Transcript: Real Estate Capitalism and Gentrification with Samuel Stein02 May 2019
Welcome to The Dig, a podcast from Jacobin Magazine. My name is Daniel Denvir and I’m back broadcasting once again from Providence, Rhode Island. I received a ton of electronically transmitted love in response to my remarkably lengthy monologue introduction to my interview on transportation idiocy with Kafui Attoh a few weeks back. About half of that intro was inspired by Kafui’s incredible book. The other half was inspired by Capital City: Gentrification and the Real Estate State, a book by my guest today Samuel Stein. As Stein writes, so-called livable neighborhoods have become synonymous with gentrified neighborhoods, and it’s tellingly a definition of livability that somehow excludes the two key things about city life that allow most people to actually live in a city: the price of shelter, and the price of labor. Even the term “young people” has become a euphemism for the small slice of that age cohort that business craves: affluent white youth. The system of real estate dominated capitalism that we live under has commodified not only public amenities like public transit and public schools. It has commodified the most basic ways that people think about public amenities and public spaces. And really, it has commodified the way we think about the whole world.
So, what is gentrification? It isn’t just about what was once known as the hipster and is still known as the artist––the telltale warning signs of impending demographic change. Rather, gentrification is part of an entire political economic order that has made real estate global capitalism’s most prized asset for storing wealth. One that has helped bend place-based urban governments to the will of mobile, and thus more powerful, capital. Real estate has played a long game. For starters, the settler colonial project that built the American empire was, of course, about land. First, that land was violently stolen from Indigenous people in the name of white settler empire. Simultaneously, however, it was gobbled up by voracious speculators, railroads, and other capitalist interests. The result was that the so-called “closing of the frontier” in the late 19th century, revealed that the frontier had never been truly open for most people who didn’t own the means of production.
Real estate has ever since always found a way to put itself at the center of American capitalism. In the New Deal in the period that followed, real estate capitalists took federal dollars to build whites-only suburbs, cordoning off the cities as ghettos to be asphyxiated under segregation-enforced capital flight. Meanwhile, urban neighborhoods, particularly those home to Black people, were destroyed in the name of renewal. And this was nothing new. The creation of Central Park in the 1850s destroyed Seneca Park, the largest Black settlement in Manhattan. One important point here is that we have never had some mythically libertarian housing or land policy in this country. We’ve had huge government intervention, but only of a very particular and regressive sort. Today, the real estate industry is madly profiting from those livable spaces that were made scarce by those same real estate capitalists’ project of mass, automobilized suburbanization. In other words, the very same forces that have turned vast swaths of this country into a soulless suburban wasteland are now, in response, charging an exorbitant premium on what little pleasant urban space was left behind, expelling the poor people of color who had inhabited and cared for those neighborhoods during their generation of neglect, disinvestment, and mass incarceration. And now, ironically, this very same process of elites moving into the city to appropriate the scarce luxury of dense city life is producing the very sort of suburbanized street-killing processes that undermine this luxury in the first place. Hideous, anti-human megadevelopments like Hudson Yards on Manhattan’s West Side; chain drugstores and bank branches supplanting a once diverse mix of storefronts across the borough; a train system that’s dying in streets more choked with traffic than ever, as those who can flee the trains do so into Ubers.
And now, Donald Trump. Trump, writes Stein, is “a product and an embodiment of real estate capital’s global ascendancy.” As Stein shows, the president’s wealth was built upon the foundation of his grandfather Friedrich’s business, which was buying and selling brothels, and engaging in the sort of land speculation that defined the railroad-guided westward expansion of this country. And then, second, profiting from the rising land values that followed the construction of the Queensboro Bridge and the extension of subway lines to Queens, both of which connected that outer borough to Manhattan. Then Trump’s dad, Fred, who, when he wasn’t busy getting arrested at a Klan rally, expanded the empire by taking advantage of the Great Depression’s housing crisis and the New Deal spending on defense housing, to build government-financed homes that became infamous for excluding Black people. Fred Trump was even a lead developer on a massive and massively destructive urban renewal project in Brooklyn’s heavily Black Fort Greene neighborhood.
And then Donald took over, and he moved his racism and graft-built government-subsidized family business to Manhattan, where he used his political connections to siphon off massive public subsidies and accelerate the deindustrialization of New York for his own private profit. First, Trump used the ascendant New York real estate state to build. And then, after becoming a too big to fail debtor, he became a grand, all-purpose huckster. Trump was by no means one of the biggest players in the housing market, but it’s still pretty amazing that he helped create the crisis by selling subprime mortgages, then profited from that crisis by teaching people how to flip foreclosed homes. And then of course, he politically capitalized on the resulting contradictions in American political economy to win the presidency. All of this and more is covered in Stein’s book which I highly recommend that you read. Okay. That’s that.
Okay here’s Samuel Stein, a PhD candidate in geography at the Graduate Center of the City University of New York, and the author ofCapital City: Gentrification and the Real Estate State , out now from Verso Books. I interviewed Stein recently at a live event at Riffraff Books here in Providence.
DD: Samuel Stein, welcome to The Dig.
Samuel Stein: Thank you very much.
DD: We should start by highlighting the really stark reality that people are facing in terms of housing. You write that there’s not a single county in the United States where a full-time minimum wage worker can afford the average two-bedroom apartment. In New York City alone nearly two million people pay the majority of their income to landlords every month. Homelessness, and attempts to criminalize and invisibilize it and eliminate homeless people from public space, are all rampant. So, before we get into a ton of detail about the political economy of real estate, which is what your book is about, could you start by explaining what life is like right now for people living under this system that you call the real estate state?
SS: Yeah there is pretty widely recognized a housing crisis in this country, in almost, basically in all of its cities, but around the world as well. In this country homeownership is at a 50-year low. A record number of homes are being sold to absentee landlords––we hit 37 percent a couple of years ago. We have two million people homeless in this country, and another 7 million precariously housed. And I think as a lot of us are familiar, wages are relatively stagnant as housing costs are going up, which creates a real scissor effect for residents. And we talk about rent burdens in the housing world as the amount of your income that you pay towards rent. The federal government says 30 percent is what we should be paying––30 percent or less. And that even is an inflated number: it used to be 25 percent. But most people, or a lot of people, are paying a lot more than that, and it’s deeply racially segmented. So, the average, in mostly white neighborhoods, rent burdens are about 33 percent. In mostly African American neighborhoods, they’re 44 percent. In Latino neighborhoods it’s 47 or 48 percent. People are paying huge amounts of the incomes that they’re making, which are insufficient, to landlords – you can think of it as a pretty direct transfer of capital from employers to building owners.
DD: You write that real estate worldwide is now worth 217 trillion dollars which adds up to 60 percent of all of the assets in the world, and most of that is in housing. Why is it that capital has been flocking to real estate at this particular moment in the long history of capitalism? What have been the constant and changing roles laid by land and real estate within the global political economy? And putting it in some historical context, how does this fit in to the broader transformation in the global economies since the neoliberal turn in the 1970s?
SS: I think it’s worth repeating that statistic that 61 percent of the world’s assets are invested in real estate.
DD: It’s an astonishing number.
SS: It’s a majority of global capital and it’s never been the case before. So real estate has always been a factor in capitalism––it’s certainly always been a factor in urban politics––but never to quite this extent. And I don’t think there’s any one reason that you can point to that explains the whole thing. But if we think of a few reasons in combination: just global inequality in general has created the need for a whole bunch of money to go somewhere, and a lot of that is going to particular metropolitan areas that are becoming hyperinvested, New York where I live being a prime example, London another. So there’s a lot of very rich people who are looking for something to do with their money and are a little bit worried about keeping it in their own country, or in a bank account, and real estate is doing quite well right now and so that becomes the global safe deposit box. One reason that real estate is doing so well right now, in this country especially, has to do with deregulation of finance over the last 25 or so years, which has unleashed all sorts of derivatives that grew out of the housing market. There are all sorts of things you can do with housing you couldn’t do before. So, it becomes not just a place to live but a way to turn money into a lot more money. The whole quantitative easing program that the federal government has been undertaking, or had undertaken in the Obama era, meant that the Federal Reserve bought out a whole bunch of assets from banks which was meant to create liquidity which it sort of did. But the thing that all the banks did with that money was basically put it in real estate. There was no point in holding onto it––interest rates were incredibly low. So as long as the real estate bubble was getting bigger, which it was even after the financial crisis, that became the place that capital moved into. We’ve seen massive urbanisation programs in China, in Dubai, and in other countries that have to do with the local political system there, but also have to do with transformations of agriculture. So as agriculture is being mechanized and globalized, peasant lifestyles are harder and harder to maintain, and more and more people are moving into cities which creates opportunities for more construction development and ultimately exploitation. So, all these things are happening at the same time creating the conditions we’re in now.
DD: And where does the restructuring of the global economy, beginning with the crises of the 1970s and the shift towards neoliberalism––why is that so conducive to the rise of real estate capital?
SS: A whole bunch of reasons. One thing has to do with the falling rate of profit. So, as a lot of industries were becoming less profitable than they might have been otherwise, investors were moving money out of those industries and into other sectors and real estate became a key location for that capital to move to. Capital gains were rising as rates of profit were falling. So that’s one reason that hit a particular crisis point in the early 70s. Another was deindustrialization, which is really industrial restructuring or geographical shifting of industrial production––
DD: Because it goes somewhere––
SS: It goes somewhere. The world is more industrial now than it’s ever been. But First World central cities are not the place where most of that industrial production is happening. And that had started in a first wave after World War II, moving production out to the immediate suburban areas outside cities. But it really took off in the 70s and picked up steam in the 80s and 90s, to the point that manufacturing was leaving big cities in a big way. In New York City for example, between the 50s and the 90s, the City lost 750,000 manufacturing jobs. So that turn created all sorts of opportunities which we can think of as a vacuum. It was an economic vacuum that had to be filled by a different kind of economic development. Real estate was a huge part of that as was the financial sector and insurance. It also created a political vacuum in that a new class of capital came to be dominant in cities like New York and many others. And that was the decline of the political significance of manufacturers and the rise of political power of real estate. And then the final one is a spatial vacuum. So as manufacturing leaves these places, there’s all these buildings leftover, one of which we’re in right now––in a former manufacturing space that’s been turned over to a very nice retail space. But as manufacturing capital left these cities they left behind huge amounts of space. Some of that space like this building gets preserved and turned over to another use; some gets demolished and then built up in the image of what the real estate developers want to see.
DD: And another piece of context there is that it’s these huge changes that take place in things like transportation and logistics that lead to massive transformation in how different sorts of spaces are valued within capitalism.
SS: Right. And so suddenly a place like Elizabeth, New Jersey becomes incredibly attractive because you can build out new port infrastructure that would completely displace almost all of New York City’s port economy, which was New York’s competitive advantage for centuries. So, the logistics revolution changes the geography of industrial development in a way that creates all sorts of opportunities for real estate capital.
DD: You just mentioned that industrial and real estate capital are very two distinct forms of capital that make very different sorts of demands on the city and thus shape very different sorts of cities. And in part that’s because they tend to view the value of land in very different ways. Explain the difference between these two different types of capital and what that has meant for the economics and politics of real estate in the many cities, that over the last more than half century, have experienced deindustrialization.
SS: Yeah I think this is one of the most important points I wanted to make in my book, so I’m glad you asked. We often paint capital as one thing, when it is many different forms of capitalist accumulation that are sometimes in competition with one another. And in cities for a long time the two most powerful groupings were industrial capital, representing manufacturers, distributors, warehousers, and real estate capital, representing developers, landlords, real estate brokers, and that whole ecology of accumulation. Sometimes they had similar interests, but they had certain differences that turned out to be politically useful, and that became very important for urban planners to mediate. So, if we think about a moment when both industrial capital and real estate capital is very powerful in cities, both are making certain claims on the state, certain demands on the state. They don’t want to admit that they like planning. They like to give the image that the market will settle everything. But in truth, both industrial and real estate capital need certain things from the state. They both need certain kinds of infrastructure, for example. If there aren’t transportation networks, electronic networks, waterworks, they can’t do business, their entire model is worthless. So, they’re dependent on the state, and its coordination and planning, to provide those things. Industrial capital is very much concerned with state––what they would call––overreach around environmental protection. They don’t want to see limits on where and how much they can pollute. Real estate capital tends to support environmental regulation if it makes more land livable and buildable. Industrial capital tended to support affordable housing programs, whether that be rent control or in some cases even public housing. And it’s not because they were a wonderful caring capitalist. It’s because if their workers were paying less in rent they would have lower demands of them in terms of wages. So industrial capital could support affordable housing.
Real estate capital had no interest in anything that would lower rents and bring down the value of land. Industrial capital likes cheap land because it makes stuff on land. Buildings and land are costly for a manufacturer or distributor or warehouser. For real estate capital, land values are the very thing that they trade in. They want to buy low and sell high. So, they want to see land values going up and up and up once they hold onto land. So, they were making different kinds of claims on the state. The working class of course was making an entirely different set of demands but could sometimes partner with one of those two groups to have a more powerful voice in city politics. So, planners were trying to negotiate the shifting or the contradictory demands of industrial and real estate capital, while maintaining popular legitimacy. And so if the first was a contradiction within the capitalist class, there’s a second contradiction that planners are trying to resolve, which is making sure that the capitalists get what they need while also involving the public enough to have popular legitimacy.
DD: Those two sets of contradictions potentially allow for the public to exercise more power by pitting those people, those forces, against each other.
SS: Right. They can work one against the other in different ways at different times. There’s strict limits put on popular power within urban planning during this period, so people are consulted but they don’t necessarily have the power to change the rules in ways that would threaten the bottom line of either industrial capital or real estate capital. So, the way I describe it in the book, is systems that are open but rigged. You have a say, but your say can’t overturn the system, it can choose between options that are given. But that was a moment when, as you say, popular voices had a little bit more power and the division within the capitalist class was useful, socially useful, in terms of getting things like rent control, some public housing, also some environmental regulations on the books.
DD: There can be a coincidence of interests if industrial capital wants land cheap for their own reasons, and also have an ancillary interest in land being cheap enough for their workers to be able to afford to live near the factories. There can be coincident interests between them and their workers on that subject. But then with the flight of industry, that leaves real estate capital alone.
SS: Exactly. There is no longer such an intercapitalist feud going on in most cities. Which leaves a whole lot of power for real estate to make claims on the state. To say, please act in a way that drives land values upward. Please act in a way that stops restricting our ability to extract higher and higher rents. Capital still makes all sorts of requests and demands of city planners, but those demands are mostly going in one direction, which is more expensive, more gentrification. Groups that are against that sort of thing, we organize as tenants, we organize as a housing movement, but we’re in a structurally more complicated, more difficult position in terms of challenging capital’s hold on the urban planning system.
DD: The last question I want to ask about deindustrialization before we move on, is that one thing I like about your book is how it really forces us to think about it in a more expansive way. When people think about deindustrialization they usually think about places like Detroit, or Camden, New Jersey, but Detroit and Brooklyn are, in fact, part of the same and stuck in the same processes and parts of the same system. And geography is really critical because we need to understand how, what Marxist geographers call “uneven geographic development,” functions within capitalism. Explain the way that various places get whiplashed between gentrification and disinvestment, and why there’s such a fixed dynamic that allows for so little stable ground between Manhattan and Camden, New Jersey.
SS: Right. Yeah. I mean there’s all sorts of other urban environments, economic modes that we can imagine, that would be neither hypergentrification nor hyperdisinvestment, but real estate driven political economy pushes cities toward one or the other direction. It sorts places out, the places that are going to be overinvested in, and the places that are going to be severely disinvested. Part of this is that one creates the condition for the other. So severely disinvested places are places where you can also buy land cheap, invest in it, and raise rents, and ultimately produce the conditions for gentrification. Severely hypergentrified places are susceptible to real estate crashes, which could drive down property values once again, which then creates another round of opportunities for reinvestment. And so the two tend to depend on each other. And another important element of this uneven geographical development that you talk about is capital flowing from one place to another. So, if we look at, for example, city-suburb relations, there was a long period in US mid-century development where capital was moving out of cities and into suburbs. In a lot of places, we’ve seen the opposite and we’ve seen poverty in inner ring suburbs and extreme wealth in cities. And that dynamic works really well for capitalism because once again, each side produces the opportunity for the opposite.
And capital, as Marx said, is value in motion––it needs to be moving, it needs to be creating new value. And so having this unevenness creates the opportunity for new development all the time. There’s never a situation where an entire country is gentrified. It can’t happen. There needs to be investment as well as disinvestment for the system to operate. That doesn’t mean that there’s a one to one relation, where a dollar comes out of Detroit and goes into Brooklyn. But the two are always present. And in the U.S. right now we, I, talk a lot about gentrification. It covers a relatively small proportion of the surface area of the country. Far more of the country has experience capital flight and severe disinvestment. But that capital gets pulled really intensively into certain places, until it can’t anymore, and then there’ll be a new accumulation strategy that develops.
DD: So let’s talk more about gentrification. What is gentrification? How does it work? And if it covers such a small area of total land in the U.S., why is it something that’s important for us to analyze if we’re to understand this bigger picture of uneven development?
SS: Right. Well first of all, even though it covers a relatively small proportion of the surface area of the country, like we said before a majority of the world’s capital is in real estate, and that real estate is concentrated in certain places very intensively. So, if we look at the proportion of capital investment in land and buildings, we’d see these hotspots. And so it is important if we want to understand the dynamics of 21st century capitalism to understand gentrification, even if it doesn’t affect most of the country at the same time. But I would argue that there’s a very close link between all the disinvested areas and all the reinvested areas. So for me, gentrification is the third phase in a process of investment, disinvestment, and reinvestment. So, money goes into a place, and it gets built up with a certain, often very nice built environment. Money then flows out of that place either because of changes in policy, changes in the economy, other opportunities elsewhere, and it becomes disinvested. And then gentrification is the return of capital to those disinvested spaces. As a geographer named Ipsita Chatterjee who defines gentrification as “the theft of spaces of labor and their conversion into spaces of profit.” I think that’s actually the definition I prefer. That if you think of space as socially produced, that takes a whole lot of labor of people who don’t necessarily have a whole lot of capital. People put their lives into building up not only their home but their neighborhood, in a way that makes it suddenly appealing to capital, which comes in and transforms spaces of labor into spaces of capital in a way that displaces those who built them up in the first place.
DD: And there are also historically particular ways that this has worked in the US where, for example, post-war suburbanization has made what we now call “livable spaces,” made those spaces scarce, and is now profiting from that scarcity.
SS: Right. So. you’re saying that the suburban landscape was built out with massive federal subsidies––
DD: And that aesthetic and lifestyle was valorized for a time––
SS: Right. And now if you want to live without a car you’re going to have a hard time in a lot of the built environment that was built out between the 1930s and the 1960s. And so yes, there’s then this scarce environment that people like for all sorts of reasons, some of which are economic. When gas prices went up in the early 70s––the period we were talking about before––a lot of people suddenly wanted to move to the city where they could use mass transit instead of relying on their car. When two family or two worker or households became the norm, it suddenly made a lot of sense to live a lot closer to where you were working, especially if you were raising children. So those changes took place that made these remaining so-called livable spaces highly competitive in a way that they weren’t before. We also need to look at the dynamics of redlining that created the suburbs and created the opportunity for people to get their FHA loans and their VA housing and everything else in the suburbs.
DD: And these were explicitly racist policies.
SS: Explicitly. It’s not that we have to extract the racism from it. We coded just about every neighborhood in every residential area in the 30s and 40s, and we looked at how old the buildings were, and how much distance there were between them. But we mostly looked at race, and areas with any African American population were coded as risky investments, as places that were unsafe to lend. And places that were integrated were shaky. And so integrated places were given every incentive to become segregated places. And especially African American, but also Latino and Asian populations, were clustered into the remaining redlined area. So that’s how we get the disinvestment that then produces the condition for gentrification afterward. The banks were told not to lend to particular areas and actually got to choose those areas themselves––the Homeowners Loan Corporation was mostly made up of bankers who could then decide which areas should be loaned to and which areas should not. So then we have massive disinvestment from central cities in a way that then becomes the opportunity for the kind of cultural avant-garde of semi-wealthy people in the 60s and 70s to buy up the brownstones, to move into the lofts, because they had been severely disinvesting that made them affordable to them in the first place.
DD: There’s a certain aesthetic and cultural critique of gentrification that focuses on the artists moving into a poor neighborhood, or not so long ago it was the figure of the hipster. And it’s certainly true that artists and people with high cultural capital are often precursors to gentrification, but it seems like too much of a myopic focus on artists and whoever else mystifies at least two things. First, that artists, etc., themselves don’t have anywhere else to live except maybe where they’re able to afford rent which is in these soon-to-be gentrifying neighborhoods. And, two, it seems to miss that the artist is used by real estate capital, rather than the other way around. What’s your take?
SS: I think that’s right. I think there are certain artists who embrace their role as a gentrifier, and who try to be useful to real estate capital in a way that’s pretty disturbing. But for many artists they don’t have any place else to go––they go where they have cheap rents, but also a lot of space which often tends to be post-industrial areas that real estate capital is kind of waiting for somebody to make cool again. And then real estate capital absorbs the labor that artists put into remaking these spaces, raises the rent, kicks out the artists, and brings in the newer, higher rent paying tenants. So that’s the game that we’ve seen over and over and over again. You can’t just blame the artist necessarily; you also can’t take away their capability. But the artist, the hipster, tends to be the most visible element of gentrification, in a similar way as retail is. Like you notice when the stores change, but the stores don’t tend to change until after the demographics have already changed. But who lives in a large brick building is not necessarily clear until the retail at the bottom changes. So, I think people have sometimes reversed the order in which these things happen. The artist, the hipster, certainly plays a role, but they alone can’t make gentrification happen.
We sometimes talk about the production explanation of gentrification and the consumption explanation. The production explanation looks at the landlords, the developers, the bankers, the people who put in the money to create a new built environment. The consumption explanation looks at the artists, the hipsters, the new bourgeoisie who move into these areas. There was a debate back and forth for a long time, that I think is fairly unproductive, because it doesn’t work if you don’t have both. If you have the production side of gentrification and a whole bunch of money goes into building out new areas, and is ready to make loans, but there is no class to consume that––there is no relatively wealthy people to move into these spaces, no artist to make them cool––it won’t work. And if you just have the consumption side, without the money going in for the loans, and the new apartments, to build out that built environment that these so-called cool, wealthy people want to live in, then that’s going to be a whole bunch of unmet demand. And I think what’s missing, then, is the role of the state. And part of what urban planners do is ensure that both the production side and the consumption side are there, which is the condition that you need to have a successful so-called gentrification.
DD: There is a contrarian line of argument about gentrification which is that it’s not entirely bad. Most famously I think the scholar Lance Freeman did some ethnographic work that reports that people living in neighborhoods undergoing gentrification report a range of feelings about the changes that they’re seeing in their neighborhood. I know that you’re pretty familiar with his work and the debates around it. Explain his argument in his research, and where it fits into the debate, and what you make of it.
SS: Sure. I don’t want to focus too much on just Lance Freeman alone. But he did write one of the most influential books and set of first quantitative, and then qualitative, studies about gentrification and his argument is often that it’s really not as bad as people think. Poor people move a lot. Their housing is always precarious because they don’t have the money to pay rent. So, for him, it’s methodologically problematic to say gentrification causes displacement––people would be moving otherwise.
DD: And eviction takes place in huge numbers in neighborhoods that are not gentrifying by any means, for example.
SS: Right. Which is the other side of uneven geographical development. You don’t have the gentrification without the disinvestment. In the disinvested areas it’s not this working-class utopia where everyone can live cheap. It’s often the sum of the highest concentration of eviction. So then, Freeman goes out and interviews people in Harlem and in––
DD: Fort Greene?
SS: It’s not Fort Greene, it’s not Bed-Stuy it’s––
DD: Clinton Hill––
SS: It’s Clinton Hill, thank you. He goes out to Clinton Hill and he interviews people in Harlem, and he finds, as you’re saying, a range of feelings among long-term, mostly African American, mostly renters––not homeless––about gentrification. So, for me the methodological problem there is, you’re missing the displaced. They already moved out. So, you know, if you talk to the people who, for one reason or another, could ride the wave of gentrification, it’s less surprising that they enjoy the outcomes. Either because they live in a protected class of housing of some sort, maybe they’re rent stabilized and their landlord isn’t particularly aggressive, or they live in private housing and the owner knows them and isn’t going to raise their rent, or maybe they live in public housing and––for a long time, not so much now––they were more protected from the impacts of gentrification. They might enjoy the income mix but more than that I think they enjoy the public benefits that people associate with gentrification. So, after neighborhoods get gentrified, a whole bunch of public investment tends to be made in neighborhoods. The sanitation gets better. That’s the one that people talk about the most, is the garbage gets cleaned up faster and the snow gets pushed away quicker. The transit options tend to be better. Bike lanes go in where they didn’t have bike lanes before. And it’s not because people didn’t have garbage, ride bikes, or take buses before. It’s because the city reacts differently when wealthier and predominantly white people move into these neighborhoods. So of course if you live in the neighborhood and suddenly the sanitation got better and the transit got better you’re going to be glad for that. I think a lot of people want all those public benefits without the risk of displacement, of either themselves or their friends. Because there’s another way of thinking about displacement which isn’t about each individual tenant gets pushed out, it’s that people get displaced from their community, because their community no longer exists. Even if they are the relatively lucky ones who get to stay, their social networks or destroyed.
So, Freeman found something which is real, which is that people have mixed and complicated feelings about gentrification when they are able to ride it out. I think a lot of people in the media, a lot of planners, a lot of other researchers who had very different politics picked up on that reporting and said, “see gentrification is fine. People love it.” And that was really disingenuous, but then pervasive. And then those reports get cited. So, it spins out into this new logic that actually, people in the neighborhood love gentrification, it’s these sort of like outsiders who don’t understand the real dynamics, who are the ones making trouble. Which is kind of like an old red-baiting tactic that it’s the outside person coming into the community to stir up trouble, when really, we were fine with what was happening all along.
DD: And also reflects this naturalization of real estate capitalism that it’s not even really thinkable, the idea that we could have the public amenities that everyone deserves without gentrification––that these two things could be delinked.
SS: Right. So, we can enjoy the benefits right now but only if they come as a result of real estate reinvestment, which only happens in cases that will result in displacement. So decoupling all those things is a really important political project for the Left, so that people can imagine the things that they want out of city investment without fearing the displacement that they now associate with that investment.
DD: One related issue is that gentrification is sometimes described as a solution to the problem of segregation. But the integration achieved by way of gentrification has at least two problems. First, it’s not, almost ever, stable. You might have a brief period of integration, which is more of a snapshot, that, as the process continues to play out, is going to lead to the demographics being flipped in a neighborhood, and thus a perpetuation of segregation. And then second, it fails to confront the core driver of segregation which is exclusionary neighborhoods and suburbs. Explain a little bit about how the politics of class and racial segregation and integration––how that plays out in debates over gentrification.
SS: Our current liberal mayor of New York City has embraced this idea that gentrification is a good way to undo the ill effects of segregation, which, he would rightfully say, was structurally produced through redlining, through blockbusting, through patterns of FHA lending, through patterns of highway construction. That’s all true. So, we produced the segregation in a way that it didn’t even necessarily exist in the prewar period. Brooklyn for example was far less segregated at the beginning of the twentieth century than it was at the end. But, gentrification as a solution to integration will ultimately displace the people who lived through long periods of disinvestment and segregation. So, people will then not get to benefit from the undoing of the dynamic that produced the conditions that they lived in for a very long time.
DD: Because it’s in fact a perpetuation of the same dynamic.
SS:Right. It’s just flipping it again. We’re moving from disinvested to hyperinvested. Things don’t stay stable in between without a change in the political economy. Right now things are sorted out into those two areas. So yes there’s this moment when it looks like a nice balance but it has pretty quickly turned into a tipping point. I worked on a book called Zoned Out!that came out a couple years ago that looked at the zoning changes under Bloomberg and the beginning of what was happening under de Blasio in New York City. And we showed that there were many many many changes to the neighborhood zoning in New York City during this time, which were complicated. And if you looked at it as a whole, it was hard to make sense of any of it, unless you look at race. Race turned out to be the determinant factor in which neighborhoods were given protective rezonings, and which neighborhoods were given rezonings for intensive redevelopment.
DD: Protective rezoning is like a historic district or something.
SS: A historic district, a contextual rezoning––which means changing the zoning rules to match what’s there right now––or a downzoning, which means in the future people will only be able to build smaller than what’s here right now. So it wasn’t even, I said neighborhood before, but it’s really block by block, block by block by race, so white blocks––predominantly white blocks––got protected, predominantly African American, Latino, and Asian blocks were subject to big, new development. And so, the result of that ends up looking like integration. If you look at those prior, mostly Black, Latino, and Asian blocks, and you see there was this luxury development that was built and suddenly all these white people moved in, now something else is happening. But at the same time, they cut off the ability to build out low-income and mixed-race development on those white blocks. And so, they were channeling integration in one way and cutting it off in the other. It’s like a one-way street that’s going––there’s a one way street and you’re moving in the wrong direction. If we want to do integration, we need to unsegregate those white spaces. The problem is not the concentration of people of color in neighborhoods that they built up over a long period of segregation and disinvestment. So that in many cities the integration that’s happening is the exact wrong way to do it.
DD: You describe the entirety of this complex of economic and political power as “the real estate state.” That doesn’t, of course, mean that the entirety of American capitalism or government is all about real estate. What does it mean?
SS: So I’m using that term the way people use “the welfare state,” “the carceral state,” “the warfare state,” as a way of expressing a faction of the state, or a block, and really a faction of not just the state, but an element of capital and an element of the state, like the military-industrial complex. We’ve got the military, the state, the industrial, as the forms of capital that are feeding off of military growth. I see the real estate state in a similar vein, as the combination of real estate capital in various forms with state power. We see that most directly at the local level because most urban planning in the US is done at the municipal level. We don’t have a national urban plan. We don’t have a national housing program. We also don’t have a national industrial program. We have state-by-state and really city-by-city.
DD: We just have a national bank bailout program and a national imperialism program and whatnot.
SS: That’s convenient how that works. And we have a president who is a real estate developer. So, it’s not like this doesn’t exist at the federal level––it very much does. And so, we have the real estate developer for the president. We have our Treasury Department run by someone who helped Goldman Sachs get into the subprime industry, and then bought out a major subprime lender in California. He was known as the ‘Eviction King of California’ for a long time. He now runs the Treasury.
DD: Very cool.
SS: Very cool. Yep. The head of the Housing and Urban Development agency is not a developer, but he is a person who is most famous in the housing world for arguing against federal intervention aimed at desegregation. The one piece of writing that he’s done on housing was about how HUD should do less to end segregation. That’s our HUD chair. So, it exists at the federal level––
DD: Ben Carson.
SS: It exists at the federal level for sure. But at the city level it’s especially strong, because the city level is where those zoning decisions are made, where decisions about tax incentives for development are done––often either at the state or the city level––and so real estate can have a huge impact on urban politics. And so, the real estate state is the collusion between real estate developers, landlords, brokers, in some places homeowners and homeowner associations, on the one hand, and government at all scales but particularly at the local level through urban planning.
DD: Looking at this story from the municipal level is also important, I think, in terms of understanding how neoliberalism, this big thing that changed the world, took root at the local level in the 1970s, amidst this fiscal crisis and capital strikes. Explain the political economy of municipal New York in the 70s, and how the crisis at that moment provided an opening for the rise of real estate, and for the restructuring of urban government, and more generally, how all of this laid the groundwork in cities all over the place for not only gentrification, but also the ongoing power of finance to discipline cities, bending them to the will of capital.
SS: So, I live in New York. I study in New York. So, New York is the go-to example in my book even though it talks about many other cities throughout country, and to some extent throughout the world. New York was, many people believe, the test case for neoliberalism, not just at the urban level but at the global level. In the mid-1970s the city faced a severe fiscal crisis and was teetering on the brink of bankruptcy. There are many different explanations for what happened. The mainstream and conservative version is, the city’s welfare state was just far too generous, and it couldn’t support that with the tax rolls that it was bringing in. I don’t really buy that, and I think it’s important to show that at that very moment when conservatives were saying that its welfare state was too generous, the city and state were giving enormous amounts of money to real estate. The financing of something like the World Trade Center, which was empty for a very long time, was done at massive cost to the taxpayer. So that’s where I tend to focus my ire. But it is true that the city was was nearing bankruptcy. And so a coalition forms of bankers, of the state government which was run by a banker’s brother, a Rockefeller, and they managed to bring in some of the biggest municipal labor unions. And so, the labor unions spent their pension money buying out a lot of the debt for New York City. The state put on really strict limitations in terms of what the city could do anymore. So, we lost control over our rent control laws, which went to the state level. We lost control of our taxation laws. We even lost control over our speed limits. All these things got taken away from the city and moved to the state level, while at the same time the bankers and the other financiers were demanding that the city restructure its political economy in a way that was beneficial to them. Slashing corporate tax rates, slashing stock taxes, creating more opportunity for real estate investment. And so, the entire city was restructured. Crisis was technically averted. The city never went into bankruptcy, but there was a pretty strong capital strike that it took decades to undo.
DD: Capital strike meaning that finance said, if you don’t do what we want, you won’t get loans for anything, you’ll be shut out of capital markets.
SS: Right. And this isn’t just a metaphor. They have municipal bond rating agencies that will meet with city governments and say, if you want your bonds to be worth anything, and if you want people to be buying those bonds, then you’re going to have to make certain changes. If you make those changes, we will rate you better. And if we rate you better, all the insurance and pension funds will start buying your bonds and you’ll be flush with cash. So, it’s not an abstract process, it’s not an impersonal process, it actually happens in meetings between city leaders and municipal credit rating agencies. And so, this happened in 1975. The city responded with a program that was notoriously called “planned shrinkage”, which meant actively disinvesting from the outer boroughs, the poorest areas, the concentration of people of color, and actively investing in the central city. And this is the moment when Donald Trump, who had gotten his start with his father building a different kind of housing in Queens and Brooklyn, moves over to Manhattan and takes full advantage of all these sudden––
DD: Racist housing in Queens and Brooklyn––
SS: Racist housing in Queens and Brooklyn, explicitly segregated, challenged by the federal government––
DD: And a slumlord even in his segregated whites-only housing.
SS: Yes, he was the worst as a slumlord in Virginia which was, so, yes he was a slumlord, he was a segregationist, he was arrested for being at a Ku Klux Klan rally. That’s the business that Donald Trump in inherited. But then he moves it across the river from Brooklyn and Queens into Manhattan and takes advantage of this moment where the city and the state are saying let’s get all the money we can into Manhattan as we pull the money out of the Bronx, Brooklyn, and Queens.
DD: One critical thing about how capitalism functions at different scales of governance is that it helps us to understand how mobile, globalizing capital not only disciplines particular nation-states––which is how we often think about, you know, the American worker in competition with other workers and then downward pressure on regulations at the national level––but also it shapes government at every single level, and in different ways. And cities in particular are in maybe the toughest situation because they have so much less power over capital than the national or state governments. And this is my devil’s advocate, “what could cities do in this situation,” question. They really feel compelled to make themselves into maximally attractive honey pots for capital that will induce capital to sit still. You write that critics call this form of local prostration before capital “geobribery.” But to me, it’s also maybe more so “geoextortion,” because it’s capital, rather than municipal governments, that’s in the dominant position. And what’s more, because of the setup that we have in this country, municipal spending depends upon real estate taxes, which means that the funding for things that we like a lot––like education––is reliant upon driving real estate values as high as they can go. So, my question is, if you could explain the constraints that mobile capital imposes on cities, given the super reactionary system of devolved power that we have in this country? And, whether cities could have and can do differently in the face of what is essentially a constant standing threat of capital strike?
SS: Right. I mean it’s important to set up those stakes so that we don’t think that it’s either an accident or just a set of bad choices that led to this situation we’re familiar with now. It is structural, and I think that’s frustrating for people to hear. It’s easier to imagine our way out if somebody made a bad move. We can say, let’s get rid of that person, replace them with somebody else who will make a good move. It’s not that individuals haven’t made choices here, but their choices have been really constrained by those two sets of dynamics we talked about: mobile capital, and then this combination of what we call devolution and centralization. So, to take the second one first, devolution and centralization produce another kind of scissor effect in the same way that wage stagnation and rising rents produce a scissor effect. But this is for municipal governments. Devolution is forcing of political responsibility to ever more local levels, from the federal to the state, from the state to the city, so that it becomes cities’ responsibilities to provide for all sorts of things that used to be at least aided, if not fully funded, by the federal government. Talking about mass transit for example; mass transit operations used to be heavily subsidized by the federal government––no longer. Public housing used to be mostly paid for by the federal government, and there have been severe cuts to that starting in the late 70s, accelerating in the 80s continuing in the 90s, and not really getting any better since––a couple blips up but nothing significant. So, cities are responsible for all these things, but they don’t have control over them. And that’s where the centralization comes in.
The federal government imposes all sorts of rules on what cities are and are not allowed to do. For example, we put a moratorium on the construction of new public housing in the late 70s, and then in 1996 I believe, there was an amendment added to a bill that said, cities can’t have a net increase in public housing or else they won’t get federal funding. The federal government is saying, cities you have to pay for public housing, but you can’t expand it. A similar sort of thing happens with rent control in a lot of places, where that would be an important immediate––not necessarily solution to the crisis of gentrification––but a very important tool in addressing it. Many states have rules saying that cities can’t institute rent control at all.
DD: There was in Massachusetts––I forget when it was––a statewide referendum that eliminated rent control, I think just in cities like Boston and Cambridge. But it was voted on statewide, and narrowly passed, I think in the 90s.
SS: Right. And in New York we have rent control or rent stabilization only in a few counties, but the entire state is what regulates it. So, it’s a state law, after 1975 when the state took it away from the city. So rural voters have a huge amount of sway over city rent laws, and that also allows urban real estate interests to give tons of money to rural politicians, who don’t care at all about rent control because it doesn’t affect their people, who then vote against it or vote to weaken it. So, devolution of responsibility with centralization of control really limits what cities feel they can do. Then you’ve got this mobile capital problem. Capital moves from place to place to place at quicker and quicker paces, especially, we think of finance capital which can move in milliseconds and doesn’t have to be grounded in any particular location except through real estate. Which is why real estate is such an important piece of the finance economy as lived city. And so, cities end up competing with each other.
DD: Or Amazon’s HQ2, for example.
SS: Right. That was a terrible, but very exemplary demonstration of this dynamic, where one company said, we’re going to one place––the lie, they have ended up saying they were going to two––and made cities compete for who could have the most––
DD: Humiliate themselves publicly––
SS: And humiliate themselves publicly, and keep their bids private, so even their residents wouldn’t know what their cities were promising to this one corporation owned by the richest person in the world. And that happens all the time. It was just a very visible demonstration of it. And in New York people got so furious that we were able to actually stop this from happening.
DD: If it made such less of a spectacle over it, just did it like they did with Hudson Yards or any of the other massive taxpayer giveaways to developers that happen every day, they might have gotten away with it.
SS: Right. And so, the task of the housing movement, and of researchers and writers, is to generalize out from Amazon. To show people that this is actually continuing to happen all the time. And if we were against it with Amazon we should be against it with other companies, that similarly pit the vulnerabilities of local places against one another and force cities into this entrepreneurial state where they have to present themselves as the most generous in terms of tax breaks, the most lax in terms of labor standards, and the most lax in terms of environmental standards on top of that. It’s a race to the bottom quite explicitly, and it would take some sort of collective action to undo. So, there’s all sorts of things that cities can do differently right now, but very few are willing to be the ones that will risk the capital flight. So, unless there was some sort of organizing at a larger scale, it’s hard to find one city’s way out of this problem.
DD: One of the saddest ironies, or realities, that you point out in your book is that it’s often the best planning, in a sense, that often fuels gentrification the most, because the value created by public amenities like nice parks, bike lanes, and perhaps most distressingly expanding public transit––that value is mostly appropriated by real estate capital. My question is, how, short of full communism, can we temper this? By substantially decommodifying public amenities, by decommodifying housing, maybe by delinking the relationship between public amenities and private real estate?
SS: That’s definitely the key task, so that people don’t just reject things that they would otherwise want in their neighborhoods out of the very well-founded fear that it will pave the way for their own displacement.
DD: Because, a new subway line does mean your rent is going up probably.
SS: Right. And now it’s more and more structured so that, we’ll pay for the subway line through a tax that only kicks in when the property values go up. So, if the property values don’t go up, the whole thing goes bust. And if the property values go up, you’re going to have a hard time living there. So, the displacement is built in to the financing model of many of these projects. So, we need ways around it. As you said decommodifying land and housing is ultimately what we need. In the meantime, rent control is a pretty effective way of delinking those two things because if rents can only go up based on either an annual accrual rate or an actual change to the property itself, then you are already delinking what happens in the surrounding neighborhood and the public investment that goes into it from the private benefit of the landlord.
We often talk about rent control is important for all sorts of other reasons but this to me is a crucial one. If you want a park in your neighborhood, and you don’t have rent control, it’s economically against your interests to lobby for that park to be created because you know that it will raise your rent. If you have rent control, you can have that park, and you can have a rent that is unlinked to that public investment. So that is, I think, one of the main reasons that rent control is a threat to real estate capital, is because it starts to sever this cord and creates a new subjectivity among tenants, who are now pushing for a different kind of urban planning than they might have before, and are also unafraid to organize because they can’t have their lease denied simply because they stood up to their landlord.
DD: What’s your response to the argument that many economists make, that rent control ends up driving up rent by disincentivizing housing construction.
SS: I’d ask to see where that happened. Rents have gone up in places without rent control. Rents have gone up in non-controlled places that have rent control. What that seems to say is that non rent controlled places see their rents go up. That’s a different proposition than, rent control is the reason why rents are rising. Mainstream economists have all sorts of reasons for disliking rent control but it’s worth saying they don’t like any kind of price control. So rent control is just one form of controlling a good. But, I mean, rents and housing are a different kind of good than many others. Without it you risk losing your life. And so there’s all sorts of different reasons why we should control rents in ways that are different than the price of other goods. In most places, new development is not immediately rent controlled or rent stabilized unless the developer opts into the system. Usually they get a big tax break. That’s how it is in New York. New development is only rent stabilized if the landlord gets a huge tax break to do so. Otherwise, new development is not rent controlled. So there is no restriction on new supply that’s created by rent control. Landlords sometimes say that rent control causes them to disinvest from their buildings because they’re not bringing in enough money. Landlords tend to disinvest from their buildings even when they get the money––they just hold onto it. Rent control often allows landlords to raise rents when they invest in their buildings, so that’s an incentive to invest in the building, not to pull money out of it.
There are all sorts of disingenuous arguments that get made around rent control. It’s not perfect, and it doesn’t actually get us toward decommodifying housing, which is what we really need, but it is a very important immediate step. And I think more and more economists have been coming around to the fact that the free market does not produce affordable housing, which is very helpful for those of us who thought that all along.
DD: As you mentioned earlier, U.S. homeownership is at, has hit, a 50-year low. 37 percent of all home sales in 2016 nationwide went to absentee investors. Does this crisis in the private, post-World War II system of American homeownership––something that we can also describe as a crisis in in social reproduction under American capitalism––does that present an opportunity to push for a decommodification of housing? And if so, what would that look like in the short, medium, and long-term?
SS: Right. So housing is a key terrain for struggles around social reproduction, which is the ability of labor to live, on into the future, for people to have the basic needs met. And what we’ve seen in housing, as with healthcare, as with childcare, as with other terrains of social reproduction, more and more of the burden has been put onto labor. More of the cost that used to be borne either by capital, or the state, or both, is expected to be paid out directly by workers, including domestic workers. And so yes, it is a crisis of social reproduction if people simply can’t afford to live anymore. And this is the case in both those hypergentrified areas, and those severely disinvested areas. And so, it could create a crisis for capitalism if the working class simply can’t live anywhere and therefore get to work the next day. And so, you could see capital––
DD: Because then there are no workers––
SS: Then there are no workers. Same problem if there was no food. Same problem if, well, we have a healthcare crisis, but we’ve managed it as we have for a long time. But this seems to be moving into crisis dimensions in healthcare. So yes, it’s possible. Unfortunately, capital seems to be willing to let this go on for quite a long time and is only coming up with solutions to the crisis that are productive for real estate capital. So, creating affordable housing as a way of sheltering taxes for luxury housing. Or creating affordable housing as a small component of a much larger luxury development. Those are forms of mediating the crisis that ultimately make the underlying conditions worse.
DD: In terms of potential solutions, I want to talk a little bit more about public housing and social housing. And the history of that, in short, is that it was by and large built in one post-war moment, and then subjected to segregation, marginalization, stigmatization, and most critically disinvestment. And so, it was government that failed public housing. But then in a classic sleight of hand, public housing was deemed to be a failure. In recent decades a huge number of public housing units have been eliminated, ironically in the name of things like integration and livability. And now, New York is going so far as to privatize open space in public housing to raise funds for public housing. Explain first, the politics and funding structure for public housing, how that fits into your analysis of the roots of the rise and ultimate dominance of real estate capital, and then how we will need to think about public and social housing as key components of the cities of the future that we’re fighting for.
SS: Sure. So public housing in this country was largely a response to the Depression. And we’ve gone through many different phases of public housing solving many different problems. It was actually first a mass employment program, more than it was dealing with housing conditions, although it also did that. It then becomes a housing solution, as many many people were foreclosed and evicted during the Depression. There are also different models that got experimented with in the early years. The first public housing is called First Houses. It’s in the Lower East Side. That was where the city acquired tenement housing and turned it into public housing. It wasn’t the sort of demolish and rebuild, tower in the park style, that most of us are used to now. There were also investments in worker-owned cooperatives that were built out by unions, sometimes on open space, sometimes by demolishing even poorer workers’ housing.
But there were multiple different experiments going on at once, and we ended up sort of settling with a mode of public housing that was first built through urban renewal––which meant tearing out existing communities of workers––then building up public housing largely not for the people who lived there before, and ensuring that it would be segregated as part of the idea of what made good housing. It is invested in but never enough. And so there is all sorts of shortcuts that get made that make the housing vulnerable to the weather and other things that could have been foreseen. In New York City we put almost all of it along the waterfront, which has made it really prone to flooding, and leaks for example, and mold, and other dangerous conditions. But it was not until the 1970s and especially the 1980s that the federal government just said, we’re not going to pay for this anymore. And the budget for HUD got scaled back and scaled back to a minuscule amount of what it was originally. And so as the federal commitment to it goes down, the city and state has to either pay more or let them rot. And in a lot of cities starting, I believe, in Atlanta, moving on to New Orleans, Chicago, Baltimore, Miami, all sorts of places, public housing is just destroyed.
DD: There’s Hope Six.
SS: Hope Six––a Clinton era program to demolish public housing and to replace it with mixed income private housing. This was not done in New York City, except in one instance, and just a couple days ago it was in the news that city leaders are thinking about starting to do more of this. But in a lot of places we just tore down the public housing and we replace it with a much smaller amount of low-income housing. So not in any way solving the housing problem, just moving it elsewhere.
DD: And this is all premised on the idea that the problem with public housing is that too many poor people are living together, rather than the fact that public housing has been systematically disinvested in.
SS: Right. It blames the the residents for for some reason not paying enough rent, even though a lot of them are paying a greater proportion of their income toward rent than a lot of private housing tenants were. There’s also these kind of strange architectural explanations that get expounded, that tall buildings are bad for people, and no one will take care of their public housing complex if it doesn’t have a clear entryway, and things like this. The same design is used in rich people’s housing all the time, but it’s invested in. Public housing in New York looks exactly the same as Stuyvesant Town, only Stuyvesant Town never went through a period when no one was paying for anything. Which is exactly what happened when the federal government stop paying for public housing.
DD: Stuyvesant Town is a massive middle class, at least formerly middle-class housing development.
SS: Right. That was built out with subsidies by an insurance company.
DD: A powerful part of your book is how it shows that a lot of the purported solutions to real estate capital’s problems simply reproduce the problems with real estate capital. In particular you critique inclusionary zoning, a model for creating affordable housing pushed by New York Mayor Bill de Blasio and many others, that provides developers with things that developers want, like permission to build their buildings taller in exchange for them setting aside some number of units for so-called affordable housing. And proponents claim that inclusionary zoning recaptures value from developers, but in reality, you write that it just transfers more value to those same developers all while creating very little in the way of truly affordable housing. Explain inclusionary zoning in theory and practice, and how it is that it so masterfully avoids confronting the seemingly obvious question of why the state doesn’t just create this value directly for the public through its own public expenditures.
SS: Zoning is the rules that cities have about what can be built where, in terms of how big a thing is, and what use type it is: residential, commercial, industrial. So the city can change the rules around zoning, and when it does it often creates enormous value for landholders. If you increase the development capacity on a lot that’s owned by a person from three stories to 20 stories, you’ve created 17 stories more value for whoever owned that land. It’s a windfall profit. And so, the idea with inclusionary zoning, in theory, is we’re going to undo the old patterns of segregation by saying that new development has to have some affordable housing in it. As practiced in many places, not all but many places, it only takes place in an upzoning, when you’re increasing the development capacity, and it tends to take place––and in New York has almost only taken place––in poor neighborhoods, where the value of land is relatively low. And so, they go to places where the value of land is relatively low, they massively upzone it, and so they create tremendous value for whoever owned that land, and they say, a small portion of this is going to have to be affordable. It’s not that small; 30 percent is the average at this point in New York.
DD: But how affordable is it?
SS: But it’s not very affordable. It’s certainly not affordable to the people who live in those neighborhoods. Sometimes it’s not even affordable to anybody in the city. It’s actually market rate, but it gets coded as affordable.
DD: And they come up with that value of what counts as affordable by measuring it on the metropolitan level, which is incredibly ironic given the way that segregation between municipalities operates on the metropolitan level.
SS: So it’s not what’s affordable in the neighborhood that’s being rezoned. It’s not what’s affordable in the city. It’s what’s affordable in the city plus the surrounding suburbs. But that wouldn’t even be a problem if we said, okay, so that artificially high calculation, which is demanded by the federal government, we’re going to subvert that by saying new housing should be a really low percentage of that median income. Right? So if we said, new housing will be for people making 20 percent of that median income, we would undercut that regressive federal standard. But that’s not the way it is. In some of this affordable housing you can make one hundred and fifteen percent of that area median income and have it still be coded as affordable, even though it is more expensive than asking rents in that neighborhood. And so, the affordable housing isn’t affordable, but even if it was, it is tagged along to a huge amount of luxury development in places that are at risk of gentrification.
They don’t do inclusionary zoning in those exclusionary areas that I talked about before, that are predominantly white, that are upper income, that are low density, and yet high transit accessible. Those places exist in New York City; they exist in many other places. They are not the targets of inclusionary zoning. Instead it’s places like East New York, which is one of the poorest places in New York City, which is one of the only places where the African American population increased during the Bloomberg era. That’s the place that gets this inclusionary upzoning. And so yeah, it’s a perfect way of making a new market in places that capital has abandoned or has not yet figured out the business model. It’s not a solution to the housing crisis.
DD: And politically legitimating the gentrification of a neighborhood like East New York.
SS: Right. It’s considered progress; it’s success. And as we talked about before, it’s coded as desegregation even though it’s really gentrification.
DD: Speaking of things that are considered progress but are not, we should talk a little bit more about Bill de Blasio. Because, understanding what has become of his administration I think is really critical for the Left everywhere, not just in New York right now. In 2013 he ran this ‘tale of two cities’ campaign that rightly demonized Michael Bloomberg as governing solely on behalf of the super rich. But, ultimately, you write, both de Blasio and Bloomberg, “subscribe to the same planning paradigm. Whatever the problem the solution is luxury developments.” There are no doubt important differences between the two mayors, including some recent protections put in place for people facing eviction. But, that something so important is shared by two politicians that appear to be, and present themselves as, so different reveals that there is, you write, “something much bigger than the figure at the top of the political pyramid.” Explain your analysis here, both concretely in the case of how real estate capital has operated so similarly in New York under two so purportedly different mayors, and then also if you could step back and just more generally, I think this is a really good case study of how Marxist analysis can provide a powerful tool to look underneath the noisy surface of politics.
SS: There is so much noise there. Their styles are dramatically different. Physical appearances are somewhat different.
DD: De Blasio is very tall.
SS: He is a very tall man.
DD: Bloomberg’s a short guy.
SS: That’s right. And a lot gets made of that for arbitrary reasons. And, they can do a lot of different things. So, if what you’re looking at is their relation to charter schools, for example, they have a very different approach. When you look at planning and real estate, however, it’s remarkably similar but discussed as if it were different. So, both of them are premising their development strategies on upzoning working class neighborhoods of color. That’s not just the way to expand the housing stock and to create this inclusionary housing, it’s also the way that they fund transit. It’s the way that they promote the arts. It’s the way that they will fund NYCHA, the public housing agency authority. It’s the way that they will desegregate neighborhoods. It’s the way they will fix the education system. It’s always a big part of the answer.
Whatever the problem, the solution is luxury development. It gets talked about differently. So, Bloomberg would say, this city is a luxury product and that’s a quote. He said, we are not Walmart, we are selling ourselves at a very high level. And only the best and the brightest will come here––by best and the brightest he means the richest––will come here, and afford it, and enjoy it, and they will pay their taxes, and we will use that money toward everybody’s benefit. And the irony is, he attracts all these rich people through tax cuts. You can’t attract rich people with tax cuts and then expect those taxes to then support social services. But he wasn’t hiding the fact that he was trying to create a luxury city.
De Blasio was doing many of the same things as if that was a progressive agenda. As if this would create more stability in the housing market for working class people, as if this would address the fundamental inequalities of the city. So, the actions are the same, but the description is quite different. The mode of political journalism can often get caught up in the story of the day; the soundbite and the mayor’s press release that presents a certain spin on these developments. It is helpful, then, to have Marxist analysis that will show the continuity within capitalist government regimes while also noting the differences.
DD: Because it’s often the quiet parts, the points of agreement, that matter the most.
SS: Right they don’t have to say the fundamental assumptions that govern both models. Those are fundamental assumptions––that’s the point of assumptions is you don’t have to say them. So that allows a huge amount of continuity to go unnoticed. And whenever there is an election then, we just assume that most of the things will remain the same, and we debate where there’s flexibility.
DD: Though it’s pretty hilarious when the De Blasio Administration is pushed on what some of these assumptions are. This is a quote from Alicia Glen, who was, until I think pretty recently, de Blasio’s Deputy Mayor for Housing and Economic Development and prior to that was an executive at Goldman Sachs. She told Vice, “we have certain tools in our municipal toolbox. We can’t change the entire history of capitalism and we’re not Trotsky. You try to redistribute some of that growth to the people that need it.”
SS: Right. So, she was helpful in that she was unusually frank. She would say exactly what their assumption is, which is we’re not going to change the fundamentals, and we’re going to create a whole bunch of wealth and we’re going to redistribute some of it. That’s what she says in that quote. In another quote in the same interview she says, people just hate change. And so that’s why they’re all mad at us, because they don’t like change. I don’t like change. Like when my dry cleaner goes out of business and is replaced by a new dry cleaner. “It pisses me off,” is what she said.
DD: That’s really strong feelings about having to use a new dry cleaner.
SS: Right. It’s either really strong feelings about her dry cleaner or a mass underestimate of the anger that people were feeling towards their planning and rezoning regime.
DD: And a naturalization of the particular type of change that is happening with gentrification as just sort of the normal change that places always inevitably experience.
SS: Yeah. And this is the irony, is that they can say we are changing the city. By rezoning, by encouraging development, by bringing in real estate capital, by ultimately creating gentrification as the solution to gentrification. They say, that’s change, and people don’t like change, so they’re just against it because they’re reactionary. People on the ground are calling for stability. Whether that’s in the form of tenant protections or commercial rent control or other things. It’s true––they are arguing against a form of change, but that in and of itself is change. Going on the the existing path gets us toward that gentrification and that promotion of real estate strategies. It would take a massive political change to create the stability that people are craving.
DD: One huge debate raging all across the country, I think most fiercely in San Francisco, is over how much to build and where to build it. And there a group of people called “YIMBYs,” which stands for Yes In My BackYard, who argue that restrictions on development are what is driving up rent, by restricting supply. And the only solution, they say, is to get the government out of the way so that developers can build as much as they can at all price levels. Explain the YIMBYs and your argument about what they get wrong about how supply, demand, and price work under the real estate state.
SS: So this is a growing movement coming out of San Francisco and Boston. We’re now seeing it in New York a bit more, though it hasn’t really taken hold. And their argument is, the problem is a constraint on supply. And they use this kind of economics 101 argument that the supply is too small, so if we increase the supply, the demand will go down, and fundamentally the price will follow. I think the most offensive thing about their argument is an unwillingness to distinguish between different types of housing, different types of development in different places. So, a core principle of this YIMBY movement is we need more of all types of housing. Which is fine, except developers are only building to the top of the market, unless there’s some sort of regulation that forces them to do something else, or some other sort of incentive structure, which most of the YIMBYs consider to be an impingement on the market rather than a way to increase––
DD: But they believe it doesn’t matter because it’s one market, in their view, and the units filter down.
SS: Right. They believe in a unified rental market. But this filtering never happens. Housing built for very rich people does not become housing for very poor people. There are multiple markets at play at the same time. Creating new luxury housing may––at enormous quantities––may affect the price of luxury housing. It will not filter down to the rest of us. That assumes that everyone would move all the time to maximize their market equilibrium; that we would move to find the place that has the vacant apartment that is exactly my perfect capacity to pay rent.
DD: Sounds like a very pleasant way to go about one’s life.
SS: It’s impossible. I mean, it’s unpleasant, it’s anti-social. It assumes that nobody cares about anybody else in their neighborhood, or their family, or their institutions, or their school district, or anything else. That people will just pick up and move to the next place. That people have the money to pick up and move. Moving takes money. It’s expensive. This model assumes a perfect economic market in which everyone has perfect information about what is available when. It assumes, like I said before, that raising the supply of luxury housing will somehow filter out to the rest of us. It doesn’t take into account the relational aspects of real estate, i.e. that if a big, expensive luxury tower goes up next to a tenement, the tenement renters are going to pay more in rent, not less, because they are next to the big fancy building. it’s a model that sometimes has been using the language of racial equality, and correctly bringing up the racist history of zoning laws, to make the argument that the government should simply get out of the practice of regulating development. Which I would argue will produce far more racially disparate impacts than a well thought out regulatory system. Or not well thought out, an anti-racist regulatory system.
DD: I’d like you to chart out the short, medium, and long-term tasks of the Left at the city, state, federal, global level to fight real estate capital and place land planning under democratic, popular control, both from a left governance perspective and from a grassroots organizing one. And in addition, how we should think about that fight to democratize control over land in terms of our thinking about how we’re going to confront climate change, because we’re going to need to reorganize the spaces that we live in big time to avoid total catastrophe.
SS: Yeah, I’m not going to do that. I’m not going to do that because one person shouldn’t answer that much for the Left at the local to global level.
DD: It can be local then.
SS: I’ll give you a mix. But this is something I struggled with at the end of my book, is you spend four chapters explaining how we got this way and then you’re expected to give a solution at the end, and it can come off as very arrogant, to say I know what we should all be doing. And so, I don’t want to go there. I do, however, then chart out at the end of the book what could be done right now within the system as it currently exists. Things that aren’t against the rules of republican government or the capitalist mode of production, that would actually address some of these dynamics of the real estate state. And I do this not because I expect planners and mayors to read this and say like, oh yeah, we should be doing that, but to show people that this is not the only way that it could have turned out. That there are other ways of doing things, even within the restrictions that we have, that would produce different results. And so, an example of that is like, with inclusionary zoning, which I don’t think is a great tool, which is classic neoliberalism because it expects the developers to fix the problem that the developers created, rather than the state or any other social function. But if we only did inclusionary development in exclusionary places, and we then transferred all the protections that are in exclusionary places into places that are vulnerable to gentrification, we would produce a very different result. If we taxed at a very high rate luxury vacant apartments, we would change the market calculus that currently incentivizes building out endlessly tall luxury buildings with the assumption that someone will buy it as an investment property to sell it to someone else as an investment property to sell it to someone else as an investment property. Severely taxing those places would change those dynamics.
We have many things in cities that could be expanded. For example, we have limited rent control in many places that could be universal. We have community land trusts in small areas of cities that could be expanded to cover much larger areas. These things already exist and should be, ought to be expanded. We have a political economy that is dominated by real estate but is not exclusively real estate. There are other economic actors, and we could be working to rediversify some of our urban economies to bring back those contradictions we talked about earlier. Not because that was an excellent moment in the history of labor, but it certainly produced a better set of possibilities than what we have right now. All those things are things that we can be pushing for in the immediate short-term. I think the way that we actually get anything bigger is through housing movements, and specifically tenant movements, in cities. So we’ve kind of given up on a lot of that and focused mostly on development, and that’s where the YIMBY argument starts to make sense––that if the problem and the solution is development, then we should change our zoning codes and we can recorrect the market for housing.
moremoreBut if we first problematize the fact that there is a market for housing, and that all of us pay rent to landlords regardless of whether the landlord needs that money to reinvest in the building––it’s simply a de facto thing that you have to do every month or you lose your right to housing––if we politicize all of that I think we can build a stronger movement than the one we have right now, which fights really hard over new development for and against. And I am very involved in those struggles because they are immediately very important. But I would like to move beyond them to be struggling more generally around housing and tenancy as a condition. The same goes for public housing. We are sort of fighting to protect what we have, which is a very battered-down public housing stock that needs great investment. But we could also be expanding, acting to change the law that restricts us from expanding public housing as it exists, either through new construction or the original mode of public housing, which was acquiring buildings. Even de Blasio has threatened to do this. He has now done it in a couple of cases and immediately transferred them over to a nonprofit. It’s better than nothing, but we could be acquiring much more housing and taking it out of the private landlord.
DD: In terms of overton window shifting on housing, it seems like it could be useful if a certain presidential candidate decided to politicize housing as a national issue.
SS: That would be very useful.
DD: I don’t think it’s been part of the debate yet has it.
SS: Not really. I mean Elizabeth Warren has a housing bill which is basically, let’s do more of what we used to do, which is good––
DD: In terms of public housing funding.
SS: Yeah, but mostly a housing trust fund that would go to nonprofits to develop low-income housing, tax credit-funded development. All of that is better than what we’re doing right now, but it’s not really a bold new program it’s like, let’s stop the bleeding. I want to stop the bleeding, but I want to do more.
DD: So what would be the paradigm shifting Medicare-for-all style proposal on the national level on housing?
SS: I’m going put in a pitch for the next issue of Jacobin which is all about housing and covers a lot of these issues, and I believe there is a Dear Bernie letter in there which will get at a lot of this. We should remember that rent control is originally a federal price control that was put into place in wartime. So, it’s become a municipal issue, maybe a state issue, but it was originally a federal issue. And that’s my first idea. That and stop defunding public housing. It doesn’t have to be public housing for all, but public housing for anyone could be the model.
DD: Well, Samuel Stein, thank you very much.
SS: Thank you.
DD: Samuel Stein is a PhD candidate in geography at the Graduate Center of the City University of New York, and author of Capital City: Gentrification and the Real Estate State, out now from Verso Books. Thank you for listening to The Dig, from Jacobin Magazine. As Marx once said after remarking that, “the rent of land is established as a result of the struggle between tenant and landlord.” While other podcasts have only interpreted the world in various ways, our point is to change it. We are posting new episodes every week, sometimes twice, recently more like once, but we’ll be back to twice soon. The Dig was produced by Alex Lewis. Music by Jeffrey Brodsky. Thea Riofrancos is our managing editor. Our communications coordinator is Logan Dreher. Follow us on Twitter @thedigradio and please find us wherever you get podcasts and subscribe. And if it’s on iTunes, or wherever, please leave us a nice review. Those reviews help introduce us to new listeners. What also does that is you telling other people about the show. Please make propaganda for us. And do find us at patreon.com/TheDig and make a monthly contribution to keep this operation running strong.