A basic problem of housing it this: Housing is a commodity instead of a human right. We’re not accustomed to seeing housing as a basic right for everybody, but why isn’t it? Other than food and water, what is more basic a need than shelter?
It is here that questions about why the cost of housing is so out of control should begin. Because real estate is a massively profitable commodity — a locus of speculation — your rent is too damn high. So is your mortgage. And not disconnected from that is the scourge of gentrification, which continues to decimate urban communities around the world.
The specifics can change from one city to another, but ultimately massive accumulations of capital are at work. In New York City, where the form of government is a de facto dictatorship of the real estate and financial industries, the hands behind sharply rising rents are in the open. In San Francisco, where gentrification is fueled by cascades of money flowing into the technology industry, or Vancouver, where foreign speculators are seeking profitable outlets for the massive amounts of capital at their disposal, the proximate causes are somewhat different. But the underlying causes in these and other cities are ultimately “market forces.”
Market forces are nothing more than the aggregate interests of the largest industrialists and financiers. Markets do not sit high in the clouds, dispassionately sorting out worthy winners and losers in some benign process of divine justice, as ideologues would have us believe. There is no magic at work here.
Neither housing, nor education, nor a clean environment are considered rights in capitalist formal democracies, and if you live in the United States, health care is not a right, either. Democracy is defined as the right to freely vote in political elections that determine little (although even this right is increasingly abrogated in the U.S.) and to choose whatever consumer product you wish to buy. A quite crabbed view of democracy or “freedom” if we stop to think about it.
That is because “freedom” is equated with individualism, a specific form of individualism that is shorn of responsibility. Those who have the most — obtained at the expense of those with far less — have no responsibility to the society that enabled them to amass such wealth. Imposing harsher working conditions is another aspect of this individualistic “freedom,” but freedom for who? “Freedom” for industrialists and financiers is freedom to rule over, control and exploit others; “justice” is the unfettered ability to enjoy this freedom, a justice reflected in legal structures. Working people are “free” to compete in a race to the bottom set up by capitalists.
Housing costs in U.S., Canada far outstrip inflation
Let’s run some numbers and examine just how this “freedom” works for working people. By no means are the massive increases in the cost of housing limited to a handful of popular cities. Nor is this merely a new or recent phenomenon.
Since 1975, the average prices of houses in the United States have risen by more than 60 percent faster than inflation. In Canada, real estate prices have increased 46 percent faster than inflation since 2000. Those are countrywide numbers, not specific to particular cities.
That inflation-adjusted cost of U.S. housing was calculated by comparing the statistics for the period January 1975 to February 2017, as reported by the S&P/Case-Shiller U.S. National Home Price Index, with the rate of inflation for that period as calculated by the U.S. Bureau of Labor Statistics’ inflation calculator. The increase in Canadian national housing prices from January 2000 to February 2017 was then compared with the rate of inflation as determined by the Bank of Canada’s inflation calculator.
If the prices of buildings are increasingly inflated above inflation, then as sure as the Sun rises in the east rents will rise, too. Often faster, as holders of real estate try to squeeze every possible dollar out of beleaguered renters. The U.S. government’s Department of Housing and Urban Development, in a report that the Trump administration has not yet gotten around to removing, says:
“Shelter costs have been increasing faster than the costs of other items. According to the Bureau of Labor Statistics’ Consumer Price Index (CPI), the costs of equivalent levels of shelter increased by 104 percent from 1985 to 2005 compared to a 74-percent increase in the cost of all other items.”
The department reports that for home owners, the cost of principal and interest on mortgages increased nearly 18 percent, adjusted for inflation, from 1985 to 2005. The cost of rent, over the same period also increased nearly 18 percent over the same period, again adjusted for inflation. As a result, the percentage of income paid toward either a mortgage or rent increased over these two decades. These trends have only accelerated since.
Incomes fall but rents keep rising
Those are national averages. In many cities, of course, rent increases have been much faster. Examining the trends in rents going back to 1960, Andrew Woo of Apartment List wrote:
“[I]nflation-adjusted rents have risen by 64%, but real household incomes only increased by 18%. The situation was particularly challenging from 2000 – 2010: household incomes actually fell by 7%, while rents rose by 12%. As a result, the share of cost-burdened renters nationwide more than doubled, from 24% in 1960 to 49% in 2014. … Rents have risen rapidly in many cities across the US, but looking at things over more than fifty years helps us understand the impact of these trends. If rents had only risen at the rate of inflation, the average renter would be paying $366 less in rent each month.”
Mr. Woo reported that although incomes in expensive areas like Washington, Boston and San Francisco have risen rapidly, rents have increased roughly twice as fast. In Houston, Detroit and Indianapolis, incomes have actually fallen in real terms, while rents have risen 15 to 25 percent. He found that the only U.S. urban areas where incomes kept pace with rising rents were Austin, Las Vegas and Phoenix.
For those workers struggling to survive on the lowest wages, the cost of living is a nearly impossible burden to bear. There is not one state in the U.S. in which a minimum-wage worker can afford the cost of the average one-bedroom apartment by working a full-time 40 hours. It would take 49 hours per week to afford the average one-bedroom apartment in West Virginia (the lowest figure) and 124 hours in Hawaii. In 14 states and the District of Columbia, you’d have to work at least 80 hours per week at minimum wage to afford the average one-bedroom apartment.
As this is a product of capitalism, not national peculiarities, we can see the same trends around the world. Average real estate prices in Toronto, adjusted for inflation, are seven times higher in 2016 than they were in 1953! Thus it comes as no surprise to learn the average rent of a one-bedroom apartment in Toronto is nearly double that of someone earning Ontario’s minimum wage. And not only does the supply of affordable housing not keep up, it is actually shrinking: In Calgary, for example, 3,000 rental units were converted into condominiums from 2006 to 2008 alone at the same time that the number of people in unaffordable housing steadily increases, while in Edmonton the wait-list for social housing in 2015 tripled.
A BBC report found that the average rent on a one-bedroom flat in London is £920, which would consume more than 90 percent of the after-tax income of someone working 39 hours per week at the minimum wage. Although not as expensive elsewhere, the rent for a one-bedroom would consume more than half of that minimum wage in Wales, West Midlands, and the southeast and east of England. A separate report by the Resolution Foundation found the household income of British renters increased two percent from 2002 to 2015, while their housing costs increased 16 percent.
Limited local efforts to counteract global forces
Some local governments in the cities subjected to the most extreme rent crises are taking measures to ameliorate market conditions, including those with a measure of effectiveness, such as Vancouver, which has instituted targeted taxes, and those with no effectiveness, such as New York, where the mayor continues his predecessors’ policies that accelerate gentrification.
Homelessness in Vancouver has reached record heights at the same time as the city has become one of the world’s least affordable, along with Hong Kong, Sydney, Melbourne, Auckland, and the California city of San Jose.
The city council of Vancouver in November 2016 instituted a tax on unoccupied homes that are not principal residences and are unoccupied for at least six months of the year. The city government estimates that more than 20,000 homes are empty or left vacant for most of the year. Earlier in the year, the British Columbia provincial government imposed a 15 percent tax on foreign buyers, who have been rapidly buying up real estate. “We need to find a balance between welcoming investment and ensuring it doesn’t skew the housing options for people who live here,” Vancouver Mayor Gregor Robertson told The Guardian, while lamenting the actions already taken as “too late.”
Home prices were reported to have declined since the 15 percent tax on foreign buyers was imposed, but whether that decline will be sustained, or translate into reduced rents, remains to be seen.
Doomed to certain ineffectiveness, by contrast, is the housing plan of New York City Mayor Bill de Blasio. Rents there have escalated well beyond inflation for many years, with landlord profits increasing yearly. Gentrification was encouraged by the city’s mayor during the late 1970s and 1980s, Ed Koch, who infamously declared, “If you can’t afford New York, move!” The pace quickened under Rudy Giuliani and Michael Bloomberg, with the latter forcing through massive re-zonings of neighborhoods against the wills of residents.
The Bloomberg plan was to allow developers to run wild, and give gigantic subsidies to them in exchange for a few units to be set aside for affordable housing. Although he won election as a supposed progressive reformer, Mayor de Blasio has kept the Bloomberg plan firmly in place, and thus continues to drive gentrification, rising rents and the ongoing removal of residents forced out by unaffordable rents.
Gentrification is a deliberate process
Gentrification is not some natural phenomenon like the tides of the ocean, as ideologues are fond of asserting, but rather is a deliberate process. Gentrification frequently means the replacement of a people, particularly the poor members of a people, with others of a lighter skin complexion. A corporatized, sanitized and usurped version of the culture of the replaced people is left behind as a draw for the “adventurous” who move in and as a product to be exploited by chain-store mangers who wish to cater to the newcomers.
Gentrification is part of the process whereby people are expected, and socialized, to become passive consumers. Instead of community spaces, indoors and outdoors, where we can explore our own creativity, breath new life into traditional cultural forms, create new cultural traditions and build social scenes unmediated by money and commercial interests, a mass culture is substituted, a corporate-created and -controlled commercial product spoon-fed to consumers carefully designed to avoid challenging the dominant ideas imposed by corporate elites.
Bill de Blasio tries to assert that gentrification is some natural, uncontrollable process beyond human control as fervently as his billionaire predecessor, Michael Bloomberg. In sum, Mayor de Blasio believes that the only way to get affordable housing built is to allow billionaire developers to do whatever they want, grant exceptions to already pro-developer zoning regulations, and accept a few crumbs in return. As a result, rents have increased more than twice as fast as wages since 2012, and a minimum-wage worker would have to work 139 hours per week to afford the average New York apartment.
Rezoning is the linchpin of Mayor de Blasio’s housing plan — specifically, what is called “inclusionary zoning,” whereby developers are allowed to exceed height limits and are given huge tax credits in return for a few extra apartments below market rates and targeted for specific income levels. This simply does not work, instead funneling still more money into developers’ bulging pockets and further fueling higher profits for existing landlords because the new high-rent housing puts upward pressure on the rents of older apartments. The affordable units created by Bloomberg’s inclusionary zoning account for just 1.7 percent of housing growth between 2005 and 2013, according to Samuel Stein, writing in Jacobin.
That is below the level of the city’s population increase for the period. Coupled with de-regulation laws with large loopholes, an estimated 300,000 to 400,000 rent-regulated apartments have been lost since the 1990s, a city housing activist and reporter, Steve Wishnia, reported in Truthout. At the same time, other subsidies are thrown at developers to build luxury housing unaffordable by almost all city residents — a Midtown Manhattan tower in which apartments cost tens of millions of dollars and which is largely empty because the units are mostly bought by capitalists from outside the country as pied-à-terre received $35 million in tax breaks!
Jamming more money into developer pockets
Inclusionary zoning is a “fatally flawed program,” concludes Mr. Stein:
“It’s not just that it doesn’t produce enough units, or that the apartments it creates aren’t affordable, though both observations are undeniably true. The real problem with inclusionary zoning is that it marshals a multitude of rich people into places that are already experiencing gentrification. The result is a few new cheap apartments in neighborhoods that are suddenly and completely transformed.
De Blasio wants to use inclusionary zoning to create sixteen thousand apartments for families making $42,000. That’s just 3 percent of the need for such apartments in the city today, according to the plan’s own figures. At the same time, the mayor’s policies would build one hundred thousand more market-rate apartments in the same neighborhoods. What will happen when these rich people arrive? Rents in the surrounding area will rise; neighborhood stores will close; more working-class people will be displaced by gentrification than will be housed in the new inclusionary complexes. …
Rather than curbing speculation or aggressively taxing landlords, inclusionary zoning keeps the urban growth machine primed and ready to build. … What this and other public-private partnerships will not do is fix the city’s perpetual housing crisis.”
The only alternative is to fight back. Fran Luck, a housing activist who has fought the gentrification of the Lower East Side of Manhattan, notes:
“Progressive movements from the 1920s through the 1960s fought for and won some housing relief for low-income people — including rent controls, public housing and Section 8 subsidies. But during the ‘Reagan [counter-]revolution’ of the 1980s, federal housing monies were slashed and by the late ’80s, mass homelessness, such as had not been seen since the Great Depression, had made a comeback, accompanied by accelerating gentrification.
“Today, with little housing money from the Feds, mayors such as New York’s Bill de Blasio, even with the best of intentions, simply have no source for ‘affordable housing’ funds other than the crumbs thrown out by large developers. While the housing movement in New York City is not dead — as shown by the annual struggle between tenants and landlords over rent regulation — it has been on the defensive for some time due to a real estate climate heavily skewed toward developer profits, not people’s housing needs.”
Such a climate enables judges judges to overturn even tepid attempts at stabilizing rents, such as in San Francisco, where a federal judge in 2014 declared that rents rise without human invention and thus a ruled against a city law that would have forced landlords who kick tenants out of rent-controlled apartments to pay them the difference between the rent they had been paying and the fair market rate for a similar unit for a period of two years.
Landlords are innocent victims of rising rents, the judge declared, and have no responsibility for San Francisco’s housing crisis. Bizarre, yes, but the logical conclusion of rampant ideology that declares the workings of capitalism operate on their own, as a natural process outside of human control. Public-private partnerships, whether designed to create housing or public infrastructure, are thinly disguised schemes to turn over public property to private capital, so the latter can cash in at the public’s expense.
As long as housing is treated as a commodity to be bought and sold by the highest bidder, housing costs will increase and we’ll remain at the mercy of landlords, who, under gentrification, decide who is allowed to stay and who will be pushed out of their homes. Housing should be a human right!