NON-PROFITS VERSUS PROFIT MAXIMIZATION
For a New Social Housing Policy
By Heidrun Bluhm and Andrej Holm
[This 2013 conference report from DIE LINKE (Left Party) in Germany is translated abridged from the German on the Internet. Heidrun Bluhm is a DIE LINKE member of the Bundestag. Andrej Holm is a professor at Humboldt University in Berlin.]
This conference has a long prehistory.
Five years ago DIE LINKE (Left Party) in the Ruhr had several visions on housing policy and broke a taboo.
The reports of activists concluded: “The status quo or business as usual cannot continue!” The trifling funds earmarked by the German government more as an alibi than as a long-term financing of housing programs are hardly enough. The government takes a round-about way through the capitalist market when profits are realized.
The real goals of social housing or social-ecological urban development decay to remainders of a profit-driven, liberal housing market.
Impossibilities immediately encountered the word “non-profit.” “Old hat,” “burnt land” and “European legal incompatibility” are actually knock-out criteria. No ground was given up for a long time. The idea became firmly fixed.
Thick boards must be drilled to win partners and make doubters into allies. The struggle is long but rewarding. This conference will have a long after-effect.
PRESS RELEASE BY HEIDRUN BLUHM, MEMBER OF THE GERMAN BUNDESTAG
NON-PROFITS VERSUS PROFIT MAXIMIZATION
For a New Social Housing Policy
Berlin, 10/30/2015 – “Abandoning the housing question in Germany to the market means knowingly accepting social dislocations. We want to introduce a paradigm shift from the private profit economy to public vital necessities. Housing policy must understand apartments as a social asset again and ensure that persons with low incomes are not forced out of downtown areas, that housing costs do not explode in relation to incomes and the problem of mounting numbers of houseless is effectively combated. The abolition of housing non-profits or cooperatives in Germany in 1990 was a great mistake that federal policy must correct given an intensifying situation on the housing market, commented Heidrun Bluhm, housing spokesperson of DIE LINKE on the non-profit housing sector.
Members of DIE LINKE in the Bundestag and the Rosa Luxemburg foundation are discussing the introduction of a public interest sector in the housing economy today. The foundation is Dr. Andrej Holm’s academic study “New Cooperatives – Public Interest orientation in Housing.” Dr. Holm is a social scientist and expert on housing policy. The lack in affordable housing with simultaneously higher demand and further decline in social housing require a new social housing policy. DIE LINKE (The Left Party) wants to build a permanent non-profit cooperative stock of housing in Germany according to the example of other EU states as a supplement and corrective to the dominant profit-orientation of the housing market.
Lukas Siebenkotten, director of the German Renters Alliance, says: “We need above all more affordable housing in Germany, not only more housing. This goal can hardly be reached with the classical promotion of social housing and temporary commitments. We need a housing sector that is obliged to the public interest or common good and accepts unlimited commitments – housing providers who guarantee permanently safe and affordable housing.
In his study, Dr. Andrej Holm concludes: “The New Cooperatives in the housing sector are feasible, sensible and necessary.” “More and more apartments are built and marketed to profitably invest money and not to satisfy basic human and social needs. This radicalized dominance of exchange value over practical value should be reversed.”
NON-PROFITS VERSUS PROFIT MAXIMIZATION
For a New Social Housing Policy
By Heidrun Bluhm
How beautiful to see this crowded hall and that all of you accepted our invitation to this conference…
The year 2015 is a year of jubilees!
We are in the 25th year after the abolition of non-profit housing and not only experience the 25th anniversary of the reunification.
This is truly no reason for a celebration but rather for the admission: the abolition of non-profits was the greatest housing slip in the history of the Federal Republic of Germany! Many more slips followed but the basis for all later slips and decades of state non-action was created with this turning point or crucial event.
With the 1990 tax reform, the German government simply declared it was no longer competent. The German government invoked the fairytale that the market will solve everything better and shifted political responsibility with the federalism reforms to the German states.
The Federal government gave away an important creative social-political element. The state abandoned the primacy of politics over the economy and replaced housing policy with housing market policy. Since then, there has been no direct political creativity any more, only market-incentive programs. What does not benefit the market does not happen. The market itself requires the intervention of the state. The state falls into the homemade trap of the supposed self-healing powers of the market.
Social or ecological interests hardly worry the market. Only solvent demand interests the market. Therefore central social concerns must always take a round-about way around the market like
• providing the population with affordable housing
• making available sufficient barrier-free, senior-friendly apartments or
• climate protection through energetical revitalizations of buildings.
The concrete market on one side consists of 40 million people who appear as more or less solvent customers on the housing market. On the other side are different providers who make available around 20 million rental apartments. Small private housing entrepreneurs hold 66% of the total stock of rental apartments; communal and cooperative providers hold 9%.
International financial investors who devalue housing real estate in the profit interest of their shareholders gain increasing influence on the ownership structure of the German housing market. Federal German politics bears a large share of responsibility since it actively promotes and does not prevent this development with its sales and tax policies. The only remaining possibilities of the state for awakening the partial appearance of an active housing policy are:
• promoting social housing,
• laws governing tenancy and
• transfer payments.
In all these areas, the Federal German government only acts on great pressure so it does not fall politically in existential danger. It does not act voluntarily or in a socially caring way.
The choice of words in the promotion of social housing is revealing:
The talk is either of decartelization measures or compensation payments on account of the ending of financial help in social housing.
The further withdrawal of the Federal German government from housing policy should be covered with money – with even more money than planned if necessary.
That does not sound like a future-friendly program. The last big tenancy law reform in Germany occurred in 2013 and was needed like a hole in the head! Nearly all relevant political and social powers agreed the laws regarding tenancy stood the test in practice and there was really no social need for a reform of tenancy laws…
How comfortable politics can be!
The energetical building revitalization did not become one iota faster through this tenancy law reform. However many landlords in population centers mix the necessary energetical revitalization with luxury rehabilitations. They consciously misuse eviction to rent the modernized living space at a higher price. While this is not legal, there is no judge where there is no petitioner or complainant.
A significant part of landlords misuse energetical modernization both to get rid of low income renters and to evade the new instruments on tenancy law, the so-called brake on rental prices.
The German government appears to be finally doing something against the explosive rent increases in the booming regions and high debt cities. But in reality the rents are not controlled. The speed of rental increases is only temporarily slowed down in partial markets defined as strained.
In some German cities, the rent increases in the last years were between 20% and 45%. The apoplexy of some renters associations was tremendous. Great disillusionment is spreading in many places. In practice, the market still governs and the law of supply and demand…
Affordable apartments are lacking, not legal regulations!
This is true in relation to the new housing grant law. After years of abstinence, an increase in housing money is planned for January 2016. This is better than the idleness of past governments but on balance is still deceptive or cosmetic packaging… According to the author of the law, the increase will only cover the preceding loss in purchasing power…
The context is important. In the last years, several hundred thousand renter households, approximately 40 percent, were removed from the circle of persons entitled to housing money although their housing costs increased… Housing grants can only fulfill their task and secure appropriate family-friendly housing when the conditions for calculating housing money are regularly adjusted to changed conditions. But this has not happened… The number of households entitled to housing money has clearly decreased – despite rising prices and higher rent burdens.
The consequence is that renters receive less or no housing grants on account of higher gross income… The law does not include a regular adjustment to the actual costs of living… That prices, rents and housing costs get out of control in relation to income development.
The policy of subsequent and emergency reacting to housing necessities practiced for decades represents a hopeless response to reality. If politics really wanted social or ecological improvements, public money could always be steered into private pockets so the desired effects would be realized through the market.
That is an illusive hope!
The framing conditions of the housing economy must change if a genuine and permanent housing policy should be realized and if the rule of the market over politics should be broken.
What we need is a counterbalance, a corrective to the housing market oriented in pure profit.
Now we take the step of opening this little circle of the like-minded and presenting the largely theoretical findings of Dr. Andrej Holm and his team from Humboldt University to the general public. Our goal is the establishment of a sector in the housing economy that is only committed to vital social necessities and distancing itself from the profit orientation of the housing market.
This sector should provide necessary living space to all those households that cannot be acquired on the so-called free housing market out of their own economic strength. This sector must obviously be privileged economically and politically.
Beginning with our conference today, all the individual legal favors and Europe-wide presuppositions necessary for this non-profit sector must be discussed in a broad public. The field for this is plowed but not yet cultivated.
A new competitiveness is envisioned in many social areas. We can now make concrete proposals and advance parliamentary initiatives. We have great support in renter initiatives and in the German renters Alliance (DMB). A partnership cooperation exists with the DMB. What we need is a partnership with the actors in the housing economy, first with the communal housing enterprises…
With the debate around new cooperatives, we could initiate a social process that concretely contributes to the social-ecological reconstruction of society and is not satisfied with repair measures on a moribund market economy.
If this conference helps to a result-oriented social process, our meeting will have been worthwhile…
Public and non-profit housing enterprises that already live out cooperativeness are potential supporters of a non-profit housing economy. They can transfer their holdings either completely to the non-profit realm or subdivide them into subsidiaries administered with separate bookkeeping and subject to the non-profit housing law. The non-profit housing realm can represent a sensible business model – particularly for new businesses – independent of the interest of investors.
Housing cooperatives represent an alternative investment option given the other investment options like government loans. So-called “ethical capital” of responsible investors, churches, foundations and public investors could be considered supporters of a new housing cooperativeness. By resolution, non-profits and communes should transfer their holdings to cooperatives.
In this way, housing stocks should become cooperatives in a silent reorganization of the ownership structures…
DR. SAHRA WAGENKNECHT, DR. DIETMAR BARTSCH AND DIE LINKE
Creation of a sufficient supply of apartments for needy groups with below-average or insecure incomes and special access problems to the housing market contradicts the profit interests of commercial housing providers.
Investment in special and ecological housing only occurs when competitive profit can be realized in freely financed investments on account of market conditions and public favors without permanent restrictions.
Permanent social bonds cannot be achieved only through limited credit commitments. A social public bond of property is necessary.
Without non-profit supporters, public subsidies and grants for housing will flow exclusively to private actors. This capital will be lost for the public authority in the long run. On the other hand, new housing cooperatives create the presuppositions that public funds will permanently preserve and multiply the public and social wealth of society.
In the scope of the new housing non-profits, binding rules can be created for the transparent democratic management of housing that did not exist as a rule with the past private or public housing entrepreneurs. The concept of new housing cooperatives represents a sensible, technically viable and politically commanded option for reforming state housing policy in clear contrast to the old housing cooperatives. The current actors in the housing economy either do not have the will or are unable to repair the social dislocations in the German housing market. Not introducing a new housing non-profit sector that is applied as a successful model in many neighboring European countries, e.g. the Netherlands, France, Denmark, Great Britain and above all Austria as an instrument of social housing policy was a missed chance to solve the crisis of the German housing market and an omission of a socially responsible policy.
Given the present housing problems that are a consequence of abolishing housing cooperatives, the time has come to correct the greatest housing policy mistake of the past and follow the judgment of many experts whose goal was a reform instead of abolition of housing non-profits. After 25 years of helplessness and being without a concept, revitalizing housing non-profits and following the January 7, 1987 recommendation of the “New Home” investigative committee are vital.
“Housing cooperatives have proven to be a tried and tested principle worth protecting that is indispensable for seekers of housing in the future. The idea of cooperatives in the housing system must be strengthened. The abuses in NH may not be a pretext for discrediting the NH in general and the many cooperative housing enterprises that have done important work. All reflections and concrete recommendations of the UA NH on changes of the WGG should be understood on the background of this fundamental statement of the UA: Housing cooperatives must be preserved and strengthened.”
NEW COOPERATIVES – PUBLIC INTEREST ORIENTATION IN HOUSING
By Dr. Andrej Holm, October 2015
The study: New Cooperatives. Public Interest Orientation in Housing” gives a systematizing overview on the debate around the re-introduction of a public interest oriented sector in the housing economy and supports the goal of implementing new cooperatives in housing. The study gives stimulations for a specialized discussion with possible concepts of new cooperatives and contributes to a broad social discussion on a new public interest oriented housing policy.
MOTIVE AND GOAL OF THE STUDY
Rising rents in many big cities, strained housing enterprises in shriveling regions and new social demands on housing sparked off the housing question in the last years. Protests of renter initiatives, housing demands of parties and associations as well as academic studies show that a market- and profit-oriented housing rationing often falls in conflict with the public interest claims on housing.
Many housing policy instruments are now discussed in view of the social, urban and ecological challenges to housing in the 21st century. Most of the support programs, housing money regulations, tenant laws (like rental price brakes) and new building alliances try to realize social goals within a housing market largely organized as private enterprise and profit-oriented. On the other hand, rental protest movements urge permanent changes and emphasize building and strengthening non-profit oriented models of housing. The slogan new cooperatives in housing can be heard increasingly alongside ideas of a fundamental reform of land law and proposals to strengthen cooperative collective and communal housing.
The study “New Cooperatives: Public Interest Orientation in Housing” provides a comprehensive survey of past debates on the theme, refers to the need for future research and discussion and sketches the necessary steps to new non-profits.
METHODS AND APPROACHES
The study “New Cooperatives: Public Interest Orientation in Housing” is based on an extensive analysis and evaluation of academic, specialized and parliamentary articles on the housing policy debate on cooperatives over the last 30 years…
STRUCTURE OF THE STUDY
In the first chapter of the study, the historical development of cooperative housing in Germany is sketched… The second chapter thematicizes the current social challenges in housing. In the third chapter, the far-reaching incompatibility of profit-oriented rationing strategies in the housing sector with the social demands for housing are analyzed. Building on that, the necessity of new cooperatives is justified with the systematic market failure and the social blindness of a housing supply organized as private enterprise. The fourth chapter grapples with the legal and political conditions for reintroducing new housing non-profits. The positions of the parties and associations on the new cooperatives are presented alongside a brief explanation of the general legal foundations of cooperatives in Germany…
HISTORY OF COOPERATIVE HOUSING: LOOKING BACK AND FORWARD
The origin of cooperative housing in Germany reaches back to the 19th century. The first cooperative housing enterprise was founded in Berlin in 1847 with the goal of guaranteeing “healthy and spacious apartments for little people.” The principles of cooperative housing developed at that time are supportive principles of social housing rationing up to today.
• Breaking even instead of profit-orientation. The economy of cooperatives was characterized by a strict orientation in the rent-cost principle and should prevent the profit-based exploitation of the housing stock.
• Profit-restriction: Strict limitations on dividends are in effect for cooperative housing enterprises.
• Earmarking revenues for specific purposes” With the status of cooperatives, a further development of cooperative housing stocks should be secured for businesses.
• Social provision mandate: A clear target group was defined with an explicit mandate for socially disadvantaged households. The cooperative housing economy promoted by the state and legally regulated since 1930 was marked by a multitude of possible business forms and structures. Foundations, bodies of public law and associations constituted the sector of the non-profit housing economy alongside public housing enterprises and cooperatives…
With the social upheavals in the 1980s and a gradual exit from the social state realm, the principle of cooperatives came under pressure and political majorities began to form for abolishing cooperatives in the housing sector. The arguments made at that time like a) the allegedly unjustified interference in the claimed functioning market, b) the innovation blockade through bureaucratic structures and non-existing incentives, c) the so-called competition distortion through the hidden subsidies of “tax privilege” and d) the appeal to the high costs of the fiscal relief of non-profit housing enterprises represent an anticipation of the later neoliberal reorganization of social- and housing policy.
The failure of the market-supported housing economy in providing the socially disadvantaged, the breakdown of market incentives in satisfying the needs for new buildings, the open and hidden subsidies for private enterprise businesses and the greater social spending for housing refute the arguments at that time and reveal the ideological character of the debates around abolishing housing cooperatives.
In old Germany, cooperatives developed into an instrument of a central welfare state housing policy. Abolishing housing cooperatives in the course of the 1990 tax reform reduced the possibilities of social housing and was part of the neoliberal reorganization of the social republic.
HOUSING CHALLENGES: MORE THAN A ROOF OVER HEADS
Housing expenditures are part of urban development and the social provision of the population. They reflect a series of social-political responsibilities that go beyond mere accommodations. The current challenges to housing cover a wide spectrum:
• The changed social and demographic demands should be covered with sufficient, need-based, up-to-date and affordable housing possibilities.
• Urban development responsibilities in guaranteeing housing for households with low income while avoiding segregation and strengthening social cohesion.
• The housing supply should make a permanent contribution to a resource-sparing and energy-efficient urban development.
• The housing enterprises should help secure and innovate an increasingly decentralized net-based social infrastructure.
Prioritizing different demands in housing supply is determined by local conditions and assumes a social discussion in the respective contexts. Social provision is connected with social goals whose realization is hardly consistent with the profit expectations of private housing businesses.
Most current housing policy instruments affirm market logics (for example support programs and housing money), stimulate real estate investments (for example tax incentives) or must be accepted (for example, tax regulations and laws governing tenancy). Strategies emphasizing a cooperative sector of housing become more important since these forms of enforcing social demands against the market are mostly temporary and limited and hardly influence the basic problematic. A partnership cooperation with builders obliged by statute to the public interest seems a sensible and modern alternative to expensive support programs in ever new fields of urban development and private businesses buying the desired effects.
The discussion around new cooperatives gains necessity and actuality in view of an increase of social demands in housing and the limited effectiveness of other housing instruments.
SOCIAL BLINDNESS AND MARKET FAILURE: THE NECESSITY FOR A “SILENT REORGANIZATION” OF HOUSING
Given the diverse demands on housing supply, the question is raised whether the social goals of housing businesses oriented in private enterprise and competition can be fulfilled.
In public debates, the double character of housing as a social and economic commodity is underlined. The economic peculiarities must be analyzed to clarify whether and under what circumstances market actors can produce a social increase in value, not only a private increase in value. Critical housing research assumes the specific community character of housing and confirms a systemic market failure and a social blindness.
The program of a socially-oriented organization of housing can be described as de-commodification and socialization. Drawing housing out of market logic can be understood as a goal and measure for evaluating housing programs and regulations. A “silent reconstruction” and non-profit sector in housing seems necessary given the obvious incompatibility of social demands and market-based economic principles.
The conflicts around housing supply are embedded politically and administratively and did not simply emerge from economic logic. Therefore every housing reform faces the task of changing the existing conditions of the political-administrative system and breaking the interest-blocks of the present exploitation regime. This interest in land-exploitation shared by the real estate branch, the construction industry, the banks and many city governments has led to the formation of coalitions in exploiting real estate effective politically and in the media. Therefore enforcing new forms of organizing housing will depend to a great extent on a new constitution of urban political interest coalitions. Ultimately every form of a different housing policy will only succeed when interest blocks are broken and new urban political coalitions can be formed.
The social increase in value of housing is greatly restricted under the conditions of capitalist urbanization by private and entrepreneurial market actors and subordinated to their conditions. The systemic market failure in providing reasonably priced apartments can only be annulled through a far-reaching de-commodification of housing. A “silent reorganization” of the ownership structures in favor of non-profit and cooperative builders must be enforced against a hegemonial interest block of real estate exploitation.
TASKS AND STRUCTURES OF NEW HOUSING COOPERATIVES
The development of concepts of new cooperatives is spurred by high expectations. New cooperatives in the housing sector should:
• compensate the systemic failure of the housing market in making available affordable living space,
• overcome the existing discriminations on the housing market (single parents, persons with migration backgrounds, large families etc),
• counteract the displacement processes in many downtown areas of big cities,
• fulfill the demands for an ecological modernization of holdings at socially compatible conditions,
• fulfill the growing expectations of renters in a joint determination on the development of the housing stock and
• guarantee infrastructures and supply quality even in shriveling regions.
The development of concepts of new cooperatives faces the challenges of defining in more detail the increase in social value to be realized. The legal legitimacy of new cooperatives presupposes the fulfillment of tasks in the general interest. However the confrontation with the demands of EU law in the course of this study shows the introduction of new housing cooperatives under certain conditions is entirely compatible with EU law and refutes one of the central counter-arguments. Nevertheless the initiatives for new cooperatives will only have a possibility for a social majority when these new cooperatives can be connected with a greater or more effective potential of solving problems than with the now dominant instruments of housing policy.
New cooperatives in the housing sector serve vital necessities in housing and sustainable urban- and regional development. These cooperatives cover all activities of building, rationing and renewing housing at affordable rents and bringing housing-friendly services that increase social value by earmarking revenues, limiting profit and contributing to permanently solving social, spatial and ecological challenges. Cooperatives in housing are marked by a strict non-profit orientation in rationing, a clearly defined earmarking of entrepreneurial goals and an effective social control.
SUMMARY: NEW COOPERATIVES IN HOUSING ARE FEASIBLE, SENSIBLE AND NECESSARY
In this study, the historical and current discussions on possible new cooperatives in housing are presented and summarized. The necessity for developing a non-profit oriented sector of housing is emphasized in the context of the growing social demands for housing and the systemic failure of the housing economy. In the study, new cooperatives are outlined as a possible instrument to break the housing supply out of the capitalist investment logic and to orient policy in the socially defined demands. In view of a strengthening tendency of financializing the housing economy, more and more apartments are built, acquired and purchased to profitably invest money and not to satisfy basic human and social needs. This radicalized dominance of exchange value over practical value should be turned around. The transformational potential of new cooperatives consists in the possibility of an unequivocal prioritizing of the social goal of housing and the principle of the strict limitation of possible profits.
Initiatives for new cooperatives stand before a series of specialized and political challenges. A strategy for a housing supply oriented more strongly in the public welfare must develop perspectives for new alliances and requires broad parliamentary and non-parliamentary coalitions. New cooperatives in housing are feasible, sensible and necessary. The breach with profit logic in housing that is on the horizon points beyond a simple reform perspective.
HOUSING AS SOCIAL INFRASTRUCTURE
By Andrej Holm
[This article published in January 2013 is translated from the German on the Internet, http://www.links-netz.de
For several years, the editors of links-netz have discussed new forms of a social policy in developed capitalist countries under the keyword social infrastructure. The starting point is a redistribution of vitally necessary social resources possible and necessary through high productivity.
The efficiency of production, the transition to the knowledge society and the resulting unequal distribution of income and wealth and the running aground of the neoliberal paradigm in social policy are understood as developments necessitating a new organization of social policy. Increasing poverty plights and social divisions are artifacts of current social policy that can be overcome – starting from the assumption that a sufficient gross domestic product is produced in the rich countries of Western Europe and North America to offer all inhabitants a pleasant and carefree life (Hirsch 2003). A social infrastructure should now replace the individualized, selective distribution mechanism of traditional or Keynesian social policy limited in its effect.
Public goods and services accessible to everyone and usually offered free or for trifling fees cannot be produced by individuals. The areas of health care, transportation, housing, education and culture are concrete examples. Taxes and fees shou9ld finance the social infrastructure.
Nicole Vrenegor and Manuel Osorio first outlined housing as a social infrastructure and proposed several elements for the new orientation of housing as social infrastructure. Concrete visions for such a social policy were already worked out for health care and education as social infrastructure. In both cases, the necessity for integration in a social infrastructure was derived from the actual development trend of the respective area…
1. SOCIAL-POLITICAL ASPECTS OF HOUSING
Rising rent prices in many cities, the sellout of previously public housing stocks, the displacement of poorer income groups from downtown areas and the ac companying segregation processes are currently set on the agenda of urban politics by urban protest movements and do not only occupy urban research.
The social-political relevance of housing supply consists in the effects of housing conditions determining social situations and not only in access chances and quality as existential presuppositions of reproduction.
The housing supply is regarded as a firm element of vital necessities in a series of international agreements and past laws. The “right to housing” in the Universal Declaration of Human Rights under Article 25 is anchored as part of the right to a proper living standard: “Everyone has the right to a living standard that guarantees the health and well-being of himself and his family including food and clothing, housing, medical care and necessary social services” (Universal Declaration of Human Rights of 1948, Article 25).
While the right to housing was explicitly formulated in the 1918 Constitution of the Weimar Republic, it is not protected in the German Basic Law today. In the last years, renter organizations, social associations and the DIE LINKE party (The Left Party) demanded unsuccessfully the legal anchoring of a human right to housing. An “Alternative Expert Commission Housing is a Human Right” commissioned by the Bundestag DIE LINKE in 1994 defined the “right to proper housing” as the right to one’s self-contained housing in sufficient size. This also includes an intact infrastructure and possibilities for participating in cultural, social and political life. This right should be in force for all communities and individuals independent of gender, nationality, age, confession and way of life. Lodging in a homeless asylum, hostel or temporary/ emergency accommodations were explicitly excluded as possible realizations of the right to housing (Alternative Expert Commission 1994)...
In the 1970s, Manuell Castells pointed to the contradiction between “the individual appropriation of living conditions… and the collective management of these processes” (Castells 1975). This contradiction cannot be solved under the conditions of the Fordist welfare regime. Still the discussion about a social infrastructure and new forms of social policy must face this problem…
2. HOUSING SUPPLY IN THE CAPITALIST ECONOMY
What political-economic power relation is needed for a reorganization of the housing economy?
The term housing market implies an organization of housing supply under the conditions of the capitalist economy. Like other commodities, building and rationing apartments are subject to economic rationality. Several basic reflections derived from this are important for assessing current developments in the cities and for formulating alternatives for social housing.
The double character of commodities of being bearers of practical- and exchange values is also true for housing. While the practical value (the usefulness of a thing constitutes its practical value) includes aspects like size, quality and furnishings of a dwelling – the exchange value is expressed in the selling price or profit margin of apartment rentals. A central conflict in market-based housing occurs here. While renters are interested in improving the practical qualities of their apartments, economically rational owners are oriented in maximizing the rental revenues or selling prices. The aspects of distribution justice of the housing supply are strictly subject to market mechanisms under the conditions of exploitation logic and conflict with principles of social provision.
Even if the housing supply is obviously subject to the principles of the capitalist economy, the value of real estate is essentially determined by external assessment factors like situation, classification in a specific housing market segment or shortage of supply and is not derived from the production price or the socially necessary labor in its construction… Marx called attention to the peculiar value circulation of real estate: “Certain goods can only be purchased as fixed capital according to the nature of their practical value like houses, ships, machines and so forth…” (Marx 1894).
From an economic perspective, real estate represents interest-bearing capital – comparable to a financial investment:
“The interest-yield that the homeowner hopes for from the apartment rental leads him to build or buy the house. The amount of the interest depends on two factors: the amount of the advanced capital and the interest rate that can be realized on the housing market” (Brede/ Kohaupt/ Kujath 1975).
This interest economy of the housing market has tremendous consequences because investments in new buildings and preservation of housing… always compete with other investment options (savings accounts, stocks, ship containers etc). An investment in the housing market is rewarding when the average interest-yield is higher than in other areas. Different partial markets with different profit prospects exist within the housing market so that more is invested in the profitable areas of housing. Reasonably priced rental apartments are not the most profitable. The systematic deficiency in reasonably priced apartments can be explained from the economic structure of ground rents.
The economic foundations of the real estate economy fundamentally changed under the conditions of globalization and the accumulation regime dominated by the financial market (Chesnais 2004). Under the watchword financialization, a transition from an interest-based ground rent to a finance market oriented profit economy is discussed… Housing markets are increasingly directly determined by financial market actors who press on the housing- and real estate markets. This transition to financializing the real estate economy was a reversal of past functional relations between the financial market area and the real estate sector. Financial markets aim directly at increased profits of financial investments and no longer serve the real economy (Huffschmidt 2007). The former means of financing projects changed into the end-in-itself of investment-seeking capital (Heeg 2011)…
With the transition from the industrial- to the knowledge economy, the relative importance of the real estate economy shifted in the context of the capitalist economy as Michael Hardt and Toni Negri explained… From this perspective, the function of the housing supply organized in a capitalist way shifted from a part of social consumption to the center or profit realization. The contradictions between practical value and exchange value orientations will intensify when the housing supply no longer secures the general reproduction conditions for the capitalist reproduction regime while becoming an immediate part of financial market investments.
Housing supply as part of a social infrastructure faces the challenge of breaking with the current mode of capitalist urbanization.
The conflicts around housing supply are embedded politically and administratively and do not simply emerge from the economic logic… Any housing reform has the task of changing the existing conditions of the political- and administrative system and breaking the interest-blocs.
The housing system is a very complex system that only functions with the teamwork of different actors. So an urban housing market assumes the cooperation of property owners, financing banks, architects, city planners, the construction industry and municipalities. Political and administrative conditions like tax laws, building codes and laws governing tenancy, preservation of historical buildings and support programs influence investment activities…
The active role of city governments is manifest in structures of clientele policy and an increasingly entrepreneurial orientation of city politicians while the interest of owners, banks and the construction industry can be economically explained (Harvey 1989; Brenners/ Theodore 2002).
Carrying out new forms of social policy will greatly depend on a new constitution of urban coalitions of interests and does not only face the challenge of de-commodification of the housing supply. Ultimately a different housing policy can only succeed when existing interest blocs are broken and new urban coalitions formed. A strategy for the housing supply as social infrastructure must be developed alongside perspectives for new alliances. Whether this coalition-building should include the owner structure, the municipalities, the architects or the construction industry must still be discussed.
3. REGULATIONS FOR HOUSING AS SOCIAL INFRASTRUCTURE
What are the prerequisites of housing as social infrastructure?
The program of a socially oriented organization of housing can be described as de-commodification and socialization. In connection with the displacement dynamics in the course of upgrading proce4sses, Neil Smith and Peter Williams formulated at the end of the 1980s:
“De-commodification of housing is the only defense against gentrification in the long-term (…). Respectable apartments and neighborhoods should be a right and not a privilege. This obviously cannot be achieved with a series of reforms. Rather political upheavals will be neede3d that will be more far-reaching than the social and spatial changes that we know today” (Williams/ Smith 1986). De-commodification, the deliverance of housing from market logic, can be understood as the goal and measure for evaluating housing programs and regulations.
The keyword socialization can help us understand the second aspect of a socially-oriented urban policy. Socialization implies the dethronement of the real estate exploitation conditions and a re-politization of urban policy in the sense of a public debate and decisions about common public interest.
In the past, there were only a few beginnings of de-commodification although the history of housing policy is rich with deep incisive control attempts by the state.