Rents Will Continue To Rise As Long As Housing Remains A Capitalist Commodity, by Pete Dolack

Image by Matt Brown via Flickr

by Pete Dolack
Writer, Dandelion Salad
Systemic Disorder, May 25, 2022
May 26, 2022

Capitalism marches on. And thus housing, because it is a capitalist commodity, has resumed its upward cost, putting ever more people at risk of homelessness, hunger, inability to access medical care and medications, or some combination of those.

There had been a temporary dip in the costs of rentals in 2020 as the pandemic threw a spanner into the economy, but the dynamics of capitalist markets have reasserted themselves. Rent is not only too damn high but getting higher, fast. And almost everywhere, not just in your city.

Here are a few numbers that begin to tell the story:

• In the United States, rents on residential units have increased at more than double the rate of inflation since 1980.
• In Canada, rents increased seven and a half times faster than wages from 2000 to 2020.
• In England, rents grew 60% faster than wages between 2011 and 2017.
• Germany’s 77 largest cities have a shortage of 1.9 million affordable apartments.
• In Australia, rent from 2006 to 2022 has increased 12 times faster than inflation-adjusted wages.

Those are countrywide numbers, not specific to particular cities. The numbers are more disastrous in the largest cities.

Does this just happen? Could this be, as the corporate media, corporate-funded “think tanks” and the whole panoply of capitalist institutions incessantly propagate, the natural workings of the world? A federal judge in San Francisco, one with a reputation as a liberal, once declared that landlords have nothing to do with rent increases but instead rents rise without human invention in striking down a city law that would have required landlords who kick tenants out of rent-controlled apartments to pay them the difference between the rent they had been paying and the fair market rate for a similar unit for a period of two years.

Perhaps this is what is meant when right-wing ideologues praise the “magic of the market.” More profits just by showing up.

In the real world, actions don’t necessarily happen without human intervention and large trends don’t happen without larger interests. As a case in point, gentrification does not happen spontaneously, but is a result of powerful social forces.

Corporate and government backing of gentrification

A working definition of gentrification is: A process whereby an organic culture originating in the imagination, sweat and intellectual ferment of a people living in a particular time and place who are symbolically or actually distinct from a dominant moneyed mono-culture is steadily removed and replaced by corporate money and power, which impose a colorless chain-store conformity. The process of gentrification is assisted by a local government under the sway of local corporate elites, and is centered on dramatic increases in commercial and residential rents such that the people and culture who are being removed find it increasingly difficult to remain.

Gentrification frequently means the replacement of a people, particularly the poor members of a people, with others of a lighter skin complexion. A corporatized, sanitized and usurped version of the culture of the replaced people is left behind as a draw for the “adventurous” who move in and as a product to be exploited by chain-store managers who wish to cater to the newcomers. Once community members are pushed out, real estate money begins to pour in, rapidly pushing up rents and making the area increasingly unaffordable for those who remain.

One city where this process was particularly harsh is Detroit. Not only are municipal services withdrawn, schools starved of resources, militarized police unleashed and homelessness criminalized, but a “gentrification to prison pipeline” is set up, with People of Color targeted by the legal system. In a “personal” article published in Truthout detailing his experience in Detroit’s Cass Corridor area, Lacino Hamilton, who was incarcerated for 26 years thanks to a wrongful conviction, gives first-hand testimony. He writes:

“I don’t know which came first, but the changes came hard and fast: mortgage foreclosures, the imposition of tax liens, governments seizing property through their power of eminent domain, the reduction and gutting of city services, city officials ignoring an influx of drugs and prostitution, rampant homelessness, and courts and prisons’ increased presence in our lives. But I am certain we were being pushed out of the Cass Corridor, displaced through a complex network of public and private interests. In the mid 1980s, Detroit Mayor Coleman Young announced that city dollars would be used to finance the development of downtown hotels, so that Detroit could attract convention business. Homes were foreclosed. Businesses were dismantled. And everyday decision-making power was shifted from families and local business owners to state legislators, venture capitalists and a combination of financial institutions and interests. It was as if a number of bombs just went off. Almost overnight the Cass Corridor resembled a war zone. …

Forcing people to evacuate a neighborhood or entire section of a city cannot be achieved by democratic means. It is inconceivable that anyone would vote to displace themselves, right? This explains why police, courts and prison are often used to remove and disappear some people. …

The grim reality of gentrification for a large portion of the Cass Corridor’s population has been evident for years. In the eyes of city officials and the big corporations that now control that section of Detroit, the ‘limits of development’ did not call for public participation but for confinement. We were viewed as obsolete commodities that had to leave whether we had some place to go or not, and many of us didn’t. This is how the city of Detroit’s approach to ‘social development’ came to rely so dramatically on the bricks and mortar of prison at the expense of other responses that would have been both more humane and more effective — such as social development with people in mind, not profit.”

That process is deeply related to other problems imposed on Detroit in recent years, such as the same city officials who assisted the process of gentrification being fleeced by financial industry predators who talked them into buying complex, and poorly understood, derivatives that are much more profitable for Wall Street than the issuance of “plain vanilla” municipal bonds that denominate a set amount of debt paying back a set amount of interest on a specific schedule. Following Detroit having to declare bankruptcy because of the financial fleecing, the city literally became a colony with a corporate lawyer imposed as an “emergency manager” who oversaw the shutting off of water to tens of thousands while allowing businesses to accrue vastly higher arrears without penalty. That corporate lawyer was a partner at one of the biggest law firms in the U.S., Jones Day, which supplied at least a dozen officials to the Trump administration.

Pitting renters and homeless people against each other

Gentrification is certainly not confined to Detroit. Far from it. Nor are the processes set in motion by capitalists, especially those in the real estate industry. In Boston, the United Front Against Displacement, an anti-gentrification organization, has reported on the “onslaught of gentrification being unleashed upon Boston’s working-class residents by developers, construction companies, and the city government.” A part of the city’s strategy was to create divisions between renters and homeless people. The organization writes:

“The cops were also regularly messing with people, allowing them to stay in the park for a week or two and then forcing them to move on. They often push people towards a part of the city known as ‘methadone mile’ because of the concentration of methadone clinics. ‘Methadone mile’ is not somewhere most homeless people want to end up, since there is a lot of stealing, violence, and heavy drug use. The police know this stuff is going on and don’t do anything to stop it, preferring to push homeless people from across the city into a situation where they’re likely to get caught up in violence, have their stuff stolen, or fall back into addiction. …

These dynamics have created significant divisions between homeless people in the park and working-class residents of the surrounding projects and apartment complexes. Many residents have grown frustrated after dealing with unsafe conditions in the park for years, from needles left on the playground to stabbings, fights, and other violence. These problems have so far been a significant barrier to bringing residents of the apartments and the homeless population together.

The major divisions we saw amongst people in the park and between them and local tenants are not unique to this one part of Boston. They reflect a larger strategy that the ruling elite use to keep people down by creating conflict and division between people who really should be organizing together. For instance, the police push homeless people to move into the park and the city fails to provide services or sufficient shelters to them. They do this knowing that it will lead to various negative effects for people living in the area: needles and broken bottles in the park, violence, and so on. Then a section of the tenants will start to blame the homeless for these problems, and potentially support increased police patrols and the like as a result. Then two groups of people, homeless people and working-class tenants, who have a common interest in opposing gentrification, are at each other’s throats instead of organizing together.”

Divide and conquer is of course one of the oldest tricks in bourgeois tool boxes. The new administration of New York City Mayor Eric Adams, shortly after taking office, began sending the police to make hundreds of sweeps of homeless encampments. Mayor Adams claims he wants homeless people to “trust” authorities, but having the police arrest them and throw away their belongings hardly seems likely to earn “trust.” At the same time, he appointed real estate-aligned people to the city board that oversees what landlords can charge tenants in rent-stabilized apartments, who promptly asked for massive increases despite steady increases in landlord profits since 1990, a trend that accelerated from 2005.

Seeing battles for affordable rent in a larger context

Although a full toolbox is needed to combat high rents, one tool desperately needed is rent control. Few localities have it, and in most places that do it is inadequate and in need of strengthening. One place with some of the strongest rent control laws in the United States, yet still not providing needed protection, is San Francisco.

Randy Shaw, writing on the FoundSF website, has provided a brief history of rent control in San Francisco, noting that a comprehensive struggle must go beyond:

“As rents rose and gentrification and displacement worsened, tenant activists unified around a common goal: strengthening rent control. While Proposition R represented a comprehensive response to all aspects of city housing policy, since 1980 the tenant movement has been a series of campaigns designed to improve the very weak 1979 rent control ordinance. This exclusive focus on rent control had positive and negative implications. The 1979 laws clearly provided tenants with inadequate legal protections against eviction, and permitted automatic 7% annual rent raises, an amount well in excess of inflation. Moreover, San Francisco’s rent control law allowed unlimited rent increases on vacant apartments. This gave landlords an economic incentive to evict, and meant that the housing stock would, as tenants vacated, become increasingly unaffordable. As a result, rent control on vacant apartments (i.e., vacancy control) became the chief goal of tenant groups throughout the 1980s.

Tenants’ exclusive focus on strengthening rent control, however, had a major downside: the movement became divorced from the larger urban crisis agenda. Tenant-landlord and rent control fights were no longer surrounded by discussions of class, economic unfairness, and redistribution of wealth. The broader context of rent control as akin to progressive taxation was replaced by debates whose dialogue excluded the tax benefits offered to landlords, their superior wealth, and the conflict between Democratic Party politicians who espoused Republican, free-market principles when rent control was involved. The tenant movement was increasingly comprised of people whose involvement arose from negative personal experiences with their landlords rather than from a broader political outlook. Progressive activists who came to tenant issues in response to an urban crisis were not drawn to tenant organizations whose only response to the crisis was stronger rent control.”

Could a broader focus have helped pass a 2014 ballot referendum that would have imposed a “speculation tax” on building owners who sell a building in less than five years after buying? The proposed law included exemptions to ensure it would have applied only to speculators. Outspent 12-to-1 by real estate interests, the referendum narrowly lost. An activist with the Tenderloin Housing Clinic believed that a greater emphasis on community organizing would have made a difference; the referendum had been placed on the ballot by four members of the city Board of Supervisors (San Francisco’s city council), rather than by activists collecting signatures.

United Front Against Displacement, also active there, reports that “almost all the public housing has been privatized” in San Francisco and Oakland. The organization writes:

“In San Francisco, there is an ongoing citywide privatization scheme … called HOPE SF. The city government, banks like Bank of America, Wells Fargo, JP Morgan Chase, corporations like Google, Kaiser Permanente, and foundations in the city are working together to achieve the HOPE SF scheme. HOPE SF’s plan is to eliminate the last public housing in San Francisco (Sunnydale, Potrero, Double Rock/Alice Griffith, Hunters View), which are in working class neighborhoods in San Francisco, by destroying them and building mixed income developments owned and managed by different private developers.”

United Front Against Displacement reports that the San Francisco Housing Authority actually sent them a letter alleging its organizers were harassing tenants! In response, tenant organizers at one of the targeted public housing projects sent a letter to the authority saying its “misrepresentation is particularly shocking” in light of “over a hundred tenants, voicing opposition to the HOPE SF’s privatization of Sunnydale that is destroying our homes.”

Even getting effective laws passed does not guarantee better housing policies will be implemented. In Berlin, for example, a rent cap that would have frozen rents for 90% of the city’s apartments at their June 2019 level for five years was overturned by Germany’s Constitutional Court in April 2021. The German high court ruled that because the federal government had already made a law regulating rents, which allowed landlords to raise rents by 10% above the local market level, state governments can not impose their own law. But this ruling does not simply repeal Berlin’s law, it may even result in higher rents, reports German broadcaster Deutsche Welle. The “decision could mean a windfall for landlords as rents are instantly raised by hundreds of euros a month, on top of which landlords could now demand their tenants back-pay higher rents for the past year,” DW reported.

Predatory speculations spread their tentacles

Although everybody who rents is affected by gentrification and the social forces pushing rents upwards, those stranded in low-wage jobs and in particular People of Color are most affected. Racism being an ever present reality throughout the advanced capitalist countries, it would be most surprising if that did not impact housing. And here we have no surprises. A highly useful new book, Counterpoints: A San Francisco Bay Area Atlas of Displacement & Resistance, prepared by the Anti-Eviction Mapping Project collective, provides a series of stories and colorful graphics and charts detailing the precarious state of housing in the nine counties of the San Francisco Bay Area, backed by copious research. For example, research detailed in Counterpoints revealed that although Latinx communities represented 25 percent of the populations of San Mateo County in 2014 and 2015, they were 49 percent of those evicted. Black/African-American peoples were 2.5 percent of the county’s population but 21 percent of the evictions.

Displacement is not confined to cities such as Oakland, but is underway in suburban towns. This is due, in part, to the voracious appetite of financial speculators buying up houses in large numbers to rent out, a trend that catalyzed in the wake of the 2008 economic collapse. Geography professor Desiree Fields, writing in Counterpoints, outlines the scale of that speculation, which contributes to rents becoming out of reach. As many as 7 million single-family homes in the U.S. have been converted to rentals since 2008. This is now a suburban phenomenon, not only an urban one, Dr. Fields writes:

“Whereas, for generations, urban crises set off by financial exploitation were largely confined to aging buildings in [the] ‘inner city,’ after 2008, the single-family home, representing middle-class suburban life, became the ‘mascot’ of the crisis. Cul-de-sacs in low-density subdivisions were lined with for sale signs, and auction notices dotted the front yards of McMansions. In sunny California, Arizona, and Florida, ‘zombie pools’ in abandoned properties grew algae and bred mosquitoes, becoming incubators for disease. Speaking to how the crisis overflowed the spatial, racial, and class boundaries of the urban core, Alex Schafran observed, ‘Just as burned-out housing projects in inner cities were the iconic images of the mid-1970s recession, trashed-out tract homes in California and the Sun Belt are the signature images of crisis in post-millennial America.’

In suburbs and exurbs like Antioch, Brentwood, and Pittsburg (and down-at-the-heels sites of industry like Richmond and Vallejo), places where African American, Hispanic, and Filipino American Bay Area residents displaced from the region’s urban core sought affordable (ultimately unsustainable) homeownership, it was these ‘trashed out tract homes’ to which investors — of all kinds — were drawn in the aftermath of 2008. Crisis as opportunity is, of course, nothing new in capitalism. If anything, crisis is one of its fundamental dynamics and how it adapts to changing contexts, thereby reproducing itself anew. And so, as crisis created a ready population of tenants comprised of former homeowners and those unable to qualify for mortgages under tightened crisis conditions, a financial industry ‘somewhere between anxious and desperate for new products’ began to reimagine single-family rental homes as financial assets. The activities of large-scale ‘corporate’ investors have been particularly notable in parts of California and the Sun Belt hit hardest by the crisis.

Able to raise cash cheaply on capital markets rather than relying on the uncertainties of mortgage credit and armed with digital technology allowing them to zero in on properties meeting their investment criteria, these corporate actors enjoyed a distinct advantage over smaller investors. … ‘Wall Street’ landlords saw in single-family rental the ingredients for a novel financial asset: once they had aggregated ownership, bundles of rent checks could replace bundles of mortgage checks, fueling a model of securitization suited to a potentially post-ownership society. … The sale of these financial assets to bondholders allows Wall Street landlords to borrow against the value of the properties, securing a cash infusion to settle previous debts or pay themselves out. Meanwhile, tenants back this loan with their rent checks.”

Similar dynamics are at work on the other side of the U.S., in Atlanta. A U.S. Department of Housing and Urban Development report, “From Foreclosure to Eviction: Housing Insecurity in Corporate-Owned Single-Family Rentals,” found that evictions are spatially concentrated, meaning minority renters are more likely to be thrown out of their homes, and that corporate landlords are much more likely to evict. The report said:

“We document a high, spatially concentrated evictions rate. More than 20 percent of all rental households received an eviction notice in 2015, and 5.6 percent of tenants received a judgment or were forcibly removed from their homes. Evictions are spatially concentrated; in some zip codes, over 40 percent of all rental households received an eviction notice and over 15 percent of all households received a judgment or were forcibly removed. … We find that large corporate owners of single-family rentals, which we define as firms with more than 15 single-family rental homes in Fulton County [the county centered on Atlanta], are 68 percent more likely than small landlords to file eviction notices even after controlling for past foreclosure status, property characteristics, tenant characteristics, and neighborhood. … Depending on the firm, institutional investors were between 11 percent and 205 percent more likely to file for eviction than mom-and-pop firms, even after controlling for property, tenant, and neighborhood characteristics.”

Out of control rent increases vastly outpace wages and inflation

This is a trend almost certainly to get worse — the Housing and Urban Development report said that, from 2011 to 2013, institutional investors and hedge funds bought an estimated 350,000 bank-owned homes.

A New York Times report noted that “Various studies have found that corporate landlords are more likely to raise rents, evict their tenants and poorly maintain their properties than smaller landlords.” Financial speculators are rapidly buying up single-family homes and are targeting African-Americans. The report said:

“Real estate investors bought a record 18.4 percent of the homes that were sold in the United States in the fourth quarter of 2021, up from 12.6 percent a year earlier. In Charlotte and Atlanta, investors purchased more than 30 percent of the homes sold in the fourth quarter of 2021, according to Redfin. In Jacksonville, Fla., Las Vegas, and Phoenix, they bought just under 30 percent. … More than 93 percent of homes purchased by corporations as of May 2021 were bought for under $300,000. Many of them were in predominantly Black neighborhoods.”

Regardless of whether you rent a single-family house in the suburbs or an apartment in a city, rent is going up, around the world. In the United States, average rent prices have increased at a rate of 8.9% per year since 1980, consistently outpacing wage inflation by a significant margin. By comparison, average wages increase at an annual rate of 3.44%. Thus, as stated above, rents increase at more than double the rate of wages. A report in the online publication Real Estate Witch reports that from 1985 to 2020, the national median rent price rose 149%, while overall income grew by only 35%. That 35% figure may be overstated; the Pew Research Center reported that U.S. wages, adjusted for inflation, have increased by pennies since 1970, from about $22 per hour then to $22.65 in 2019.

To put all this in another way, your rent would be hundreds of dollars less per month if rents had increased at only the rate of inflation over the past 50 years. If rents had risen at the rate of inflation from 2000, today’s rents, on a national average, would average nearly $200 per month less than they do; if rents had risen at the rate of inflation from 1970, today’s rents would average about $380 per month less than they do. That’s money stuffed into landlords’ pockets and all they have to do is put their feet on the desk and let the checks roll in.

One final statistic on U.S. rents, this time for New York City: The Housing and Vacancy Survey, conducted triennially for the city by the U.S. Census Bureau, published its latest report on May 16, 2022. The median wage in New York City is only half of what would be necessary to pay for the median rent, a figure calculated by using the standard metric that nobody should pay more than 30 percent of income to rent. The report said, “The median rent of a unit that was available for rent was $2,750, which would require an income of at least $110,000 to afford; yet, the median household income of renters in 2021 was only $50,000.” In 2021, more than half of New York City renter households (53 percent or just under 1 million households) were rent burdened (more than 30% of income going to rent) and one-third were severely burdened (more than 50% of income going to rent).

These trends are accelerating as the brief pause in rent increases in 2020 are now behind us. Median rents for one-bedroom apartments in several Boston-area towns, including Cambridge, are up by at least 30 percent compared to last year. Boston itself wasn’t far behind with a 27 percent increase in median one-bedroom rents.

Rent gouging and spiraling housing costs in Canada, Britain

As dramatic as housing costs are in the United States, the situation may be even more out of control in Canada. Unlike the U.S. and many European countries such as Germany, housing costs did not pause following the 2008 economic collapse. Prices have risen dramatically since 2000, and the trend of institutional investors scooping up housing is more accelerated in Canada than in the United States. Better Dwelling, which describes itself as “Canada’s largest independent housing news outlet,” reports on the rapid increase of speculation in housing:

“Canadian real estate is being scooped up by investors with excessively cheap credit. Ownership data for residential real estate across four regions show a significant share owned by investors in 2020. What’s most impressive is how fast this trend must have accelerated. Cities have seen up to 90% of recently completed homes go to investors, much higher than normal. … Since we’re only looking at cities, no one’s shack in the woods is likely to be included. Only data for Ontario, British Columbia (BC), and Atlantic Canada is available. … About 1 in 5 (21.0%) homes in the median city across the four regions are investor-owned. When isolating new construction (built after 2016), that number rises to 1 in 3 (33.7%) bought by investors. …

Toronto is Canada’s biggest real estate market, and it’s seeing investor-ownership soar. Investors owned 18.4% of the housing stock in 2020, just shy of 1 in 5 homes. Isolating recently completed homes (after 2016), investors owned 39.1% of the new supply. … Vancouver real estate shows a similar trend, but a higher share of investors. Investors owned nearly 1 in 4 (23.5%) of total housing supply in 2020. For recent builds, that share jumps to nearly half (44.0%) of the supply. It’s easy to see how Toronto and Vancouver home prices are so distorted. There’s a lot less friction for home prices when you’re passing the costs on to someone else. … Atlantic Canada real estate is quickly becoming home to a robust rentier class. In Nova Scotia, investors owned 25.5% of total housing stock in 2020 but 48.7% of recently completed homes. New Brunswick has seen a similar trend where 17.2% of total housing is investor-owned, representing 41.0% of recent completions.”

That concentration of ownership helps fuel the dramatic increase in Canadian housing costs. Sales figures show a 318% rise in home prices since 2000, according to the Canadian Broadcasting Corporation. House prices in Montréal, Toronto and Vancouver tripled from 2000 to 2020, and the rest of the country wasn’t far behind, as Canadian house prices overall increased two and a half times, adjusted for inflation, from 2000 to 2020. Canadian wages, by contrast, increased only 49% from 2000 to 2020, which really means wages barely improved because Canadian inflation rose 44% from 2000 to 2020.

Across the Atlantic, rent in Britain is too high as well, and it is not only London where such is the case. A report in the Shelter blog reveals that the average renter in England is rent-burdened, by the standard of paying no more than 30 percent of wages to housing. “Other government figures confirm the reality of the affordability crisis in the privately rented sector,” the blog said. “The English Housing Survey (EHS) shows that renters spend 40% of their income on housing costs — double what owner-occupiers pay (19%). Affordability is particularly acute for those with the lowest incomes in England, who spend over 75% of their income on housing costs.”

As noted above, rents in England increased 60% quicker than wages from 2011 to 2017. The Shelter report said, “And this isn’t just an issue confined to London and the south-east, as you might expect. … So as well as affordability worsening in London, rents in Rugby in the West Midlands have risen at twice the national rate (30% vs. 16%) yet wages have increased by just 5%. Similar figures are seen for East Hertfordshire in the east of England, and in Daventry wages have fallen, while rents have increased by 26%.” In Cambridge, rents increased 36 percent from 2011 to 2017, while wages rose only nine percent. Separately, a 2016 report by the Resolution Foundation found the household income of British renters increased two percent from 2002 to 2015, while their housing costs increased 16 percent.

And on it goes, from Barcelona to Paris to Berlin to Istanbul to Sydney to Melbourne.

Capitalism is global, and it follows that gentrification is global. Rents will continue to rise as long as housing remains a capitalist commodity. That can only change if we create a better world.

From the archives:

Eat the Rich! by Yanis Iqbal

Working Conditions are Getting Worse in the US, by Pete Dolack

Chris Hedges: Debt Peonage Is Not Accidental

Michael Hudson: The World’s Absentee Landlord

Marx in the House: Episode 3: Rent Gap + Episode 4: Disinvestment

Marx in the House: Episode 1: Intro: Gentrification and Housing + Episode 2: Exchange Value

Abby Martin: Eradicating Homelessness

Chris Hedges: The Radical Transformation of Jackson, MS

Chris Hedges: Race and Class Inequality in Major Cities