Housing shortages and rent explosions

Landed property and the housing question in capitalism

[Translated from a lecture by an editor of GegenStandpunkt, the German Marxist quarterly]

Reports say that a new housing shortage has broken out in the cities. Rents are going up constantly. Today an average wage earner pays more than a third of their income for a roof over their head. For many, housing is an unaffordable luxury after 150 years of capitalist growth. Why is this? Newspapers report that the elderly are the problem because they live longer and don’t free up their apartments to new tenants. However, young people are also targeted because many of them now occupy apartments as single people when they were once used by two or more people. The catalog of complaints is complete with fewer new buildings and the lack of government subsidies for building.

One thing is unanimously concluded from this bundle of factors proclaimed for the new housing shortage: “That’s why rent prices increase!” Of the many characteristics of rent prices, one is not among them: the ability to increase by itself. This requires a subject who causes the price increase. The owners of landed property and real estate see to this. Elderly people who live a long time, rising numbers of single people among the young, and a decline in construction shift the relation of supply and demand at the expense of demand. This market condition is used by the owners of land and real estate, who at the moment simply prefer to impose hefty increases in their return on the existing stock rather than invest in new housing. In this respect, reports of a new housing shortage confuse the specific condition, a changed market condition, with the reason for the misery, the business practices of the owners of housing and land. Whether living space is really scarce, one will never know; but that affordable housing is not made available can’t be overlooked.

In a business location that calculates with the income of the working population as a cost to be kept as low as possible for the profit of the companies and the total national growth, it goes without saying that the great majority of growing demand for housing is increasingly inadequate because its pocketbook is always empty or close to it. And the victims are right when they consider this a scandal. Unfortunately, they settle the scandal on a field where it doesn’t lie: they see abuse of power on the part of the owners and policy failures in city hall as responsible for a situation that is completely owed to the constitutionally protected right to property, which puts the land and building owners in the position to use the whole rest of society, its dead as well as living inventory, as the means of its augmentation.

Landed property

The objective starting point that gives landowners the power and the means to carry out this business that is so ruinous for the majority is that land is the basic prerequisite for all production and life in the society, including housing. The times of unclaimed land are long gone; there is no freely available land. In a modern capitalism and a constitutional state, every square meter is property that guarantees its owner exclusive disposal over it. What is striking is the distribution of this good: many have none, some a little, a few a lot of it. On this basis, an entry in the land register becomes a source of enrichment. The landowner’s monopoly of ownership over his respective area, which others need but do not have, acts as the blackmail lever which enables him to demand a lease or rent from a prospective tenant for the right to use it.

This type of tribute is not paid for the effort that an owner might have put into upgrading his land, such as by drainage or road work or by building a house. Costs for buildings may result in an amendment to the demanded rent, but this also applies to entirely undeveloped land. It also does not recompense some kind of material benefit, a help with the preparation of a work product that the landowner performs for others by transferring a plot of land. Certainly, if he does not transfer his land, it can not be produced on or lived on. But then no lease or rent comes in either. Where rent is paid, it is paid for nothing but the temporary task of excluding third parties from its use. It charges an entrance fee for merely entering another’s land. Property, the power to monopolize the necessary means of production and living, works as a source of income for the owner purely in the act of temporarily surrendering it to others.

This is scandalous, but proper and not very different in principle from the ownership of movable means of production. The oft-maligned “unproductive income” is certainly no privilege of landowners. But only they sometimes get the reputation of parasites. The respectable entrepreneur, on the other hand, (the name says it all) undertakes and creates something, so he does not get his wealth from “idleness” but “works,” it is said. It would even be correct in one respect if the decisive attribute was not missing: this esteemed figure gains his wealth from the labor of others. He does not lend a hand, and when he is seen in an office or a factory, he is organizing and commanding the work of others. If companies become big enough and climb the ladder to public companies, this function is even performed by paid managers. Shareholders, the owners of the company, as a rule never see the inside of their company, but collect handsomely from it. What puts the entrepreneurs in their comfortable position is nothing more than their property, in this case in means of production. Someone who does not dispose over such things, and there are many in the world of the market economy, can not even go to work on their own account and produce their means of living. In order to get a wage, he must find a company that will buy temporary disposal over his ability to work and tackle this problem in their production facility so that he can live. The workers do all the work; the entire product is a result of their work. But it belongs in its entirety to the entrepreneur. This has consequences in the world of property. Just as the machines are his property, so are the activities of those who work on them; he has legally acquired their activities for a fee. What his property yields in this interaction, the result of the whole production, also belongs to him. Here property, in contrast to the landowner, does not merely extort a tribute from others, which is nothing but a forced redistribution of what already exists. The ownership of the means of production acts rather as a power of its own augmentation through the exploitation of those who have to work and create other people’s property because they themselves have none.

Leases and rents: the qualities and location of the soil as the landowner’s income levers

The fact that the landowner hammers out a price from handing over his land for use by a third party is determined by the power of his property and the undeniable need. How much he charges for it depends entirely on the interest of customers, the business benefits they expect from a plot of land, and of course their ability to pay. Where interested parties have to scramble after the lease of a piece of land, landowners give the rent contract to the highest bidder. Leases or rents turn out correspondingly high in such phases or regions. However, if landowners, due to a decline in the economy or other circumstances, have to woo clientele, only the cheapest provider can attract purchasing power. In any case, the recoverable cost is a result of a power struggle between suppliers and buyers which thus determines an average level of return which can be achieved by renting or leasing.

In this trial of strength in the market, special characteristics of the offered piece of land, its natural qualities as well as its location, play an important role because, in comparison with other premises, it offers extra benefits to the specific business use interests of customers. The fertility of a region is important for those who wants to rent land for the expansion of agricultural production. The quality of the soil gives a higher yield per acre with the same advance for machinery and personnel for its processing in comparison to other regions, enabling the company to make an extra profit which its brothers in the sector can’t achieve on the poorer soils. When renting, other criteria in a business location for industry and commerce matter, such as the natural features and location. Power plant operators like to get an area with river access, because such a thing is used as a means of cooling or transport free of charge and saves the company costs and expenses, thus is conducive to profit. Proximity to urban areas speaks in favor of a location for major retailers because it positively influences the sales attainable. Developers and real estate companies represent a third department of demand, but also private individuals who are looking for land for residential purposes. And also this special need for land has its own points of view for its quality, such as the natural beauty, an attractive infrastructure or proximity to the city center. Such a thing becomes clearly noticeable in the attainable rent, and indeed completely beyond the quality and features of a rented apartment, which still, of course, has a big influence on top of it. It may be one and the same type of house, its rental in Munich costs considerably more than in Gelsenkirchen, because the location of the site itself is made into an essential component of the price. Even before one euro is expended in rent for the use of a place to stay with a roof and heating, pure existence on a piece of the earth must remunerate its owners, the more, the better or more beautiful the piece of land. [1]

So from their pure monopoly of disposal over parts of the earth’s crust, landowners hammer out a steady income. Where their spot exclusively disposes over a special, non-reproducible natural quality, they quarrel with the interested parties about the division of the extra profit that this can draw with their respective line of business, in order to divert as much of it as possible into their own coffers. Good soil quality and affordable locations are therefore more expensive than others. In the end, the whole society with every purchase price pays the tribute which landed property claims for itself for edibles, mobiles or just in the rent for living space.

It should not be overlooked that the buyers who must satisfy such claims compete not only with different interests, but also with an extremely different purchasing power. The modest wage income of working people is an annoyingly limited amount for the rental business in comparison with the costs that industry and commerce can afford to incur. For areas used commercially, a multiple of the price per square meter of housing is achieved. Often enough, the needs of these two parts of demand overlap. Not only private individuals who simply want to live, even bankers, managers and city officials like things nice and central, preferably with picturesque buildings in which to reside. So in almost all cities a similar picture comes about. The more or less historic city center is a collection of buildings that represent commerce and politics. Simply housing people there no longer happens.

The difference between the owners of a proletarian income and the owners of a company does not only consist in the quantity of available purchasing power. The capitalist brothers of the production front simply have superior resources to produce the tribute that their colleagues from landed property demand. The wage is an amount fixed by the company calculation, tending downward, which offers its proud owner only one way to keep up with the growing demands of landlords: he must sacrifice somewhere else. But that quickly reaches its limits. An entirely different course stands wide open to the company. On a given rentable area, public administration, firms and retail chains increase their turnover of services or commodities of all kinds, elevating even the high-rise building in good locations to new heights, so that in the bottom line even an increased rent is downgraded to a reduced share per item of the sales. Rent is here not merely a deduction, but part of an advance which yields a surplus. So it happens that even the representatives of capitalist industry get in each other’s way as hostile brothers. Venerated three star eating temples or famous department stores on prestigious shopping addresses of great cities must increasingly give way to top-selling fashion and burger chains.

The price of land: from the relinquishment to the transfer of landed property

Landowners do not let the matter rest with merely relinquishing their land for use by a third party. In the sale, the definitive transfer of their property takes place. The landowner has not produced the good which changes hands there. Costs for development or manufacture thus do not accrue. He achieves a price with the sale of the land nevertheless.

This stems from the fact that, in the hands of its owners, soil has the previously explained quality of yielding a regular income. Its amount is determined by the relation between the supply of soil types and the demand of the various business interests and their purchasing power. This power struggle leads to an average level of earnings that can be achieved in a region for the diverse classes of soil and land. In this respect, the lucky landowner with his piece of the earth’s surface holds something in his hands that amounts to a capital investment. He accrues a regular fruit thanks to his land just like an investor of money accrues interest at a bank. This makes the thing interesting for any investor. An investor just compares the various investment possibilities that pay interest on his assets with the purchase of land which also yields something. How much this source of revenue is worth which he buys there results from a recalculation of the fruit on the principal: the price for land that gives a certain annual income through a lease or rent is just as valuable as the amount of capital, which yields the same return with a given interest. [2]

The state: protecting land ownership and controlling the collisions that it creates through land use planning

The state goes to some lengths so that landed property can generally prove itself as a business item. It is not finished with the mere enactment of a legal system which guarantees the ownership of land. Private lands are meticulously measured, provided with boundary markers and recorded in a land registry. So it is statutorily fixed where the so profitable power of disposal of one owner ends and where another begins. Border disputes are not only a tricky affair between states, but also between individuals. Every square meter is indeed a source of money for them, and by no means do they want to be deprived of this. In addition, a state with its land registry keeps a grip on its property tax base.

So the business of the landowners gets going, and a twofold antagonism immediately with it. The state-protected ownership of land not only subjects the various departments of the society to the grip of the landowners whose tributaries they are. They come into a new conflict with each other. How are farms or agribusinesses to meet their need for additional acreage if they have to compete with the superior purchasing power of steel giants or automotive companies? What landowner gives land over for the housing needs of the population if he can market it for a multiple of the amount to banks or department stores? Landed property is important to the state, but also agricultural and industrial production, as well as the reproduction of a population that needs a roof over their heads; this is all certainly part of an indispensable inventory.

So it takes the antagonists which it has brought into being with the institution of landed property in order to regulate it so that the conflicting interests can co-exist and make themselves useful. It defines a land use and development plan which neatly separates agricultural and business lands, and both from residential areas. This fixes exclusive use rights which ensure that the competition for surfaces of the earth does not make it impossible for one or the other department to do their business or their function. That is a restriction, in the first instance for the landowners themselves, who can not simply make any field or pretty natural spot into a lucrative commercial or residential paradise because the land use plan or conservation does not permit it. And vice versa, access to usable land in residential areas is not easily opened for the wealthier representatives of commerce and industry. Also a sometimes painful experience for home owners and landowners who would prefer to soak the well-heeled clientele from the commercial sector. Such political regulations also represent a limitation for the growth needs of industry, which has an increasing need for more industrially usable land and new residential space for additional working people. Neither can happen without opening new lands which were previously excluded from such uses. So communities and planning authorities in case of need account for new commercial space and development land in which a change of use rights is foreseen, which is then practically carried out with its designation as building land.

This political regulation of the competition for access to land in this way fits each piece of land into a scale of rights that determine the possibilities of usage, and thereby adjudicates its suitability for business. These rights attached to each piece of land are of course sold with it and made valid in the attainable earnings which they can either reduce or, in the best case, strongly increase. Someone who gets wind on time of a change in the legal situation connected to a specific piece of land before the thing is on record can score a nice profit. This provides a lot of material for lawyers and crime writers on the subject of corruption and extortion.

All in all, landed property is included as an integral part of the property system and is so highly regarded that a state like Germany decided, after the annexation of the former East Germany, on a land reform of a special kind. What the late “state of the workers and peasants” had transferred as land into “the people’s property” had to be largely converted back into the possession of the former owners, even if it led at first to drops in agricultural production over large areas and fear among tenants for their housing. But vice versa, the political force did not overlook the antagonism that it installed with its system between owners of land and owners of mobile means of production as well as all the rest. Where this power of the landowners becomes too much of an obstruction for the infrastructure and growth needs of a location, a constitutional state in case of emergency even provides for the expropriation of landowners. Of course, this also happens with a lot of respect for property: usually a monetary compensation keeps the distress of those affected within limits or even gives them a nice little profit that the market would not have given them [3] .

The real estate industry and the business with housing

Developers and real estate companies are the major investors in the acquisition of land for the construction of housing which wants to profit on rent or sale. Their investment includes not only the price for the purchase of the land, but also the construction costs for residential buildings. The tenants with their monthly payments must take responsibility for the proper expansion of this total advance in land as well as buildings. Even a private builder or buyer of real estate who does not purchase a property for a rental business but for his own use calculates no differently in principle. The fruit of their “capital investment” is simply not the rent achieved, but the rent they save, which as owners of their own home they no longer have to pay and which they face like a revenue on their outlay which is thereby “profitable.” They would finally also be able to carry their money to a bank and pocket the interest.

The specific calculation of the real estate company, as part of its advance that is invested in the built-up land, carries the legal title of regular payment by the user, like any other landowner. And indeed regardless of the condition and life span of the buildings located on it. They enter into a second calculation. The owner of land never loses the power to demand a tribute for the mere use of his land as long as he remains its owner. In contrast, the second item of his advance is invested in residential buildings which are also no longer rentable at the end of their lifespan and lose their function as a source of income. The investor therefore demands, like any other productive entrepreneur, that the revenue drawn from it over a long estimated period of time – decisive here is mainly the average life span of buildings – piecemeal his capital laid out for building includes a calculated profit that enters into it. The regular tribute that is his due as owner of the soil, as well as the piecemeal return and the interest on his building capital, both enter into the rent and determine its amount. There are and will remain two different sources of income which act there, even if it disappears behind this fact, that the total return by one and the same rent to one and the same investor is paid. The difference becomes obvious where this return falls to two different figures, as is the case with the long lease. In this case, a landowner does not sell his land, but leases it irrevocably to an investor, who saves the purchase price for a piece of land and pays instead with an annual rent “in perpetuity,” which means, according to the law, 99 years. So the ownership of land and its use become permanently separated. The rental income, which he collects on this substructure, is thus paid away to a share of the landowner.

The market trend shows that the by far more important and profitable part of the investment is the outlay for the land. The sale of real estate in sought-after cities and locations exhibits huge price increases which can constitute a multiple of the original purchase price. The substance of the buildings located on the land and the value expended on it lose more over the years. But the land prices attract so strongly that in the big cities even the most inferior homes, because of the land they sit on, redeem a multiple of the cost price to the owner. The calculation employed by such investors is: the going market price for land on a location minus demolition costs equals the purchase price. This is reflected in the construction activity that aims in this way to create more expensive areas of housing for more lucrative rents. Building density and height are the means of choice to get a maximum in rent out of a minimum of land surface to justify the increased production costs. And where the stacking up of so-called residential units abuts certain building code limits, the investor often takes advantage of the fact that it increases the number of residential boxes per building by making their surface smaller. Small living spaces bring higher rents per square meter than larger ones. This is also a result of the exploitation of the tight budgets of apartment hunters.

The rise in prices for land, fueled by numerous investors who want to rescue their money from devaluation in the financial crisis, means that some investors do not expect a decent rate of interest on their investment through rental incomes. This is less and less provided for by the purse of the apartment hunters. It is bought anyway because it does not set on renting, but selling. It is a simple exercise to profit from the continuous influx of financial means into real estate: buy cheap today in order to sell more expensively tomorrow.

The attractions of real estate speculation and the thing with “gentrification”

In the calculation of the real estate companies, the current prices of land and buildings do not simply enter into relation with the current market rates for rent, but all this is set into relation with other forms of investment. Every anticipated future development on the rental market, such as the land and real estate prices, enter into the calculation and pricing. Because there are strong economic upturns and downturns, these are to be taken into account and exploited. A new runway for the Munich Airport can send land, housing prices and rents into the abyss. In this situation, it just changes the price-affecting natural characteristics of real estate for the worse. No real estate company can ignore something like that. It must sell its stock at the right time at the old price. Or, this is also an option, hop in on the now clearly fallen price and buy cheap. Because the other movement can be observed in this market: a university is founded in a city, and already real estate prices and rents soar in anticipation of a future increase in demand.

These extreme fluctuations in land, housing and rent prices, virtually limitlessly upwards and downwards, make the real estate market into a nice object of speculation. “Berlin is the capital!”– this government decision has for around two decades triggered a run on Berlin’s districts and continues to resonate today. And it is not too different in many other large cities. Real estate companies have mobilized a lot of credit with the banks to buy up entire neighborhoods, all in anticipation of the onslaught of well paid government employees, a growing civil service apparatus and an army of artists, rich and famous people whose glitter only turns an administrative power center into a true metropolis. The more profitable parts are sold out in no time. Even before the high profile spots can deliver their purchasing power, real estate and rent prices skyrocket. So investors increasingly snatch up districts of inferior housing quality, where in view of the market development they certify an excellent “potential,” thus the stuff of a future cash cow. And by their speculation on a rising profit, they do not wait for a market development in their favor, they produce it to the extent that it lies within their power. This does not always happen quietly, and the issue has become a subject of public debate as well as indignation under the name “gentrification.” [4]

In order for substandard buildings in slightly rundown neighborhoods to be turned into high-priced objects of speculation, the first tenants must be sent packing. Their small purse is useless from the get-go for the high demands of such investors; their presence as rent payers only represents an obstacle to the upgrading of the object. So the usual legal as well as illegal chicaneries are used to drive them from their dwellings, which are readied as long term construction sites in which no one can really live any longer. Furthermore, good lobbying is needed. Building speculators consult with political leaders from the ministerial bureaucracy, so as to promote the revitalization of neighborhoods and have them spring a few million for the beautification of shopping pavilions, art galleries or swanky public squares. Why not? Representatives of cities and municipalities are always interested in future revenues from the living quarters of those who have a lot of purchasing power, so in this respect they are exercising their offices entirely reasonably when they get the most for the city and region in this way. Now there’s money for the suffering budget. And this increases the reputation of the city, attracts more interested parties and their money, and even in the end creates a few more jobs in gastronomy or the service industries. The renovation of the living area at the expense of the old renters, as well as the aesthetic and artistic upgrading of the neighborhood, keeps up with the tenants. Now they are able to come, the so-called “yuppies” whose salaries not only pay for their upscale requirements in stylish lofts, but also the speculative profits of the real estate companies. And where not enough of a large number of this species can pay immediately, the housing space also remains likely to stand empty. This does not have to be a mistake in a time of a general housing shortage. Because vacancy allows the owner to participate in a general price increase of the real estate without having to worry about price reductions due to closed leases in which the agreed upon rent soon lags considerably behind the daily increasing level. Something like this lowers not only the rental income, but also the value of the whole real estate. Because buying in this market is a capital investment. The amount of monthly rental income is indeed only one indicator, but an important one for its suitability for this purpose.

Of course, speculation on real estate and its appreciation in value does not always work out. This is showed by the current crisis with the general decline in house prices in southern Europe and the United States. But this bear market is used by investors for an opportune re-entry, because they bet on an upward trend. That house prices fall only means, in reverse, that houses find new owners at a significantly lowered purchase price. And this is not in principle wrong. Because the ups and downs of prices in the markets for land and real estate happen over the long run along a rising path. The general growth of the capitalist economy also increases with demand the purchasing power aimed at acquiring land and buildings. At the same time, it increases the size of the working population in the long run too. If not absolutely, then at least relatively, moving into the augmentation and enlargement of metropolitan areas around the centers of capitalist accumulation. This increasing demand from two sources, the growth of capital as well as population, stands in relation to a not producible, thus also not increasable land owned by the landowner. That makes real estate into a long term bomb-proof investment and gives it the reputation among investors of “concrete gold.”

The state management of the housing market and its hardships

A person who simply needs a place to live is a desolate figure on the housing market and not in good hands. Before he can ever even think about housing, the profit calculations and claims of any of the three main market participants want to be satisfied. The seller of the building land must be served a nice income; the real estate company wants to get its profit expectations from the investment in land and residential buildings financed by the tenant; and because the bank is usually also on board with a loan, this business also claims interest on its credit. Housing is the dependent variable of the same three profit calculations that insist on being fulfilled – or it does not take place. Moreover, the growing demands on the purchasing power of the tenant must be paid from an income that tends to be lowered by the employer. This situation is ever less sustainable for ever more people. Housing is simply unaffordable. Not even the extreme forms of housing shortage, like those that are often attributed to early Manchester capitalism, are entirely extinct in a thriving market economy. A quarter of a million homeless people are counted in Germany next to vacant houses whose owners speculate on further price increases on the market.

It is part of the wealth of experience of ordinary people that the housing market is a battlefield. Nice apartments are not affordable, affordable housing rarely nice. And more and more often the wallet basically comes to grief from the price levels in urban areas. The approach and strategies of those affected by these hardships are as diverse as they are the same. Many try to avoid the urban price level by moving to the country. What they save in rent then goes to higher transportation costs. And where others learn from the example, even the rents in the suburbs of the big cities ultimately increase. The dream of home ownership therefore never dies, in order to finally escape harassment by the landlord. An income that already is strained by rent payments is, of course, a lot less suited for financing a home of one’s own. The loan which is then due usually puts the home owner under a double burden for the rest of his life. In addition to maintenance, he must also pay for its construction and the interest to the bank. And to contain at least the construction costs, his own labor and regular trips to the do-it-yourself superstore are necessary. Not even this combined burden can be controlled reliably, especially not in times of crisis. If he loses his job and the credit rating plummets, the house goes to auction, usually well below value. What remains is the debt on the loan.

The state is the last to remain hidden in this picture book of empowerment strategies by those of little means on the housing market. It has ultimately authorized landed property and all the social issues that follow from its hustling and demands. Without glossing anything over, it acknowledges this situation as a problem of the housing market. And with that it’s already gone through a decisive turning point. The poverty of so many people whose energetic efforts in economic life do not even enable them to scrape together the funds for their basic need for a roof over their heads – where this comes from is not a question. Much less, what accounts for the beautiful institution of landed property which on a regular basis overstrains most of its customers with its legitimate claims. Such questions are not up for discussion and certainly not called into question. This is an intolerable situation. The problem that deserves political attention only begins with the housing market because that is where the two departments come into an antagonism that has the ability to derail the business of the real estate owners, as the inescapable need for housing of a large part of the population. It works to make these antagonists co-exist: landowners’ profit claims should not come to nothing because of poverty, the poor with their need for housing should not perish because they can’t get a loan.

The legal regulations and measures are various and pass through their business cycles. The state gives the urban refugees who want to escape the rent prices of congested areas a commuter tax whose amount or abolition is regularly and stingily argued over. The state is at the side of the evasive efforts of the home builder with tax-incentives for construction contracts or bonuses for homebuyers, until these are dropped again. It’s all an admission that most people can neither meet the demands of the housing market nor finance their evasive maneuvers with their own resources. And for all those who can’t or don’t want to get involved in such adventures, and that is the larger share of the housing market, the state has even called public housing into existence. Publicly financed housing is not offered to the poor, but exclusively to the legitimate poor whose incomes fall below the state’s estimate of reasonable poverty; they may therefore stand in line for a voucher. A ceiling is put on the cost of rent which must not – apart from interest on the loan – yield a profit because its clientele can’t provide it. The well-known prefabricated slab buildings are populated with those people who in many cities are the picture of the “socially deprived.”

This social act has its price. The political authorities have increasingly classified the burden on the state budget as an unproductive dead weight, so that public housing has for over two decades been a model that is being phased-out. The stock is liquidated step by step to private investors who buy it cheap in order to market it more expensively after renovating it. The antagonism between a wage earning population center and landed property does not go away and so gets a new boost. The politicians also register that and take additional measures into account. An official rent level is manufactured which applies to the landlords in view of the limited purchasing power of the tenants; in rent reviews, their price per square meter is oriented to the current rental contracts on market average. The legitimate business sense of the apartment owner is also met: exceeding this average by 20% is legally protected. So the orientation leads on average to permanently increase, driven further by new leases because they are not subject to these restrictions. A cap limit protects tenants against rent increases without committing an injustice against the owners’ legitimate desire for an increase. 20% after a period of three years – the tight wages budget must have that much left over for the landlord under the current regime. So the enforcement of legally limited rent increases leads to the permanent increase in the rent payments to be made. In the end, applying for housing benefits is all that is left for many because they can’t get by in the state-regulated housing market either. With a subsidy, the state enables the poor bastards to meet the demand of their landlords for an adequate payment for housing.

Nothing is said against landed property, nothing against poverty. However, they must be able to co-exist without anything being taken away from the claims of landed property and anything from the poverty of the poor.

Notes

[1] Marx could already get worked up about that: “One part of society thus exacts tribute from another for the permission to inhabit the earth, as landed property in general assigns the landlord the privilege of exploiting the terrestrial body, the bowels of the earth, the air, and thereby the maintenance and development of life.” (Capital Vol 3, Ch. 46)

[2] For the fans of the rule of three, Marx has examined this beauty of political economy: “Ground-rent so capitalized constitutes the purchase price or value of the land, a category which like the price of labour is prima facie irrational, since the earth is not the product of labour and therefore has no value. But on the other hand, a real relation in production is concealed behind this irrational form. If a capitalist buys land yielding a rent of £200 annually and pays £4,000 for it, then he draws the average annual interest of 5% on his capital of £4,000, just as if he had invested this capital in interest-bearing papers or loaned it directly at 5% interest. … It is in fact the purchase price-not of the land, but of the ground-rent yielded by it — calculated in accordance with the usual interest rate. But this capitalization of rent assumes the existence of rent, while rent cannot inversely be derived and explained from its own capitalization.” (Ch. 37)

Marx considers the last sentence necessary because landowners and bourgeois ideologists like to see the matter the other way around. Namely, this way:

“The fact that capitalized ground-rent appears as the price or value of land, so that land, therefore, is bought and sold like any other commodity, serves some apologists as a justification for landed property since the buyer pays an equivalent for it, the same as for other commodities; and the major portion of landed property has changed hands in this way. The same reason in that case would also serve to justify slavery, since the returns from the labour of the slave, whom the slave-holder has bought, merely represent the interest on the capital invested in this purchase.” (op. cit.)

The real relationship is turned upside down: rent does not derive from the value of land, but the value of land from rent. And it flows because of the power that property provides the land owner.

[3] The dealing which the capitalists maintain with their opposition to the landowners keeps the unwanted effects within narrow limits – generally, companies in the course of their growth become landowners themselves and buy their company premises. The fact that these two variables appear separate at all, here ownership of means of production on the part of entrepreneurs and there the ownership of a piece of land without which no business activity is possible, was not invented by capitalism. And for its functioning that would probably not even be necessary. Landed property is older and a historical inheritance from which the post-feudal mode of production and the bourgeois state have polished off everything that is dysfunctional for the modern political economy:

“To this extent the monopoly of landed property is a historical premise, and continues to remain the basis of the capitalist mode of production, just as in all previous modes of production which are based on the exploitation of the masses in one form or another. But the form of landed property with which the incipient capitalist mode of production is confronted does not suit it. ... One of the major results ... is that, on the one hand, it transforms agriculture from a mere empirical and mechanical self-perpetuating process employed by the least developed part of society into the conscious scientific application of agronomy, in so far as this is at all feasible under conditions of private property; that it divorces landed property from the relations of dominion and servitude, on the one hand, and, on the other, totally separates land as an instrument of production from landed property and landowner — for whom the land merely represents a certain money assessment which he collects by virtue of his monopoly from the industrial capitalist, the capitalist farmer; it dissolves the connection between landownership and the land so thoroughly that the landowner may spend his whole life in Constantinople, while his estates lie in Scotland. Landed property thus receives its purely economic form by discarding all its former political and social embellishments and associations, in brief all those traditional accessories, which are denounced, as we shall see later, as useless and absurd superfluities by the industrial capitalists themselves, as well as their theoretical spokesmen, in the heat of their struggle with landed property.” (Ch. 37)

[4] The neologism goes back to English urban sociologists. “Gentry” denotes the lower English nobility. It once incurred the praise that his advance into neglected proletarian quarters contributed to a wonderful revival of urban life and an improvement of home decor. The “yuppies” in the customer catalog of the real estate companies are the ones who count as the lower nobility of today, who can’t be thanked enough for plowing under simple living quarters and their less well-off tenants. Others see him, not without reason, as an attack on their housing and living conditions. However, some representatives confront him with a wrong as well as impotent opposition: the littering of residential neighborhoods should roll back the renovation work and work as a deterrent to well-heeled investors. This is reminiscent of the Luddites of the 19th Century who did not make the purpose of capital, but its agents responsible for their damage, so they did not attack exploitation, but the machine.