Property, Planning & Protest Chapter 3

Housing Need or Greed

Here are some extracts from Chapter Three

Land as a fictional commodity

The contention that landownership itself exerts a barrier that affects house prices has gathered support in recent years as theorists have pointed to escalating land values as a cause of housing unaffordability (Ryan-Collins, Lloyd, and Macfarlane, 2017). Innovations in financial products that made it easier to invest in land and to speculate on rising prices have fuelled capital markets seeking returns from rental yield (Knuth, 2015). The value of land in the UK, for example, has outpaced returns on stocks, shares, gold, and currency markets (Murphy, 2018), and the flood of investment capital into land is a forceful reminder that accelerating housing costs arise not just from an unmet demand for homes, or from regulatory constraints on land supply, but from an unbounded rentier market in which land and housing are investment assets of securely rising value (Hudson, 2012). It is the highest and best use that land can be put to that determines its value, and real estate markets are concerned with potential rather than present-day rent and speculate on the gap between the two. Land can be traded on the likelihood that its potential use will bring in a higher rent than it currently attracts, and it is the title to a future income stream that is bought and sold. Contemporary practices in land markets no longer correspond to the neoclassical economic model in which value is dependent on productive use (Savini and Aalbers, 2016).

The urban and rural planning systems that emerged in North America, Britain, and Australia adopted the pursuit of higher land values as the operating principle for the rational development of the built environment. Land markets provided the basic organising mechanism for the allocation of land uses and the role of statutory planning was limited to the prevention of the worst speculative abuses (Harvey, 2006: 371). In neoclassical economic theory markets are supposedly self-regulating and prices carry information that enables buyers and sellers to maximise their utility. The price mechanism in land markets was accepted as the arbiter of public interest outcomes in the built environment. Property development that raised the price of land was judged to provide the greatest good of the greatest number, so long as so-called externalities and wasteful uses were mitigated by legally binding plans, zoning policies and design codes (Winkler and Duminy, 2016). The property market’s quest for the highest and best use of land became synonymous with the public interest in planning. 

The pursuit of higher land values by landowners and developers was understood to promote the most rational and, it was implied, the best use of land. The value of land, expressed as its rental yield, was supposed to reflect its utility. The concept of bid rent was the guiding economic model, and it was assumed that the highest prices were bid for the most productive uses of land (Haila, 2016). As a rationale of land valuation, the theory of bid rent depended on an understanding of land as a commodity whose supply was determined by the demand for its use and mediated by the price paid. Land was considered simply another factor of production alongside labour and capital. In this departure from classical rent theory the relations of power involved in the rent relationship and the monopoly privileges inherent to the exclusive ownership of property disappeared from view. 

If land is treated as a commodity its finite nature is obscured. All concerns over the sustainable management of land and environmental resources lose their urgency. The role of statutory planning in regulating the supply of land takes on the problematic form of a distortion of the price mechanism, since the supply of commodities is expected to respond to demand. The anti-speculation message of the town planning movement also appears less relevant. If land is thought of as a commodity, then speculation in land values can be normalised as a practice consistent with the circulation of interest-bearing capital. If land is treated as a commodity, real estate development appears as an investment in “imaginary, fictitious capital” (Harvey, 2006: 347); the rent it yields “can be considered as the interest on an imaginary capital,” (Marx 1981: 760) and landowners become entrepreneurs rather than rentiers. 

“The fact that it is only the title a number of people have to property in the earth that enables them to appropriate a part of society’s surplus labour as tribute … is concealed by the fact that the capitalised rent … appears as the price of land, which can be bought and sold just like any other item of trade …. Rent seems to him [the landowner], as we have already noted, simply interest on the capital with which he has purchased the land, and with it the claim to rent,” Marx (1981: 911) observed in Capital volume three.

The contention that land is a fictitious commodity recurs in Karl Polanyi’s (2001) classic work The Great Transformation.  In Polanyi’s thesis, labour, land, and money are all fictitious commodities but all three are essential to the operation of a self-regulating market economy. Since labour, land and money are “human and natural components of the social fabric,” to allow them to be distributed by price alone is to subordinate the substance of society itself to the laws of the market, Polanyi argued. Society must instead regulate their use to avoid “neighbourhoods and landscapes defiled, rivers polluted…the power to produce food and raw materials destroyed” (Polanyi, 2001:94). This forceful reminder that land is the foundation of existence returns us to the monopoly relationship central to land markets. What is bought and sold is not a commodity called land but the legal title to the exclusive ownership of a piece of the earth and the right to extract value from it. The rent charged for land is a tax or tribute exacted on existence and can be understood therefore as “a claim upon the future fruits of labour” (Harvey 2006: 367). It is the title to property rights – the right to exclude everyone else from a piece of the earth – that enables landowners to charge rent. 

Land is bought and sold just like any other commodity, but the rent paid for it, capitalised in the price of houses built, is payment for a monopoly on space. No two people can occupy exactly the same point in space and this characteristic of absolute space is institutionalised through the private property relation, “so that owners possess monopoly privileges over pieces of space,” Harvey (1973: 168) argued in Social Justice and the City. If property rights are not regulated to prevent the abuse of this monopoly, landowners are able and encouraged to speculate on the rental value of land; to treat their land as a pure financial asset. “This tendency means that the investing motive, compared with the use motive, becomes more prevalent. Land is purchased, developed, rented, and sold with an eye to the future expected revenue. It is expected rents that coordinate land uses,” Anne Haila (1990: 290) explained. The rent charged for land is the price exacted for a monopoly on space and the use that land is put to will be determined by the price paid. Landowners seek a use value that attracts the highest potential rent and land use becomes an object of speculative investment. Rent no longer appears as a residual cost of the productive process as neoclassical economic models predict. Instead rent determines land use and not the other way round. Land markets coordinate the “highest” uses, but not necessarily the “best” or the most rational. 

In a financialised land regime, housing is the outcome, and almost a side-effect, of the treatment of land as a pure financial asset and object of speculative investment (Haila, 2016: 33). Houses built and bought under a financialised land regime have “the materiality of cement, brick and concrete,” but “are, at the same time, abstractions, fractions of units of value circulating in the financial sphere,” Raquel Rolnik (2019: 57) said. The use values of housing – where it is built, what is built, how it is built and whether housing is built at all ­– will be all determined by its exchange value. 

Planning for housing need

The historic role of town planning in the supply of housing has been to allocate land uses to address social need. The delivery of decent quality, affordable homes for all was the immediate goal of the early town planning movements in United States, Australia, and Britain, although only in the latter country did this translate into the mass distribution of public low-cost housing. In statutory planning systems today, the concept of need coexists uneasily with a commitment to the price mechanism as the arbiter of fairness in outcomes. Land use is allocated according to an administrative assessment of housing need while housing itself is distributed on the basis of market demand.

The social concept of need and the economic model of demand are two quite different things (Harvey 1973: 154). Housing need is “the housing that households require even if they cannot afford it.” Housing demand is “the housing that households are able to afford even if they don’t need it” (CPRE, 2017: 12). Demand for housing is measured by ability to pay and personal financial resources alone set limits on how many homes or how much property any one person can have. The scarcity and unequal distribution of housing that results drives up prices and reduces supply for those with fewer resources. Housing demand is a purely economic concept that refers only to credit and wealth. Housing need, in contrast, is a social concept that refers to the essential criteria required to participate in society, and therefore in economic activity. There can be no housing preferences, no choice, no demand, and no ability to pay if need is not already met. The concept of housing need is concerned with the distribution as well as the supply of housing. It requires land and housing to be allocated to address priorities before individual preferences can be satisfied through the price mechanism.

In a liberal economic perspective “the idea of need signifies no more than a preference shared by many people” that is best addressed by the private market (Doyal and Gough, 1991: 10). In practice, however, definitions of need are in everyday use and universally accepted. “So general is this use that it is hard to imagine how we could function without it,” noted Len Doyal and Ian Gough (1991:1) authors of A Theory of Human Need. The concept of need is about precedence and priorities, and it is a system universally adopted in political and legal frameworks. It is understood that the satisfaction of basic needs comes before the satisfaction of wants. There are some requirements that are necessary for the avoidance of serious harm; there are others that are not necessary, and it is possible to tell the difference between the two. Adequate housing is a need that must be satisfied if serious harm is to be avoided and that means everybody needs a home that offers protection against the elements, provides sanitation, water, heating, and insulation, and ensures a degree of privacy, space, light, and air. Definitions of housing need have been codified in law and are evaluated according to key themes of quality, security, and privacy, and the suitability of housing to health and social welfare. Turned into operational criteria, these definitions of need provide a mechanism for making collective decisions about priorities for the supply and distribution of housing, the type and standard required, what it should cost, and where it should be located. 

The principle of housing need puts emphasis on housing as a collective concern. Unmet need will be eradicated if enough adequate housing is supplied and allocated to meet priority requirements (Whitehead, 1991876). The ability to quantify need, and apply priorities to public action, leads to policy assumptions that housing need is not only calculable but finite. In other words, the task of meeting housing need can be adopted as a goal of public policy, targets for progress can be established, and a defined collective programme of work can be identified to improve the quality of the existing stock and provide additional adequate housing distributed according to priorities. The administrative distribution of housing by need replaces the price mechanism with another form of rationing, one that invites subjective interpretation and is open to contingent judgements. The goal of needs-based provision, therefore, must be to “combine the individual right to needs satisfaction with the right to participate in deciding how such satisfaction is to occur in practice” (Doyal and Gough, 1991: 4). The determination of need by professionals was a defining characteristic of welfare state provision and the target of criticism by social movements who championed the subjective, felt and expressed needs that went unrecognised in the supposedly objective assessments of paternalist providers.

Many European countries recognise statutory obligations on public authorities to satisfy housing needs; to provide conditional support to prevent homelessness, or to secure alternative adequate housing for those considered in priority categories (Fitzgerald, Bengtsson and Watts, 2014). The provision of services on the basis of need is often conditional and means-tested and the allocation of public resources is rationed with parsimonious patronage. The concept of need has been tainted by a morality in which ability to pay is conflated with virtue, and the exchange value of a commodity is considered a measurement of its true worth. In the place of conditionality, a framework of rights emphasises the collective nature of need and the knowledge that the functioning of society depends on basic needs being met. In his renowned essay Citizenship and Social Class, Thomas Humphrey Marshall (1950) articulated the needs-based provision of the welfare state in terms of social rights. Social rights were an entitlement due to all citizens to ensure equality. The intended outcome was to be: “compression at both ends of the scale of income distribution; the great extension of the area of common culture and common experience; third the enrichment of the universal status of citizenship” (Marshall, 1950: 75). This emphasis on social rights was intended to cleanse the concept of need of any connotation of stigma and emphasise instead the universality of needs and foster an awareness of the interconnections and community bonds of mutual aid. In a 1967 lecture on universalism versus selection, Richard Titmuss, that other great theorist of the welfare state, argued: “In the main spheres of need, some structure of universalism is an essential prerequisite to selective positive discrimination; it provides a general system of values and a sense of community” (Titmuss, 2014: 38).

In human rights law, adequate housing is an entitlement of all citizens. The right to adequate housing enshrined in the United Nations Universal Declaration of Human Rights (1948) and other international legal instruments extends that right across frontiers. It obliges signatory nations to take material steps to promote access to housing of an adequate standard and emphasises security of tenure, protection from forced eviction and access to facilities and services. The distribution of housing by ability to pay rather than by priority need is regarded by the United Nations as the primary threat to the implementation of these programmes. Housing treated as a commodity for speculation is divorced from its social function. A 2017 report to the Human Rights Council from the UN Special Rapporteur for the Right to Adequate Housing, Leilani Farha (2017), argued that “rather than treating housing as a commodity valued primarily as an asset for the accumulation of wealth” nation states should “reclaim housing as a social good, and thus ensure the human right to a place to live in security and dignity”. 

The provision of housing as use value, as a social good and a “collective amenity” (Titmuss, 2014: 40) is a matter for land use planning and one that has huge implications for land and property markets. How would urban development proceed if structured around use values rather than exchange values, asked Cliff Hague (1984: 323) in his book on The Development of Planning Thought. His response was to set out a radical blueprint for town planning. Settlements would be planned to meet generalisable needs; all people should be decently housed in safe and attractive environments; there should be a basic equality of access to facilities through provision based on need, not through markets; and the planning of production and employment should go hand in hand with planning the city so that all people should have access to socially worthwhile employment opportunities, with good public transport, cycling and walking routes, and public space “which can be used when people want, not when the security guards hired by private owners deem it permissible” (Hague, 1984: 324).

This is, as Cliff Hague said, is a set of practical prescriptions ­that “are frankly oppositional to trends presently categorised as ‘practical’” ­– since they require wide-ranging social change. It would be easy to consign this blueprint to the category of utopian thought, defined by John Friedmann (2000:462) as “a way of breaking through the barriers of convention into a sphere of the imagination where many things beyond our everyday experience become feasible.” Town planning has a long tradition of utopian thought, but its practice is equally skilled in the mapping of concrete futures. To make housing available on the basis of need, rather than ability to pay, requires a town planning system capable of intervening in land markets with the power to allocate privately owned land for public use. What it demands from a town planning system is the disruption of private property rights and the equitable redistribution of land and land values.