Broken Cities

Inside the Global Housing Crisis

Deborah Potts

• Editorial: Zed Books
• Año: 2020
• ISBN:
  9781786990570
• Edición: 1
• Categoría: Ciencias sociales
• Categoría: Geografía humana

From Britain's 'Generation Rent' to Hong Kong's notorious 'cage homes', societies around the world are facing a housing crisis of unprecedented proportions. The social consequences have been profound, with a lack of affordable housing resulting in overcrowding, homelessness, broken families and, in many countries, a sharp decline in fertility. In Broken Cities, Deborah Potts offers a provocative new perspective on the global housing crisis arguing that the problem lies mainly with demand rather than supply. Potts shows how market-set rates of pay and incomes for vast numbers of households in the world's largest cities in the global South and North are simply too low to rent or buy any housing that is legal, planned and decent. As the influence of free market economics has increased, the situation has worsened. Potts argues that the crisis needs radical solutions. With the world becoming increasingly urbanized, this book provides a timely and urgent account of one of the most pressing social challenges of the 21st century. Exploring the effects of the housing crisis across the global North and South, Broken Cities is a warning of the greater crises to come if these issues are not addressed.

Chapter 1

The dilemma of affordable housing and big cities

Introduction

Generation Rent in London and divided families in South Africa; dormitory living in Shenzhen and the favelas of Rio de Janeiro; squatters on the edge of Lisbon and cage housing in Hong Kong. What do these situations have in common? The answer is obviously that they are urban housing ‘problems’. But can they be understood as manifestations of the same underlying urban processes?

Much work by scholars and policymakers argues that the common problem is to do with a shortage of housing, sometimes linked to shortages of urban land for residential housing. This conceptualises lack of housing in cities across the world as a supply-side problem – the obstacles to the provision of housing for all are constraints on supply. If enough houses were built, prices would fall into line with demand: the magic of the market, of the invisible hand, would provide the solution.

The key argument of this book is that that approach looks at the housing crisis – which is manifest across the urban world, and most particularly in the largest cities, where economic opportunities are apparently greatest – from the wrong end of the telescope. The real problem is demand. This sounds strange, perhaps, since evidently nearly everyone ‘wants’ a home – a place of shelter and privacy, a place for family life and socialising. But that is not ‘demand’ in the sense that much contemporary policy across the world can currently handle. Instead, demand must be expressed in terms of money. So while it is universally accepted that people need housing, they can only live in what they can afford. Some discussions about housing ‘demand’ can be meaningless. One set of protagonists may be expressing their arguments with reference to the norms of modern urban societies, whereby demand for housing is basically expressed in neoclassical orthodox economic terms (prices). Others may instead be referring to evidently expressed needs or ‘wants’, which, confusingly, can also be termed ‘demand’. It helps when it is recognised that housing is not that different from other basic needs, such as food. Obviously, for example, there is no shortage of food in Britain, but, as has become increasingly the case since the financial crisis of 2008, many people even in that country cannot afford enough food. No one argues that this is a supply-side issue. Thus, there is a housing dilemma. This term, which is central to the arguments developed in this book, relates to the problem that housing demands from some income groups can be met by the market but that housing needs from many in poorer groups cannot.

The views about urban housing developed in this book are underpinned by specific premises about contemporary conditions affecting urban policies and processes. Fifty years ago conditions were different. The issue of affordability that related to monetary demand was less determinant in urban housing problems across the world, in part simply because there was far more provision of non-market housing for the poor. A fundamental reason was that there were different modes of production operating in different regions. The ways in which people got access to urban housing varied accordingly. In China, the USSR, eastern European countries and Cuba, communist modes of production and ideologies meant that housing was assured for most workers and provided by the state. It was generally affordable since the costs were not determined by market forces but set by the government in line with typical incomes. Furthermore, in wealthy capitalist societies in the Global North (or ‘the West’, as these were then labelled), there was usually some provision of social housing for urban low-income workers and their families. The rents in such housing were deliberately set at rates affordable for those on typical pay levels. This meant that they were usually well below market prices. Private rental sectors were also regulated in ways that helped control rent rises. When hundreds of millions of urban residents whose incomes were in the lower deciles of national income distributions were housed in these ways, the role of affordability in understanding housing crises was evidently far less dominant. But these conditions no longer pertain.

Based on current circumstances, there are five key premises that shape the arguments of this book. These are taken to underpin contemporary low-income housing problems in cities across the world. The premises are introduced below. They will be referred to frequently and developed further in later chapters, and it is helpful to set out at the start why they are felt to be of fundamental relevance to understanding these problems.

Five key premises

1. The global reach of capitalism

The first premise is the current hegemony of the capitalist mode of production across all global societies. This is not to say that there are not important variations in the way this is practised in different countries – this is absolutely accepted and is indeed a key reason why urban housing outcomes vary. But the fundamental elements of capitalism – the operation of market forces via the factors of supply and demand to determine incomes and prices, the protection of private property, the quest for profit and the related essential requirement for continuous geometric expansion of production and accumulation of surplus value – are broadly speaking now in place across the world. The ending of communism in the USSR and eastern Europe has brought those societies into the capitalist fold. South-East Asian countries such as Vietnam and Cambodia that also had non-market philosophies and economies have likewise become market-oriented. The most important outlier remains China, but there have been remarkable shifts here also. It has adopted many of the main principles of capitalism, including private property, and market forces increasingly influence the allocation of resources and patterns of production and incomes. However, China’s mode of production is still best described as state capitalism, rather than free-market capitalism, and its cities and housing patterns remain unusual and exhibit some features in housing provision that flout the ‘laws’ of market forces and profit-driven decision-making.

Notwithstanding some exceptionalism in China, the hegemony of capitalist principles is now sufficiently global for these to be understood as the underlying forces determining urban housing outcomes. This does make comparative analysis easier. This precept may seem obvious but the basic requirements of capitalism are often ‘forgotten’ by policymakers devising housing programmes. For example, tremendous efforts have been made in Global South urban housing programmes to involve ‘big’ capital – banks, building societies and large construction companies – in the mass provision of planned and legal (formal) low-income housing. But it rarely works. Sometimes the governments involved berate the private-sector actors for the failures; sometimes analysis is directed towards the idea that there must be some market imperfection. The inability of poorer groups in cities in the Global South to obtain housing finance from formal lenders is usually seen as ‘a problem’ that needs to be solved. But analyses of this sort ignore the basic precepts and these presumed solutions can never achieve their goals. The essential problem is more obvious: capitalist banks and building societies have to operate profitably – it is their raison d’être. And they have responsibilities to shareholders and savers. They can lend money only for houses that are formally built in planned locations with permanent, approved materials and full services, and with tenurial rights recognised by capitalist institutions. These are the conditions that allow the lender to foreclose if the loan is not repaid, resell the property and thus get all or some of their money back. But these are some of the very conditions that make housing expensive and unaffordable for the poor. The gap between the income needed to live in ‘decent’ legal housing and the typical incomes of the poorer groups governments and development agencies are so keen to see properly housed is very obvious to private financial institutions in many cities in Africa, Asia and Latin America. So they do not lend to them because it would be exceedingly risky or very clearly would not be profitable. It is pointless to expect the large-scale private sector to lend money for housing to groups that it knows cannot pay that money back and/or whose tenure does not conform to the norms of capitalist private property. This is a circle that cannot be squared unless the iron rules of the market are set aside and the state intervenes with subsidies that make the processes profitable for the private-sector actors involved. This does work. However, it simultaneously proves the point: poor urban families cannot afford to be ‘formally’ housed under market conditions, and now that market conditions are globally hegemonic, this must be the starting point for all analyses of housing problems.

An objection may be raised to the argument that the capitalist private sector cannot deliver ‘affordable’ housing for low-income groups on the grounds that this is not so obviously the case in the wealthier societies of the Global North, and that the lending practices of financial institutions in the USA and Europe during the early years of the twenty-first century disprove the point that such capitalist institutions will not lend to poorer groups for urban housing. To the contrary, however, the absolute disaster that followed in 2007–08 with the global financial crash proves the point entirely. First, the iron rules of the market did eventually assert themselves and demonstrated in the most destructive fashion that lower-income groups even in the Global North could not afford private-sector housing. And second, the housing circle was, as usual, squared by massive intervention, at almost unimaginable levels, into the markets by the state sector in these societies. Trillions of tax dollars were poured into the financial institutions involved in housing loans. They were saved and a massive global depression was avoided, but the world has still not recovered from the colossal debts imposed on states and the austerity programmes that followed.

2. The impact of the neoliberal phase

In the 1980s a new phase of capitalism based on neoliberal ideology began to replace the more regulated and state-interventionist types of capitalism that had been typical in post-war Global North societies. The second premise is that this neoliberal turn exacerbated the urban housing issues that will always exist in a capitalist society. It should be noted here that a distinction is being drawn between the impacts on urban housing of the essential requirements of any variety of capitalism, as discussed above, and the conditions encouraged by neoliberal capitalist ideology. This is analytically helpful, as, quite rightly, urban scholars critique the idea that neoliberalism is at the root of all inequalities and urban problems, especially given that many of these pre-date the 1980s. In essence, the neoliberal turn promoted a much stronger reliance on market forces for determining how resources were allocated and a much reduced role for government. Public expenditure came to be seen as something to be cut wherever possible. Given the situation outlined above whereby it is largely inevitable that affordable formal-sector housing for poorer people is achievable only through state intervention in the market, the problems that neoliberal ideology create for urban housing are obvious. In both the rich and poor parts of the world the same processes emerged. Governments and development agencies of all types sought to find ways to impose full cost recovery on housing programmes for the poor at the very least, and preferably to shift the burden of provision to the large-scale private sector, which, it was argued, was more efficient and skilled due to the disciplines imposed by the requirement to make a profit. Unfortunately, that is the very requirement that simultaneously makes affordable low-income housing impossible for the private sector to provide. Functioning and long-standing public-sector large-scale provision of affordable urban housing – such as council housing in the UK – was also deemed to be inherently wrong under the new ideology because it was not market-oriented and was such a significant element of government budgets. As a 2017 EU report, The State of Housing in the EU, states: ‘In most cases policy responses at Member States level have been to decrease public expenditure for housing and … [to rely] on measures to increase the supply in the private sector or access to homeownership.’¹ The gradual undermining and reduction of the public sector across the Global North has served to make the crisis of the shortage of affordable housing in cities very much worse. Recognition of the ideological underpinnings of this situation is crucial – the conditions are not inherent in the way that the profit motive is for capitalism as a mode of production – these are political choices about what is claimed to be ‘right’. Since subsidies are seen as inherently wrong, and somehow even dangerous, this has created a fundamental constraint on the types of affordable housing solutions deemed acceptable and limits the policy conversations that are possible.

3. Segmented housing demand

The simple logic of the rule that prices are set by supply and demand is the default mindset of most housing policymakers and housing analysts. But the understanding tends to be simplistic. The general argument made is that the more urban housing is built, the lower the prices will become, and that this means that eventually they will become low enough to be affordable for the poorer groups. This mindset relates to the formal, planned housing sector – the messy unplanned markets of informal settlements in the Global South are deemed to be ‘problems’ that might be alleviated by the achievement of affordable housing in the formal market system. For the sake of argument, it helps to set informal housing aside at this point. The focus for the moment is on the planned and legally constituted housing markets.

It is also understood by most analysts that because houses actually have to be located in particular places, unlike most other goods, then the provision of urban land for housing is an essential element of the supply and demand equation. Indeed, inadequate provision of planned land – lack of land supply – is often pinpointed as the reason why housing is unaffordable for so many urban families, shifting the focus to land rather than buildings. For pro-market protagonists, this also has the benefit of shifting the ‘blame’ onto governments, since these nearly always play key roles in determining which urban land can legally be used for new housing, and away from the constraints imposed by relying on private profit-oriented suppliers.

The land issue is important but it is not the panacea so often assumed. The problem is that it is quite possible – indeed it is common – to have land occupied by empty housing units, including new-build houses, across a city at the same time that many poorer groups cannot afford to buy or rent legal, planned housing. The issue that is insufficiently recognised in the simple supply/demand analyses, or possibly dismissed because it is an ‘inconvenient truth’, is that housing markets are segmented. Increasing the supply of most types of housing makes no difference to the housing problems faced by the poorer groups as they cannot afford ‘most types of housing’. This is true in poor and rich countries – the same processes play out whether you are in Harare, Zimbabwe or Haringey in London, places with which I am deeply familiar (as noted in the Foreword). Housing that is affordable for such groups is a different sort of housing with a separate set of market conditions. This makes the measurement and conceptualisation of what is ‘affordable housing’ deeply political.

The significance of segmented markets is well developed in studies of labour and migration to cities, especially international migration to global cities.² It is obvious that there are different types of labour (skilled, semi-skilled, unskilled) and that, in any one city, demand for each type will vary. If internal labour migration cannot meet demands, then international migrants may fill the gaps. But the gaps are specific – the classic division being between demands for very low-paid service-sector workers (such as cleaners) because insufficient numbers of local workers will (or can afford to) work at these pay levels, and separate demands for highly paid skilled professionals (in IT or the finance sectors, for example) where a lack of domestic supply is ‘real’. As research on the associated migration streams demonstrates, these different groups are treated very differently in terms of immigration laws, etc. And just as there are segmented markets in labour, there are segmented markets in housing. In the same way that a plentiful supply of skilled financiers will not meet any unmet demand for poorly paid cleaners, increasing the supply of housing types that can be afforded only by those in the top income distribution bands cannot meet any unmet demand for cheap housing for those in the bottom bands.

4. ‘Decent’, ‘legal’ housing

Having argued that profit-oriented private suppliers cannot meet the demand for urban low-income affordable housing, it is now time to point out that, in fact, this is easily disproved! In most cities and towns across the world, informal markets provide millions upon millions of housing units, both for owners and renters. The market does work. But this is precisely the sort of housing that is so frequently labelled ‘a problem’. Often the argument outlined and criticised above – that the answer is to increase the formal supply of legal zoned land and thereby housing – is trotted out as the solution to this problem.

The mistake is to cordon off this ‘housing type’ analytically as something peculiar to, or inherent in, societies of the Global South and of no significance for urban housing studies in the Global North. For it is neither peculiar nor irrelevant. In the eighteenth, nineteenth and early twentieth centuries, European and North American societies had plenty of exceedingly poor-quality urban housing, usually in the rental sector. It certainly rivalled, and often exceeded, the worst housing conditions experienced in urban slums across Asia,...

Índice

• Cover
• About the Authors
• Title
• Copyright Page
• Contents
• List of Figures, Tables and Boxes
• Foreword
• 1 The Dilemma of Affordable Housing and Big Cities
• 2 Mismatches Between Incomes and Housing Costs: A Global Condition
• 3 Affordable Urban Housing and the Role of Basic Standards
• 4 Private-Sector Urban Housing Provision: Formal and Informal
• 5 Squaring the Circle: Social Housing Programmes and Affordable Rents
• 6 Squaring the Circle: Affordable Urban Homeownership
• 7 Global Finance, Big Cities and Unaffordable Housing
• 8 Broken Cities: Unaffordable Housing as the Norm?
• 9 Broken Cities, Broken Households: The Demographic Impacts of Unaffordable Housing
• 10 Conclusion
• Appendix 1: Bloomberg Housing Affordability Index
• Appendix 2: Total Housing Cost Overburden Rate Among Low-Income Households in Oecd Countries
• Notes
• Index