Housing Shortages and Exploding Rent
Landed Property and the Housing Market

A new housing shortage has broken out in Germany’s major cities. Average wage earners currently pay around a third of their income for housing — and rents continue to rise. The fact that this elementary living condition is a luxury the working majority can hardly afford is officially recognized at the highest levels as a “social problem.” Especially during election campaigns, politicians promise to ensure that housing remains affordable. And really that says it all: after 150 years of capitalist growth, for many it is not.

This is how the majority gets to experience first hand that housing, which some claim should not be a commodity at all, is a peculiar commodity indeed. The price of most commodities is determined by competition on the basis of production costs, but when it comes to housing, this applies only to two of three price components: firstly, the costs of construction, and secondly, operating costs (electricity, water, heating, and maintenance) that together constitute a “second rent.” Matters are different when it comes to the third factor, the land on which the building rests. In the case of land, as it is not a product of labor and therefore has no cost of production, the sheer fact of ownership functions as a source of income for the landowner. This price, which does not remunerate any expense on the part of the landowner, is what causes housing to become more and more expensive.

I. Renting and leasing — How landowners generate income

Like other members of bourgeois society, landowners use their property to make money. They own parts of the earth’s surface, which have not been and cannot be produced, and thus cannot be increased. Their property does not result from the production of goods others need, with the state enforcing the producer’s exclusive right of disposal over produced goods; rather, the property of landowners exists solely by virtue of excluding other people, monopolizing the common condition of existence, the earth. Landed property is a pure relationship of right, that is, of force. Landowners derive income from it because others need land — businessmen need it for their business and consumers need it to live — from which they are barred by virtue of private property. The price landowners demand is for the temporary suspension of this relation of exclusion, i.e., for allowing others to use the land that they own.

By exchanging the use of the land for rent, landowners make no contribution to the social division of labor. In general, they have nothing to do with the production of goods and services, nor with the labor that goes into producing them. Their income is based on, and therefore also dependent on, others using their land and producing the social wealth from which they draw a share. They simply turn their legal power of exclusion into money. The price for the right to use a mere natural precondition for production and consumption of all kinds is, in terms of its economic content, a tribute that monopolists of the land demand from the other social classes.^[1]

This principle also explains why rents differ in such extreme fashion. Leases for downtown commercial space exceed those for land in the countryside by a factor of a hundred or a thousand. This shows that there is no intrinsic measure for the value of the right to make use of land. Unlike the case of produced goods, no expenditure is made when the use of land is offered for sale, which means that the competition of the sellers does not revolve around making such an expenditure pay off. Land represents merely a natural condition for the production of wealth. How much can be earned through the power to grant access to the land or to exclude others from it depends entirely on the use that the buyers can make of it. Therefore, here we have the unique case of a market that truly is governed by supply and demand, by the competition between tenants for parcels of land in relation to the amount of supply.

The landowner’s weapons in this competition consist in incidental natural or non-natural qualities of the land that offer different advantages to different users and therefore enable the landowner to demand a higher price. For agricultural uses, soil fertility and irrigation play a role; for industry and commerce, location is key, as well as the proximity to urban centers, transportation and other infrastructure. These and other aspects determine how attractive a parcel is for residential purposes. All these qualities go into determining the demand for land and the willingness to pay for it. In order to increase interest in their land, owners even act as investors and spend money on their land, though not for initiating a capitalist enterprise and earning profits or interest; rather, their investments serve to increase the usefulness of their land for the purposes of demanding a higher ground rent.

II. The price of land — The speculative value of landed property

Landowners also make use of their property by relinquishing their ownership once and for all and turning their property into money. When land is sold, a purely legal relation becomes an object of trade: a price is put on the power to exclude others. According to the logic that whatever yields money is worth money, the price of ownership results from the rents that ownership yields for the owner.

When landowners put a price on their land, they implement an analogy of their property to capital. While industrial capitalists use their capital as a source of additional property by employing labor, the landowner merely siphons off money from others’ profits or wages for consumption. Nevertheless, land functions for the landowner as a source of regular income just as capital does for the industrial capitalist. Landowners correspondingly regard the rent they earn as the fruit of their property. The property is valued first by comparing its yield to the prevailing interest rate: by regarding the rental income as interest, a capital value for the land is feigned — merely extrapolated from what can be earned for it, quite analogous to how stocks are valued. Land, an uncultivated piece of nature, thus becomes fictitious capital, because the exclusive disposal over land includes the power to exact a tribute for its use, thus generating regular income.

This, of course, is only the first step in determining land value. After all, commercial property is a source of earnings; what is bought and sold is access to future income. Anything that could cause the rent to rise — new traffic routes and construction, local development, the state of regional and national economy — all factor into the speculation on future rental income and are used to extrapolate the value of this fictitious capital. On the other hand, presumptions about how interest rates will develop and the profitability of all other forms of investment are included in this extrapolation, so that phases of low interest rates or weak stock markets alone can justify raising the price of real estate.^[2] Whatever relative future attractiveness a landowner might imagine his property to have in the future, he will want to have it paid for today.

Of course, the buyer must be willing to agree to this speculative price. And the buyer makes a complementary calculation, regarding the price of the land to be used as the cost for avoiding having to pay regular tribute to the landowner in the future. The buyer thus also capitalizes rent or lease payments: to avoid paying ground rent, he buys its source — and calculates its value on the basis of the rent he saves. Sellers and buyers of land compete over the speculative assessment of rents and land prices in the future and over the ratio of these two quantities. Buyers who want to actually make productive use of land thus find themselves in the midst of a market of which their demand is but a small part. Once land gets valuated as fictitious capital, once it is bought or sold at prices derived from a speculation on how its value will develop, it is traded — even without any intention to use it — as a form of capital investment. It thus gets compared with and traded for alternative investments. The real estate market is part of the larger market for trading in fictitious capital. Its players are the large financial institutions, investment funds, insurance companies, which also assess the opportunities and risks of speculating on the price movements of shares, debt securities, foreign currencies, etc., and give them, like real estate, their respectively valid market prices through their investment decisions. They cause the rise and fall of real estate prices by speculating on their future prices, as well as on the economic environment upon which the demand for real estate and the willingness of customers to pay depend. The reputation of the real estate market is thus a double-edged sword: on the one hand, because land is an indispensable condition of all business and of life in general, independent of the economic cycle, it has the reputation of being a “real object of value” (“real estate”) allowing it to function as a hedge against the ups and downs of financial markets. On the other hand, land values are known to depend entirely on the ups and downs in all other branches of business, such that the price movements in this segment are viewed as early indicators of crises and booms.

In any case, the fact that land is traded as fictitious capital obscures the fact that it is not capital at all and that no capital has gone into it. For whenever landed property changes hands, the buyer invests money just as he would if he were to acquire companies, stocks, or securities. In this way, landowners have essentially disappeared as a distinct class. The large landowners and country squires of old have moved on up and merged into the larger collective of money capitalists. Their landed property has become just one item of their monetary wealth among others; and for the state, the other large landowner, its dominion over territory has become a form of money-valued private wealth.

III. Lease payments and rent have to justify the price of land: The subsumption of capitalist use under the quality of the land as fictitious capital

A monopoly on land empowers the owner to exact a tribute from the user, and the regular tribute allows him to attribute a fictitious capital value to his monopoly. But this also means that this extrapolated value becomes independent of the tribute, the source of income on which it is based. The value gets determined by putting the rental income in relation to changing interest rates and alternative investments, by anticipating the future attractiveness of the property and other competitors’ speculations on all these variables. The value of the land that gets paid or is merely claimed then determines how much rent must be charged in order to yield an appropriate amount of interest. The value of this fictitious capital, which is based on ground rent, holds the rent responsible for the accumulation and growth of the capital value. This demand of fictitious capital therefore comes into opposition with the commercial use of the land — all the more, of course, with ordinary housing. The rents that tenants must pay are not based on the competition over the profitable use of land and buildings. It is just the other way around: the buyers must be competitive enough to cope with rents whose level is dictated by the speculation on them. In this way, the whole society, due to its dependence on a piece of earth's surface, is tasked with confirming and maintaining the value of fictitious land capital: Society has to pay the requisite interest on it.^[3]

The aforementioned contradiction, which arises from the double determination of real estate as commercially used rental property whose costs must be borne by the user's business, and as fictitious capital embodying a claim to expanded value independent of the business use, asserts itself even when owner and user are the same natural or legal person. For a company, factory premises, office space, or retail properties are, on the one hand, capital assets that must yield interest that corresponds to their speculative value, and, on the other hand, the same land areas are also operating resources. In terms of the balance sheet, the company calculates lost rental income for owner-occupied properties according to their fictitious capital value and charges these fictitious losses to the business result otherwise obtained. The claim for return on real estate holdings makes business operations more expensive and reduces their profitability. The ongoing business with the production and trade of goods must in any case generate more than the “cost of capital” for the changing estimated value of the real estate holdings — otherwise the whole operation will have been completely pointless. Conversely, the fictitious capital value of the real estate holdings cannot be used, i.e., realized, as long as the company actually uses them as business premises.^[4] The same applies to the owner of a home. As long as he lives in it, it functions for him as a use value and not as capital. At the same time, he keeps an eye on how the value of his property develops, not only in order to estimate his wealth and satisfy his drive to accumulate in purely theoretical terms, but also because this value functions as collateral for the debts he has taken on to purchase the house or as a pledge against other expenses.^[5]

For all its independence, fictitious land capital, being subject to the use of the land, remains dependent on that use. In the long run, if rents cannot be obtained that pay interest on the fictitious capital that real estate represents, then the justification of its speculative value fails and the prices of the lovely realty collapse. Real estate bubbles testify both to the power of speculation and to its speculative nature. The mere expectation of rising real estate prices triggers a run on such properties that in fact causes these prices to rise and enriches investors. The successful course of the speculation is then the best and strongest reason to continue it. Since people are counting on the increase in the value of real estate, the rental income derived from it — which is after all the expanded value of this fictitious capital — becomes only one factor in justifying its value, one that landowners can go without even for longer periods. Vacancies, which represent the loss of current income, can even be preferable to low rents that can devalue the property or reveal that it has already been devalued. Only when real estate bubbles then burst do they testify to the fact that the value of these properties is a speculative quantity, which vanishes into thin air if it is not permanently confirmed by the corresponding return on capital or if the speculation “goes south” for other reasons.

IV. The state recognizes, organizes, and restricts real property: regional planning and land use plan

Landed property is a natural part of the liberal order and, like all other property, is protected by the state. The state does not shy away from the considerable effort required to give the earth, the common living space of society, the form of private property and ensure the exclusive ownership of it. Land becomes something that can be owned by someone only by virtue of boundaries drawn by a state — something that cannot be left up to the owners. With official land surveying, a land registry office that clearly assigns every square meter of land, and an associated court of law, the state asserts itself as the authority that organizes the existence of this form of property.

The bourgeois state is not fazed by the criticism, no longer so common as it once was, that the parasitic class of landowners conflicts with the norms of the market economy, since in the market economy earnings depend on productive contributions and the exchange of equivalents. In order to establish private property as a general principle of the social order and apply it not only to movable goods, but to everything that can lie at someone’s exclusive disposal, nations’ founding fathers neither know nor need to know that by enforcing landed property they are maintaining a very particular basis of capitalism from pre-capitalist times. The exclusion of the bulk of the population from the elementary working and living condition that is the earth is the indispensable basis of this mode of production: once there is no longer any freely accessible land, it becomes impossible for the propertyless majority to ensure their own subsistence. Although the exclusion from the soil, the first agrarian means of production, largely lies in the past, even in a developed capitalist system it still acts as a formidable compulsion to earn money. People who have to pay just for a place to live need money. And in view of the distribution of productive property and at the present stage of development of social labor, they can only earn it by working for businessmen who make productive use of their willingness to work. Thus, landed property acts as a constant fetter binding the masses to the service of capital.⁶ An example for how much the bourgeois state is committed to this basis of the capitalist order can be seen in West Germany’s annexation of East Germany. The fact that the faded “socialist state of workers and peasants” had converted land into “people’s property” was rejected as a crime against the system, and was rejected so radically that even land expropriated from the landed aristocracy has been largely returned to the heirs of the long-dead former owners.

By protecting the rights of landed property, the state accepts all its consequences as well. This also goes for the tribute it imposes on the other classes, as long as the state accepts it as a legitimate form of participating in the results of others’ economic activity and not as a form of usury, of ruinous exploitation of a dependency that damages or ruins the economic activity of the other classes. However, the state also restricts the freedoms of landowners, since, in the competition the latter impose on the various users of land, certain buyers are greatly disadvantaged (home owners and farmers), and since, furthermore, the various uses made of the land conflict with each other when its use is determined purely according to supply and demand. The state thus compels the various forms of property and use to coexist: it regulates the use of land and enacts zoning laws, not leaving it to the business acumen of landowners to decide how much and where to make land available for food production or housing when they can collect much higher rents from powerful industrial and commercial enterprises. The state divides off land for agricultural, commercial, and residential usage, and provides each with its own set of laws. It restricts land speculation by ensuring that the major forms of use do not compete directly against each other, but only against interested parties of their own kind. If the various claims conflict with general state concerns such as infrastructure and urban development, the state acts as the supreme landlord, from whom private landlords only sublet, so to say, and it expropriates land if necessary — though generally while showing great deference to the rights of property. Monetary compensation usually softens the blow and even enables landowners to make profits the market would not have yielded anyway. After all, public projects always help to increase land value, and thus generate indicators and opportunities for speculation. Land prices rise wherever the growth of capital creates demand for industrial zones and additional living space, and whenever cities and municipalities designate new industrial, commercial, and residential areas and connect them to supply networks and transport routes. Official decisions to establish or alter rights of use immediately generate profit opportunities.

V. The business of housing: A social confrontation

Housing for the propertyless majority is a mere appendage of land speculation. With the rents they pay, they not only finance the interest and amortization of the capital advanced for housing construction but also the price of the land or the return on its speculative value. The inhabitants of Berlin and other German centers of growth thus feel the consequences of the real estate industry’s belief in the glittering future of these cities. They and other tenants thus pay for the fact that, in the midst of financial crisis, investors fear for their assets invested in debt and shares and flee into real estate investments, thereby driving up house prices and demanding suitable returns on their investments.

This business presents a special hardship for wageworkers. The rent they have to pay shows them just how insufficient their source of income is; and given the income they have to get by on, the demands of real-estate capital are quite intolerable. After all, they are not paid according to their needs and those of their families, but by how much their employers are willing to pay to profit from their work. To make their work even more profitable, companies are known to be keen on introducing new technologies, reorganizing the labor process, and employing sheer pressure to reduce wage costs and increase the profitable work they demand from their employees. And the amount this minimized cost factor, labor, has to spend on the basic need of housing — after all, the largest single expense in its budget — does not depend on what they can afford to pay, but on what the parasitic class of land-owning finance capitalists demands it pays in order to accumulate capital. Wage earners not only have to work to enrich their employers, i.e. prove that the employer’s costs — for wages and for everything else — are capital and as such yield a profit; they use their earnings to pay rents that prove that landed property is a piece of fictitious capital that yields interest.

The double utilization of wageworkers not only determines how little money is left over for other vital necessities and desires, it also determines what proletarian housing looks like. Landlords accommodate their clientele’s ability to pay not by sacrificing the return on their investment, but the use value of the housing they provide. Those who earn average and below-average wages live in less attractive districts, where landlords extract lower — but by no means less profitable — rents from run-down houses whose maintenance they invest nothing in. If buildings are to be constructed for tenants with such weak solvency, then the return on the expensive prices per square meter requires the right kind of architecture: dense developments and high rises are the means of choice to put as many tiny apartments on as little land as possible and extract as much rent as possible from this customer segment.

VI. The state manages the housing market: Poverty and the business that takes advantage of it must be made to coexist

All housing policy measures bear witness to how incompatible landowners’ claims to returns are with the need of the masses for affordable living space; at the same time, they demonstrate the state’s need to make these conflicting demands compatible. After all, the less well-off must be able to live and afford housing, too. But, under capitalist conditions, it is just as important that the returns on fictitious land capital can measure up to returns on alternative financial investments. Real estate lobby organizations such as Haus und Grund Deutschland insist on it whenever politicians even think about imposing any kind of limits on rents. It warns about the power of the monopoly it represents: any act to diminish returns on land ownership would only reduce landowners’ propensity to invest, so that living space would only become scarcer and more expensive. Satisfying the people’s need for housing is the responsibility of landowners; and they fulfill their social function only if it pays off for them at least as well as any other capital investment would.

The state therefore intervenes in the housing market, but, as a rule, not to satisfy the need for housing, but to force together or rather mediate the incompatible demands of suppliers and demanders. In doing so, as always, it follows the principle that the smaller the market correction, the better for the growth of the nation’s economy. First and foremost, it demands that tenants and landlords settle things among themselves and freely agree on rental terms, prices, and rent changes. The welfare state counts on those seeking housing to make the utmost effort to secure a place to live and to meet the other party’s monetary demands. Housing is the most basic need, the material basis of private life. For the sake of that segment of their lives which begins after work and in which they are free to follow their own interests, wageworkers must first of all subject themselves to the hardship of serving others. And they are willing to spend as much as they can for a place they can call “home sweet home” or their “castle.”

However, because the parties to the contract are extremely unequal, the state recognizes the need for a special contract law. Landlord-tenant law strengthens tenants’ position by increasingly protecting them from eviction the longer the duration of the tenancy. Landlords should not be able to use arbitrary eviction to blackmail tenants into fulfilling all their demands. But there is much more, namely, petty legal regulations and even more detailed legal precedents on all aspects of tenant life: are the tenants allowed to keep pets, have an unmarried partner and other roommates, are they allowed to smoke, make music and noise, and if so, for how long and how often? Regulations specify when renovations are required, but also how much they may alter the apartment to suit their needs without the landlord being able to step in. What tenancy law regulates here is the qualitative incompatibility of the claims of both parties. Here, someone else’s property becomes the center of tenants’ lives; the space for their self-realization belongs to another, who certainly does not give up the right to his property when renting it out. The ownerless tenants, too, must be able to decide freely how they live, but this cannot be allowed to infringe on landlords’ right to determine the use of their property. In this way the law ensures tenants a limited right to house and home; landlords must tolerate to a certain extent tenants making themselves at home on their property; landlords are permitted to evict renters from the apartment only in exceptional cases, such as when the tenant owes rent or other tenant obligations, or when the landlord himself wants to move into the property.

Despite legal protections against eviction, the unavoidable need for housing and, even more, the desire to build a nest, obviously places tenants at the mercy of landlords’ rent demands. The state helps guard against exorbitant rents by providing (in many locales) a framework for local prices per square meter in an official rent index (Mietspiegel), which the courts adhere to when settling rental disputes and preventing usurious rents. With this guideline, the state, which does not want to damage the landlords’ business, adheres to the rents actually paid in a city for comparable residential locations and housing quality: this average rent may not be exceeded in the case of increases in the current lease terms. The limit does not apply to new rentals that, once established, raise the rent index, so that the state’s adherence to the rent index brings about a permanent increase in rents all by itself.

The experience of rising and unaffordable rents fosters one thing above all in those affected: the desire and the plan to own their own home or apartment in order to escape the demands of landlords. Of course, tenants can seldom afford to do so. Taking out a mortgage loan for a home of their own usually means taking on debt for the rest of their lives, which they now have to service instead of paying rent. Only if everything goes well will the house be debt-free by the time the owner retires; but if the homeowner cannot manage to service the loans, it is not the house but the mortgage or land charge that will remain as the largest asset (for the creditor). To prevent things from getting to this point, thrifty living is required, as is the willingness to do everything possible to earn more and more money on a permanent basis. Nothing chains propertyless employees practically and ideologically so tightly to conditions under which their own work only makes others rich as when their aim is to become an owner and make themselves a home in the world of private property. These people no longer see themselves as proletarians who somehow get by, but rather as owners who must be able to afford property. The welfare state appreciates and supports these individual efforts to cope with the housing shortage, not only because it means that private reserves and savings are mobilized to solve a social problem, but also due to the moral value of home ownership for ordinary citizens. To this end it promotes saving for building (savings and loan associations) and subsidizes non-profit building societies and housing estates (housing projects).

Only when the business of private investors and the savings efforts of small homeowners do not alleviate the housing shortage enough does the state itself step in as a developer or make private investments in social housing profitable with political assistance. As long as private developers build cheap housing and are satisfied with rents that only cover their costs for a number of years, the state waives taxes and interest, thus opening up for them new ways to make a profit. And after all, once the tax holiday expires, they are free to extract whatever the market will yield. In recent decades, municipalities and public property developers have increasingly converted their social investments into a way for the state to earn money, by selling their inventory of social housing, often entire housing cooperatives and residential districts, to international real-estate investment funds, thereby turning past social expenditures into a source of public revenue and mobilizing private capital for the poorest segment of the housing market.

The state recognizes that the entire well-managed housing shortage cannot be overcome by building sufficient living space, because the other side of poverty, the tenants’ lack of money, is not thereby affected at all. So it grants a minority of its citizens housing benefits. With these subsidies, which they immediately hand over to their landlords, the poorest families are enabled to pay their rent. It is not easy to decide who is actually being subsidized here. Finally, in the case of the poorest welfare recipients, the state prevents the absolute worst-case scenario of bourgeois existence, homelessness, by paying for housing that corresponds to their status.

VII. Tenant protest

Tenants are not likely to protest. They are generally too busy working and saving to earn the money they have to fork over to landlords. It would be strange if the same low-paid workers who modestly accept wages they could demand more of by taking advantage of the employer’s dependence on their services instead went to battle as isolated consumers up against an entire housing market with its price structure. If anyone denounces housing shortages and unaffordable rents, it is usually the professional lobbyists representing tenants’ interests. The Tenants’ Association (Deutsche Mieterbund) sees the social welfare state — always a bit more than it sees itself — as responsible for taking care of the basic need of housing. They remind politicians of their social duties, who in turn declare themselves ever ready to act to serve the needs of the people. In view of rapidly rising rents, they consider rent control measures, which, at least in Germany, do not promise to reduce rents nor even stabilize prices, but merely to slow their rise. At the same time, they discuss the problems of such measures given the resistance of landowners, who threaten to put the brakes on the housing supply. In some places, local politicians consider renewing former policies of social housing discontinued decades ago. With such initiatives, in a division of labor with tenant functionaries, they look after tenants’ hardships and manage their inevitable discontent.

The protest is carried by others, namely left-wing activists who do not so much resist the normal case of expensive housing as they do the special case of “gentrification.” According to the protesters, the basic need for housing has long since becomes incompatible with the demands of real-estate capital, with investors renovating entire rows of houses and run-down districts, upgrading them, and then renting them out at higher prices to a well-heeled clientele. The protesters regard rents as being unjust once they become an absolute barrier to living in the places they call home, forcing them to relocate. The protest takes it as a declaration of war when in one fell swoop, an entire poorer tenant milieu is faced with kinds of chicanery that are difficult to reconcile with normal civilian dealings between free individuals. Where turning an apartment building into a permanent construction site with noise and dirt is not enough to push tenants out the door, redevelopers have been known to resort to cruder forms of terror. Cases like these, but also ordinary evictions by the police, are the kinds of scandals that outrage well-meaning people. For this critical faction, the whole capitalism of the housing industry is summed up in the terror of eviction against poor tenants: the greed of a few denies the satisfaction of a basic need for the many, indeed it violates human respect in general.

The social resistance of some of the critics of gentrification consists in radicalizing the activities of the tenants’ association: providing legal assistance against impending evictions and neighborly support for those affected, making appeals to the city administration, sometimes in the form of neighborhood meetings and demonstrations against speculation and “rack-rent”, i.e., exorbitant rent. The protest cannot help but turn to local and national government, which is supposed to spare its neediest citizens from luxury renovations and forced relocations and curb the demands of the real estate business.

Virtually the same argument is made by those who view squatting and rioting as an appropriate reaction to the closing of alternative neighborhood centers or to the gentrification of the quarters the alternative milieu calls home. The most convincing argument the militants level against the injustice they oppose is the case of the grandma who is evicted despite her old age and having lived in her apartment for forty years. The touching story shifts the economic antagonism between tenant and landlord onto another level. That the old woman’s pension no longer covers her rent after renovations and after the redevelopment of her neighborhood points to the fact that poverty is the reason for her forced departure; and yet, that is regarded as a mere precondition of the more fundamental poverty criticized by the militants. The actual damage that real estate speculators inflict is their ruining of the unique character of her home. They ruin this apartment, this street, this neighborhood that she has become so accustomed to and where she gets by and feels at home. She is cheated out of her right to a home! And the protest scene regards itself as having been victimized in the same way when it is forced to defend its own alternative cultural and living space against gentrification. The protest presents itself as anti-capitalist and critical of the system. But what really drives it, what makes it come across as decent and sympathetic, is just the opposite. Their slogan reads “Take back our city, our squares and streets!” With this, the activists insist that streets and squares belong to them as living spaces in a higher sense, even though nothing there belongs to them; because they live in the district, it is theirs. Their claim to a “right to the city” is a declaration of love for the neighborhoods they have settled into with their alternative lifestyle — in need of redevelopment, with the small shops, the pubs, the backstreet culture, and the low rents. Recasting the only apartments and the only neighborhoods they can afford to live in as their home — this constant self-deception is obviously not limited to the everyday wage-dependent workers who pay virtually any price to get by and tell themselves they have chosen this happy life. The proponents of alternative living cultivate the same pedestrian ideology when they overrate their neighborhoods as an expression of their unique lifestyle and as an alternative home. It is precisely this commitment to a home that earns them a certain amount of sympathy from the art and cultural milieu, the intellectuals, and local politicians.

This alternative manner of defending the homeland might call the capitalist system its enemy, but in fact it focuses on particulars, applying to this house and this neighborhood. It is only logical then that the struggle and the politicization associated with this movement fizzle out as soon as a neighborhood has been successfully gentrified. Sometimes city fathers make certain concessions, maintaining an old youth center in the middle of the redevelopment area, delaying construction projects and offering interim uses, so that the somehow acknowledged need for “livability” of the city ends up being halfway satisfied and relieved; but sometimes, after evictions are carried out and construction projects are completed, the excitement simply disappears along with its object.

The whole front is wrong. Unlike the antagonism between workers and their capitalist employers, tenants are powerless against the power of landed property. Workers can go on strike — at their own cost — to force the other side to meet their demands, but they cannot stop living somewhere, not even temporarily. Under the prevailing legal order, tenants remain dependent on landowners that let them live on their land on their terms. Here, protest can be nothing more than an escalation of whining. Petitions to the authorities, demonstrations, and at best even brawls with the police remain documents of powerlessness.

Notes

[1] In the third volume of Capital, in which Marx also deals with the capitalist ground rent, he writes: “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.” (Karl Marx, Capital Vol. III / Part VI. Transformation of Surplus-Profit into Ground-Rent / Chapter 46. Building Site Rent. Rent in Mining. Price of Land. International Publishers, New York)

[2] This is how professional land speculators explain the current sharp rise in real estate prices: “Prices are indeed higher than average, but we would not yet speak of overheating. The high prices are still justified by overall economic development and forecast economic growth. The biggest price driver, however, is the level of interest rates… Due to the extremely low interest rate environment, prime German real estate has increasingly become the focus of interest-driven domestic and foreign investors.” (M. Danne, Board of DEKA-Bank, Frankfurter Allgemeine Zeitung, April 4, 2014)

[3] In the section on land rent in the third volume of Capital, Marx traces the land price back to its systematic root, the rent itself, and thus explains the irrational value of this peculiar commodity, which no part of the social effort of production has entered into:

“Ground-rent so capitalised constitutes the purchase price or value of the land, a category which … 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 capitalisation of rent assumes the existence of rent, while rent cannot inversely be derived and explained from its own capitalisation.” (Karl Marx, Capital Vol. III / Part VI. Transformation of Surplus-Profit into Ground-Rent / Chapter 37. Introduction.)

The author of Capital considers the last sentence necessary because landowners and bourgeois ideologues like to see things the other way around.

“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 rent can certainly not be derived from the price of land, which itself represents the transformation of rent payments into the value of fictitious capital, i.e. the price that must be paid to acquire this source of income. The ideological inversion that Marx criticizes here, however, is not merely a contrived way to justify rent and rental income, not a mere ideology, but rather capitalist practice. Having been transformed into fictitious capital, the land requires a rent that justifies its value. This is not merely craziness of the intellectual kind, but the crazed reality of a world in which capital acts as the source of its returns and reduces the sources of its returns to the instrument of its increase.

[4] To cope with this contradiction, capitalist firms have shown some resourcefulness. Factory land, in addition to its material use, is always reserve capital that can be employed for ongoing operations by borrowing against it; sometimes firms realize the fictitious value of their real estate by selling it and then renting it back; others give up inner-city factory land that has risen in value and use the speculative proceeds to build a larger, more modern factory on a greenfield site.

[5] One of the most absurd outgrowths of the dual purpose of real estate has been given to American homeowners in the last decade. Before the bursting of the price bubble, the existence of their homes as fictitious capital and the general rise in house prices made these people creditworthy, and beyond that, able to buy and pay to a degree that they could in no way justify with their professional incomes. The collapse of house prices is what they then got for the real use of their fictitious capital. For more on this, see: GegenStandpunkt 4-12: “Die amerikanische Immobilienkrise — Aufstieg und Fall des Hypothekenkredits.“ [The American Housing Crisis — The Rise and Fall of Mortgage Credit], untranslated.

[6] Marx reminds us that landownership, as the basis of existence of every mode of production based on exploitation, is older than capitalism and that the bourgeois state has made the traditional forms of landownership its own. It abolished the lord of the manor and his dominion over serfs and feudal tenants in order to preserve him — corresponding to the new order of freedom and equality — as landowner. It eliminated the personal dependence of the peasants on the lord in order to save the factual dependence of the propertyless majority on real property. It has thereby further developed landed property into pure, abstract property, into pure, exclusive power of disposal, which imposes its “money assessment” on every use of the earth by the other economic classes.

“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 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 …” (op. cit.)

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