formed the harsh feudal system to which they were yoked. Dwelling space was shaped by what Lewis Mumford describes as “the intimate union of domesticity and
labor.”6 The loosening of this bond proceeded over centuries.
The historical precondition for the commodification of land and of housing was the privatization of the commons. Before land and housing could become exchangeable sources of privately appropriated profit, ancient systems of communal regulation had to be swept away and traditional tenures destroyed. Marx calls this original or “primitive accumulation,” when
affective significance of the home.
settlements, the commodity treatment of dwelling space is relatively new.
peasants are “suddenly and forcibly torn from their means of subsistence, and hurled onto the labour market as free, unprotected and rightless proletarians.” This entire historical process is, Marx writes, “written in the annals of
mankind in letters of blood and fire.”7
The enclosure movement in early modern England was the classic
example of primitive accumulation, and a crucial episode in the early
8
custom, the poor had long regard as theirs and their heirs’.”9
Enclosure was a violent and complicated process that laid the groundwork for the eventual commodification of land on a planetary scale. What was accomplished in early modern Europe by the alliance of the landed
aristocracy, large manufacturers, and “the new bankocracy”10 was brought to the world through colonialism. In the process, countless precolonial systems
11
Even in early commercial-capitalist society, housing was still predominantly shaped by the organization of work rather than being produced
12
living space and work space, was social as well as spatial.”13 In exchange for labor, property owners provided housing for their workers on terms ranging from violently exploitative to obligingly friendly.
Elsewhere, housing also remained stuck within traditional structures of
landownership. In seventeenth-century England, for example, vast estates
controlled by aristocratic families were usually held in trust, unable to be
sold. A complex, speculative building-lease system developed in cities like
London. Landlords maintained ownership of land that they leased for decades
to builders, who might construct housing directly or sublease their plots to
other builders. Rent gouging, displacement, and other features of the modern
14
Even as industrialization and commercialism proceeded to transform urban space throughout Western societies, home and work remained
development of capitalism. In a sequence lasting centuries, common land was fenced off and claimed by individual landowners. Masses of dispossessed people migrated to cities, where they became laborers. For Karl Polanyi, this process constituted “a revolution of the rich against the poor,” where the “lords and nobles ... were literally robbing the poor of their share in the common, tearing down the houses which, by the hitherto unbreakable force of
of land tenure were destroyed.
as a commodity in its own right.
acted as integrated economic units providing both the dwelling space and the work space for the artisans, indentured servants, slaves, and other laborers involved, willingly or not, in the value-production process. “For artisans and merchants in the colonial city, the internal integration of house and shop, of
housing market emerged in what was in many ways still a feudal system.
In American colonial cities, households
connected—especially so for laborers. In the nineteenth-century metropolis,
the sharp division between work and home was a sign of class privilege.
Successful merchants and other wealthy urbanites created a world of
domesticity that they sought to distinguish, architecturally and culturally,
from the savage world of the market. Meanwhile, working-class households
15
16
were forced to resort to homework, child labor, and taking in boarders.
Slowly and fitfully, housing was disembedded from the circuits of work
and production to become a direct bearer of economic value in itself.
In the
nineteenth century, Western cities came to feature an industrial proletariat no
longer housed in—or chained to—their place of work. Now, for the first time,
majorities of people looked to the open market to secure their place of
residence. Cash payment became the main nexus between house and
17
In the 1840s, when Engels was surveying the dwelling conditions of the great towns of industrial Britain, he was in part describing the emerging
18
householder. The conditions that enabled the commodification of housing had emerged.
impact of the commodification of housing.
The residential landscapes of
industrial capitalism created enduring urban patterns. Industrialization saw the
rise of new forms of segregation in metropolitan space and the unprecedented
misery of the “slum problem” that, in Western cities, reached its peak in the
19
In the first decades of the twentieth century, it became clear that the
commodification of dwelling space had proven to be a social disaster. Many
governments moved to contain or neutralize the resulting unrest. Reformers
created new rent regulations and building standards, and social housing was
developed on a larger scale. At the same time, the value of housing within the
overall political economy was becoming clearer. Residential and urban
environments were becoming crucial circuits of investment that could act as
an escape valve through which capital sought to manage the problem of over-
20
In the United States after World War I, Herbert Hoover, as secretary of commerce and later as president, promoted housing as the key to growing the consumer sector. By stoking demand for refrigerators, vacuum cleaners, washing machines, and other domestic appliances, the privately owned home became the heart, both economically and ideologically, of a world of
late nineteenth and early twentieth centuries.
forces did not operate alone. In cases where commodified housing did not provide adequate shelter to ensure the reproduction of the industrial workforce, some municipalities and charitable organizations built some of the earliest examples of social housing.
accumulation.
Even in this context, market
21
commodities.
When consumer purchasing power collapsed during the Great Depression,
governments moved to shore up effective demand for housing. In response to
the crisis posed by the Depression, the federal government created the
regulatory structure that made the modern housing system possible. Through
the Federal Housing Administration, the Glass-Steagall Act, and other New
Deal initiatives, the standardized mortgage was born. Without this stabilizing
federal presence, widespread homeownership would have been impossible.
But in the process, government and real estate together used redlining,
discrimination, and restrictive covenants to entrench racist patterns of land
use and to exclude African-Americans from home finance, creating unjust
housing patterns that continued to have destructive consequences far into the
22
future.
The oppressive potential of the housing system, harking back to its
function as a locus for the supply and exploitation of the workforce, was
apparent—a function that was not in conflict with housing’s commodity
23
Many of the national housing systems that emerged after World War II
had a partially decommodified character. In the socialist world, and in many
countries throwing off the shackles of colonialism, housing was established as
a social right, and state-owned housing sectors accounted for most or all
residential growth. In the growing Fordist–Keynesian economies of the West,
24
In America’s postwar boom years, the housing system was also anchored
by state support. In some cases this involved the direct provision of dwelling
space. But the postwar expansion of housing in the United States did not take
the form of the partial or total nationalization of the housing system that it did
in Europe. Instead, it was built upon massive government investment in
infrastructure and equally massive government action around mortgage
lending to finance private dwellings with debt. The result was a state-
supported system dominated by private ownership. Only in the 1940s did
homeownership become the embodiment of the American dream. Throughout
the first half of the twentieth century, less than half of Americans were
homeowners. After 1950, ownership rates increased sharply. By 1980, more
25
It was not until the second half of the twentieth century that housing would become a liquid asset and real estate a global, corporate behemoth. The commodity character of housing has ebbed and flowed. Its growth has been
character, but supported by it.
housing organized the mass consumption that underpinned mass production. In the UK and other European countries, for example, national and local government built a majority of new homes.
than 60 percent of Americans privately owned their homes.
uneven and, as struggles worldwide demonstrate, it continues to be so. But it has always depended upon state action to make it possible. And it has never been a purely economic process—it has always had social and political dimensions.
The Age of Hyper-Commodification
If the extent of commodification expands and contracts historically, we are currently living through a period of unprecedented expansion. In today’s transnational, digitally enhanced market, housing is becoming ever less an infrastructure for living and ever more an instrument for financial accumulation. The extreme ways in which housing is dominated by real estate today can be called hyper-commodification.
Under hyper-commodification, all of the material and legal structures of housing—buildings, land, labor, property rights—are turned into commodities. In the process, the capacity of a building to function as a home becomes secondary. What matters is how a building functions in circuits of economic accumulation.
The hyper-commodification of housing occurs in the context of broad
political-economic developments that magnify its impact. Most significant is
our era’s growing inequality, which is reaching unprecedented levels.
Inequality multiplies the power of economic elites, who benefit from the
commodification of housing and then promote its further growth. Inequality
also means that capital is on the offensive while the power of organized labor
has been undercut. For working-class and poor people, wages have been
stagnant for decades and, for many, consumption has been maintained
26
been in over a century, or ever.
This is also a time when housing and urbanization are becoming more central to the global economy. In many places, real estate has become more profitable and important than industry. Henri Lefebvre described this shift in 1970:
Real-estate speculation becomes the principal source for the formation of capital, that is, the realization of surplus value. As the percentage of overall surplus value formed and realized by industry begins to decline, the percentage created and realized by real-estate speculation
and construction increases ... as economists are accustomed to saying,
28
through debt.
global elite, have meant many countries are more unequal now than they have
27
Lower wages for workers, paired with huge gains for the
this is an unhealthy situation.
Real estate and its allies in the finance and insurance sectors are no longer merely absorbing the shocks of the broader economy. They are increasingly calling the shots.
Beyond these broad trends, we can outline three more specific, interconnected, and mutually reinforcing factors that constitute the hyper- commodification of housing today. They are found in different varieties; some countries and cities have resisted one or another of them. But in one form or another, they are reshaping the housing systems of most of the countries and cities that participate in global neoliberal capitalism today.
The first factor is the contemporary counterpart to enclosure: deregulation, the removal of restrictions placed on real estate as a commodity. Throughout the United States and many other countries, there has been a steady trend towards weakening or abolishing the regulations, customs, and rules governing residential property.
The most obvious example is in home finance. Over the past few decades,
regulations surrounding mortgage lending were fatally weakened in the
United States, Britain, and many other countries. Pillars of financial
regulation that constrained the mortgage market, like the Glass-Steagall Act,
were gutted. Usury controls were eliminated. Competition was introduced
into mortgage markets that had been tightly controlled. Variable interest rates,
balloon payments, self-certification, interest-only loans, NINA (“no income,
no assets”) loans, and then eventually NINJA (“no income, no job, no assets”)
loans and other exotic mechanisms were introduced—and often sold to people
who would have qualified for less expensive and less risky traditional
mortgages. Predatory lending affected different communities unequally, and
29
Many other aspects of Western housing systems were deregulated as well.
Rent regulation regimes have been overthrown. Between 1981 and 2011, the
number of rent-controlled apartments in New York plummeted from more
31
part of a concerted effort to increase the number of private tenants.
disproportionately destroyed the wealth of black and Latino households. The regulatory powers that could have prevented these practices had been
30
removed.
than 285,000 to fewer than 39,000.
deregulation from the 1950s onward, accelerating in the 1980s and 1990s as
32
In the UK, the rental market underwent
1988 introduction of less secure tenancies created buy-to-let mortgages
specifically for this purpose. Around a million such mortgages have been
33
Deregulation also permitted a wave of privatization of publicly owned or controlled housing. In the United States, public housing is in full retreat.
issued since then.
The
Since the 1990s, more than 260,000 public housing units across the United States were either sold off to private owners or demolished in order to sell off
34
the land beneath them.
The situation is even grimmer in Britain, where
public housing represented a much larger piece of the residential sector. Since
1981, nearly 3 million units of council housing have been sold or
35
In the post-socialist world, the privatization of housing since
transferred.
1989 has probably constituted the largest transfer of property rights in
36
The hard-won spaces of partial decommodification developed in the
history.
postwar period have been eroded.
For all of its far-reaching consequences, deregulation has not meant the subtraction of the state from real estate markets. It has not meant getting rid of regulations so much as rewriting them to make real estate a more liquid commodity. The state is still deeply involved throughout the housing system.
Second, and relatedly, housing has been undergoing a process of
financialization. This is a generic term to describe the increasing power and
prominence of actors and firms that engage in profit accumulation through the
37
Again, the mortgage market provides a good example. What was once a
way to facilitate the production of housing has become a tool for profitmaking
on its own. Over the past half-century or so, home mortgages were
transformed from an industry dominated by local lending, thrifts, and
passbook accounts to one dominated by global corporate banking and
securitization. Government-sponsored enterprises like Fannie Mae and
Freddie Mac have existed since the 1930s to supply liquidity to the mortgage
market. But since the 1980s the practice of pooling mortgages and selling
38
of value from place-bound property.”39 This was a process that financial firms enthusiastically promoted.
Under financialization, the nature of the real estate company is changing. Traditionally, real estate even in big cities was a local and relatively small-
servicing and exchanging of money and financial instruments.
bankers, and rentiers produce profits from real estate through buying, selling, financing, owning, and speculating. Players in this market often exchange in a disembodied, electronic realm. They need not ever see the actual physical buildings from which they make their fortunes—though their trading has serious consequence for those who occupy their properties.
shares of their income stream has exploded.
a way of turning solid structures into liquid assets. Houses can be bought and sold at the speed of electronic trade, and split into thousands of slices. As the housing scholar Desiree Fields puts it, “rather than anchoring wealth in place via property, today mortgages facilitate global investment and the extraction
Mortgage markets have become
Managers,
scale affair. Merchants, professionals, and others with capital to invest would
40
But the real estate ecosystem is being colonized by large-scale corporate
finance. Wall Street and the City of London are the new landlords on the
block. Private equity is becoming a major presence in the housing markets of
New York and other cities, expanding its role greatly since the mid-2000s.
Between 2004 and 2008, private-equity firms went on a buying binge,
cumulatively purchasing 90,000 rent-stabilized apartments in New York City,
41
The growth of real estate investment trusts (REITs) is one measure of the financialization of housing. In the United States, REITs were created by Congressional law in 1960. They spent their early years as mere tax shelters. But another act of Congress in 1986 gave them the ability to take a more active role in operating and exploiting the buildings in their portfolios. Since then their numbers and their reach have grown exponentially. REITs comprise the largest property owners in New York, including firms like Vornado and SL Green.
Finally, commodification is reinforced by the globalization of housing. Residential real estate may be fixed in place, but it is increasingly dominated by economic networks that are global in scope. Daniel Rose, a New York real estate insider, told an industry conference in 2002,
Only a few years ago, New York structures were built, financed,
owned, managed and occupied by New Yorkers, just as those in
Chicago or London, San Francisco or Paris were controlled locally. In
today’s globalized world, capital, ideas, and people flow freely across
state and national borders ... Many of the people in this very room
have no idea that the net cash flow from the apartment or office rent
they pay in New York finds its way to investors in Germany or in
43
direct investment abroad by US real estate companies increased sharply.
Foreign direct investment in US real estate has also grown, increasing from
45
leverage their money and social networks as landlords.
New York, real estate has been ruled by thousands of small players led by a few powerful family firms.
nearly 10 percent of the total number of units.
companies like JP Morgan Chase, Blackstone, and Colony Capital have been buying up single-family homes in suburban and exurban areas hard hit by foreclosure since 2007. Industry analysts see cornering this market as their
“$1.5 trillion opportunity.”42
England.
Real estate has become a worldwide colossus. Starting in the late 1990s,
44
$2 billion in 1973 to more than $50 billion in 2002.
Even in cities like
Throughout America,
The involvement of foreigners in housing is not a problem on its own. But
the ways in which housing is undergoing globalization are symptomatic of the
decoupling of housing from residential needs. Some housing markets are
starting to become more responsive to global economic signals than to local
ones. In London, New York, and elsewhere, units in new apartment buildings
are regularly advertised to foreign buyers, sometimes before being offered to
locals. Governments sell their housing stock to international investors at
property fairs such as Le marché international des professionnels de
46
Together, these interlocking processes of deregulation, financialization, and globalization have meant that housing functions as a commodity to a greater extent than ever before. This is what lies at the heart of the present crisis.
What does it mean to dwell in a hyper-commodified world? The consequences of the transformation of housing can be felt throughout the housing system, but they are extremely uneven.
In the most expensive districts of the world, luxury buildings proliferate out of all proportion to actual housing need. The super-rich own huge amounts of real estate, much of which is used purely for investment. The head of a New York real estate brokerage gleefully described “luxury real estate as
the world’s new currency.”47 Exclusive addresses in cities like London, New York, Tokyo, Miami, Paris, Shanghai, Moscow, Hong Kong, and Vancouver have become favorable places to park a fortune. “The global elite,” the developer Michael Stern remarked to a reporter, “is basically looking for a
safe-deposit box.”48
So-called super-prime real estate is cloaked in secrecy. Cash-only
purchases and layer upon layer of holding companies can disguise dubious
fortunes. Numerous observers have tied the rise of luxury housing to money
49
l’immobilier, known as MIPIM. In these cases, housing is directly connected to global circuits as an investment. At that distance, its use as living space barely registers.
Dwelling in the Commodity Form
laundering, tax evasion, and other illegal transactions.
Property owners in
prestige locations—Ostozhenka in Moscow; the blocks surrounding Central
Park in Manhattan; the Bishops Avenue in Hampstead, London—have been
50
linked to criminal activity.
seem calculated to hide the fact that, according to one sociologist, in some of these landed exclaves of the offshore world, forms of corporate, personal, and
The “starchitect” designs and posh addresses criminal capital are becoming “progressively undifferentiated.”51
Plenty of super-prime real estate should barely be considered housing at
all. Many luxury buildings are not built primarily to provide housing but to
make profits upon resale. The value of super-prime real estate is secure
because of the ease with which it can be converted into money through loans,
debentures, mortgages, and other complex financial transactions. Whether
anyone will ever make a home in such buildings is irrelevant. New York
City’s Independent Budget Office estimates that only about half of the units in
52
report neighborless empty hallways. In London, areas with heavy concentrations of super-prime housing lack foot traffic or other signs of life.
54
In brief, luxury housing is antisocial. The people who own these properties may have no connection to the places where they park their money. Lefebvre had already recognized this dynamic in the 1960s: “the Olympians of the new bourgeois aristocracy no longer inhabit. They go from grand hotel to grand hotel, or from castle to castle, commanding a fleet or a country from
a yacht. They are everywhere and nowhere.”55 Research has demonstrated
that the super-wealthy use their resources to avoid encounters with poverty,
conflict, difference, and other elements of what they see as the downside of
56
The trickle-down benefits of such high-priced housing have been greatly
exaggerated. Due to the vagaries of local development policies, owners of
these buildings frequently pay little or no tax, and many enjoy huge public
subsidies. One57 received more than $65 million in public subsidies and tax
57
problems, this system produces glaring inefficiencies.
expensive newer buildings are primary residences,
be far lower. The few people who do reside in many newer high-end buildings
53
Local businesses can have trouble staying open.
urban life.
breaks.
can be incentivized to construct less-exclusive units as well. But among other
58
The idea with such subsidies is that developers of luxury buildings
rebranded Billionaire’s Row, the stretch of ultra-expensive condominiums on
West 57th Street, has so far contributed a grand total of eighty-nine affordable
59
apartments to the city.
One57’s developers contributed sixty-six homes at a
cost of $905,000 per unit. The Independent Budget Office calculated that a
grant of that size in the hands of a nonprofit housing organization could have
60
While it facilitates the over-accumulation of luxury for the wealthy, the hyper-commodification of housing leads to new forms of risk, unaffordability, and instability for everyone else.
built 370 apartments at a cost of only $179,000 per unit.
owned by billionaires contribute little to the communities in which they stand. But they still take up space, force up costs, and push others farther out.
and the true figure may
New York’s recently
More homes
The current phase of housing commodification has not translated into the affordable paradise that its promoters predicted. Instead, it has allowed powerful elites to monopolize more housing. Cities like New York that have seen extensive deregulation and huge building booms in recent decades have not seen corresponding drops in housing costs. One international study found that “demand pressures stemming from financial deregulation may have
translated into increases in house prices by some 30 percent.”61 Globalized, deregulated markets are unstable and subject to wild price swings, first
62
Increasingly, there are no alternatives to commodified housing. Public
housing and rent regulation, the spaces of partial decommodification in New
York, are disappearing. Between 1981 and 2011, the regulated share of the
63
contributing to bubbles and later to crashes.
rental market fell from more than 62 percent to 47 percent of all units.
As a
result, the rental market is more precarious for tenants. Between 2001 and
2014, real rents in the United States rose by 7 percent, while in the same
64
period real household income fell by 9 percent.
More households are forced
to compete with one another in a less regulated market controlled by bigger
corporate firms. Many of the new landlords entering the rental market have
not shown enthusiasm for improving the situation for their tenants. Renters of
REIT-owned houses in California report paying higher-than-average rents and
65
In the United Kingdom, tenants are also facing a new world of
exploitation and insecurity. Public housing is being dismantled, and, as a
result, tenants must turn to private landlords—sometimes the same people
who cannibalized the public housing stock in the first place. In one
development in South London, more than forty ex-public-housing units are
owned by the son of the government minister who presided over the
66
some local areas this figure is more than 50 percent.
In a notable example of housing policy absurdity, some UK tenants in ex- public-housing units receive public subsidy for their rent, which they pay to
68
shouldering the burden of home repairs on their own.
privatization of public housing in the 1980s.
36 percent of former publicly owned units are now rented out privately; in
67
private landlords.
One tenant on a council estate told reporters that she is
charged £800 per month by a private landlord, while her council rent for the
same unit would have been £360 per month—with the public making up the
69
shortfall.
seeking businesses inserting themselves into the residential system and siphoning off resources, making housing more expensive while contributing nothing to the ability of the system to meet residents’ needs.
The whole situation typifies hyper-commodified housing: profit-
In London as whole, more than
Commodification and Gentrification
For the corporate investors buying up housing throughout New York,
gentrification is the business plan. Firms purchase buildings on the
assumption that rents can be doubled, tripled, or more. This strategy is
predicated upon taking units out of the rent stabilization system—in effect,
70
Take the case of Zhi Qin Zheng, a founding member of New York’s Chinatown Tenants Union and a former garment worker in her sixties. When an investment company named Madison Capital bought the downtown Manhattan building where she lived in a rent-stabilized unit, it determined that what she saw as her longtime, affordable home was in fact an “underperforming asset.” Her home needed to be “repositioned” to garner the sixfold rent increase that the market supposedly demanded in the name of efficiency. So her landlord, according to reports, began a campaign of harassment—cutting the heat, leaving damage unrepaired, and gratuitously calling the police on tenants in a campaign that residents saw as “aimed at
pushing them and their culture out of the buildings.”71
Landlord associations say that only the few proverbial bad apples break the law. But this basic story—a building that is seen to be underperforming is reorganized to generate more income—happens every day across the city. It is a pure form of what the geographer Neil Smith saw as the essence of gentrification: claiming the gap between the current rent and a building’s
“highest and best use.”72 When housing units are bought on the assumption that they can be turned into more liquid commodities, displacement is the predictable result.
Low-income tenants who cannot afford higher rents maintain a foothold in gentrifying neighborhoods in two ways. Either they are protected by some form of partial decommodification, such as rent control or public housing— policies which, as we have shown, are being actively undermined by the day —or they are lucky enough to have an economically irrational landlord. This is a risky prospect in a competitive real estate environment, but it does allow some tenants a modicum of stability. A New York community organizer told housing researchers,
Landlords are not always maximising their income. Many things affect the decisions of landlords. There are members of the community, there are thousands and thousands of disabled people and older people, for example, who pay far below the market rate and have been for a long time because the landlord knows them and has a relationship with them. He makes this illogical decision and that’s why
recommodifying housing—and displacing lower-income tenants.
the old lady comes in and has been paying $600 for the last decade.
There are community values that mediate the market. Not 100 per cent
but in many cases, there is a community consensus that we shouldn’t
evict the disabled, single person; this mediates the pressure to raise the
73
The onward march of commodification makes situations like this unlikely. The community organizer continued, “As the market rate goes up and up, that
consensus breaks down.”74 Shareholders may live scattered across the world and only own a share in a property on a short-term basis. They have no patience for such irrational behavior. The economic and organizational logic demands that rents be raised as high as possible.
This is not to say that this strategy always turns a profit. Buildings can
easily fail to generate the desired returns. But even when this happens, there is
no exit from the commodified housing system—and no clear mechanism
whereby failed real estate projects might be reappropriated by residents as
common property. Foreclosed buildings are just reinserted into financialized
circuits, setting up a repeat of the entire process. Rent-regulated buildings in
the Bronx purchased by Ocelot Capital in 2007, for example, fell into
foreclosure and in the following years cycled through a series of owners,
75
Commodification is a self-reproducing process. And it operates simultaneously at different scales: at the scale of the neighborhood, the building, and even the household. Hence the practice of subletting spare rooms or sofas—the commodification of ever-smaller spaces becomes a strategy for eking out a place in an unstable and expensive housing market. This too gets absorbed into a broader instrumental logic. One self-styled “rent-to-rent” entrepreneur in London explained straightforwardly to a
reporter, “I rent a property with a view to renting it out at a higher rent.”76 No doubt some canny financial innovators are already working on the securitization of rent-to-rent housing or the pooling of income streams from subletting.
Unleashing the Cranes
Some observers argue that the unprecedented shift towards the commodification of housing has not gone far enough. There are many voices today that declare that if real estate developers were just given a freer hand, then the market would solve the housing crisis.
For example, the economist Edward Glaeser argues, “The best way to
rents.
falling into an ever-worsening state of repair.
make cities more affordable is to reduce the barriers to building and unleash the cranes. To do so, end the dizzying array of land use regulations in most
cities that increase cost.”77 The conservative housing scholar Howard Husock contends that New York must “thaw its frozen housing market” by getting rid
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Yglesias also affirms a “deregulatory agenda.”79 For these authors and more, the hyper-commodification of housing is not the problem—it is the solution.
This reasoning follows clearly from standard economic logic. But this position ignores the real-world effects of the commodification of housing. Fully deregulating and unleashing the cranes will not and cannot solve the housing crisis, for a number of reasons.
First, while markets are imagined as self-organizing entities, as we have seen, the state has always been central to the process of making housing a commodity that can circulate through market exchange. The state cannot “get out” of housing markets because the state is one of the institutions that creates them. Government sets the rules of the game. It enforces the sanctity of contracts, establishes and defends regimes of property rights, and plays a central role in connecting the financial system to the bricks and mortar in which people dwell.
In other words, housing markets are political all the way down. The balance of power between tenants and landlords, or between real estate owners and communities, cannot be determined in a neutral, apolitical way. What the free market boosters ignore is the question of power.
The housing market is, among other things, a domain of struggle between different, unequal groups. Removing the regulations that rein in property owners shifts power towards capital and away from residents—while also, not coincidentally, making land more valuable and more amenable to speculation. This is why it is the real estate lobby that campaigns to deregulate the housing system, a demand that tenants almost never make. The commodification of housing is a political project that refuses to acknowledge itself as such.
Supporters of deregulation argue that zoning, rent control, and tenant protections are only pursued by meddling bureaucrats or greedy residents. But the real estate industry does whatever it can to maintain high prices. Removing existing tenant protections would just place real estate firms in a better position to reshape markets even more in their own favor.
Second, when housing becomes a globalized, financialized commodity, the gulf widens between the price signals to which markets respond and the actual social need for dwelling space.
of rent stabilization and public housing. The liberal writer Matthew
Investment firms chasing short-term gains reorient the housing system away from local residential needs and disconnect prices from wages in local labor markets. Transnational speculation begins to shape what gets built, where it appears, and who can afford to live in it. We see this happening in cities like London and Vancouver, home to increasing numbers of apartments that are ill-suited to the families who need to live in them but easily sold to investors who live abroad.
There is a world of difference between economic demand and social need. Many people, especially poor and working-class households, need more housing than they can afford. But this form of need does not register with purely profit-oriented developers. Far from responding efficiently to residential needs, investors can turn a profit by squeezing more money out of existing spaces while adding nothing to the general housing stock. Developers routinely engage in land hoarding and other strategies centered on speculation and scarcity.
Even some economists recognize that housing markets are structurally
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incapable of being efficient.
It is easy to inflate price bubbles and difficult
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Those who want to unleash the cranes will counter that “distortions” in housing markets must be due to government regulation rather than to market dynamics as such. Displacement would not be a problem, they say, had there not been rent regulation in the first place. State interference creates distortions, they argue, so deregulation is necessary in the name of removing inefficiencies.
But we need to question this definition of efficiency. One person’s inefficiency is another person’s home. We need to ask why investors’ profits should trump the needs of residents. From the perspective of a tenant facing displacement from their longtime home, it is the system of commodified residential development that is inefficient, not to mention cruel and destructive. That a building has become a target for speculators due to changes in global housing markets in no way lessens its usefulness as living space for its inhabitants.
Supporters of deregulation offer the process of filtering as a deus ex machina that will provide affordable housing. But in practice, there are limits to the stock of old buildings, especially within specific neighborhoods. And filtering today often takes the form of older buildings being recouped by wealthier households.
to deflate them. The history of real estate is replete with speculation. Despite how it appears in abstract models, the actual market in housing is neither efficient nor rational.
This touches on the final reason why markets will not solve the housing crisis. Those who want to deregulate and build do not consider the practical consequences of commodification in action.
It may be true that, all other things remaining equal, enlarging supply while keeping demand constant would lead to lower prices. But stated that way, the claim is too abstract. All other things would not remain equal. Promoters of free-market housing solutions never consider the costs and consequences that would result from attempting to establish a purely self- regulating market in housing.
Setting up the conditions for frictionless exchange and unlimited development could in theory create a situation where the price of housing falls until it is affordable to everyone including the lowest paid workers. But trying to reach that point would entail overturning the existing residential landscape. It would mean displacement on an immense scale. It would make it easier for landlords to threaten, harass, and exploit tenants. It would lead to huge increases in residential segregation. It would encourage shoddy, dangerous conversions and environmental degradation. It would lead to the proliferation of under-maintained, overcrowded, dangerous dwellings; such buildings were pervasive during the heyday of laissez-faire housing in the late nineteenth century. The idea that tenants in a fully unregulated market could avoid such harmful conditions just by exercising consumer choice is naïve. And it is unrealistic to imagine that there would not be some countermovement in response.
Towards Decommodification
Around the world, those seeking to turn houses into liquid assets are creating problems for those who merely want to live in them. And yet the ideological glorification of the free market is stronger than ever. It is becoming harder to visualize any alternatives other than minor modifications in the pattern here or there—or even to see the commodified housing system for what it is.
Commodification is not the default state that housing adopts. It is relatively new. It depends upon state action. It differs according to time and place and mutates in response to changing conditions. And its consequences are uneven, helping the super-wealthy generate huge profits while creating instability for the rest.
In The Great Transformation, Karl Polanyi demonstrated that “the idea of a self-adjusting market implied a stark utopia. Such an institution could not exist for any length of time without annihilating the human and natural
substance of society.”82 The idea of a self-adjusting housing market is similarly utopian.
In unequal contexts where the logic of commodification rules, some
people will always be forced into uninhabitable dwelling spaces. Some will
live in sheds, some in closets. Some will live amid toxic pollution. Some will
be packed with twenty-five other people, including children, into a single
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home.
These are not market failures—they are how the market works.
Ultimately, the problem with making housing a commodity is that as such, living space will be distributed based on the ability to pay and provided to the extent that it produces a profit. But ability to pay is unequal while the need for a place to live is universal. There is thus an unavoidable contradiction.
No matter how many actors and institutions treat it as such, housing can never be a fully liquid, exchangeable commodity. Its use value, and indeed a portion of its monetary value, comes from its place within communities that emerge over time. They require continuity and stability. Wrenching housing out of its context obliterates this social dimension.
In the end, however, we cannot blame real estate companies for today’s housing injustices. As entities created, using the legal powers of the state, for the sole purpose of economic accumulation, corporations are single-minded by design. Profit seeking without regard for external social consequences is intrinsic to the way they are set up. Residential inequality and crisis will always result from a housing system dominated by these kinds of firms and by other property owners following the same logic.
The solution to the housing problem, then, is not moralism, but the creation of an alternative residential logic. Exhorting for-profit real estate companies to act differently in the name of creating a less vicious housing system is pointless. Housing problems are not the result of greed or dishonesty. They result from the structural logic of the current housing system. Alternative, decommodified models of residential development must therefore be created. Far from stopping new construction, cities need more new decommodified dwellings, such as public or cooperative housing. A proper understanding of the housing crisis today requires an account of its commodification. Making real progress on housing problems requires developing concrete alternatives to it.
