The aim of this book is to evaluate the effectiveness of the commodity known as affordable housing. The starting point for this evaluation is a switch in policy goals from the priorities of need to concern about the price of housing. Needs-based housing policies addressed themselves primarily to use values and the provision of decent homes regardless of cost. Affordability referred explicitly to exchange values. It transformed the concept of need into an exchangeable commodity. This introductory chapter characterises affordability as an economic valuation of need, or the pricing of a prized goal. Price is made the standard against which housing priorities are measured. It is this act of valuation that guides the book’s critique of affordability, and it is the value form of affordable housing – its production, circulation, and exchange – that provides its trajectory.
From Need to Affordability
A devastating shift in housing policy has caused governments across the world to neglect the housing needs of their populations and abandon their people without decent homes. In this switch in policies, a preoccupation with price and affordability has replaced the priorities of need. Housing need is concerned with the fair distribution of housing. The assessment of need advances a desired end or goal of housing policy – the universal provision of decent homes regardless of ability to pay. Housing need is enshrined in international law by the United Nations Right to Adequate Housing in article 25 of the Universal Declaration of Human Rights (1948). It is classified by lack of shelter, by overcrowding, unfit housing, and housing that is unsuitable for social flourishing. It is calculated in unmet need and the annual flow of arising need. Affordability, by contrast, is occupied only with the price of housing and the ability of households to meet their housing costs. Affordability has replaced need with price. It has made economic value the only priority, and it has undermined the will of governments to tackle a global crisis of homelessness and overcrowding, of inadequate and unobtainable homes.
Strategies to address unmet housing need are not directly concerned with expenditure or income. What matters is the fair distribution of decent housing to everyone who needs it. Housing need combines a definition of home quality standards with a calculation of households living in accommodation below this standard. Unmet housing need will be eradicated when enough homes are provided to match households to dwellings at the desired quality. Unmet housing need is a problem that can be solved. Affordability is not. Affordability has nothing to say about housing quality standards, neither in the existing stock of homes or in new supply. Affordability is not about decent housing. An affordable home may be smaller and of poorer standard and have lower quality fixtures and fittings than comparable housing at market value. Housing may be called affordable without being cheaper than homes available at market price (Bramley, 2006). What is an affordable price in one area will be unaffordable in the next.
Affordability has put a price on need. It has condensed all the characteristics of housing need into a single question of ability to pay. All the qualitative standards of housing need, of size, condition, suitability, security, and associated matters of equality and fairness have been expunged. Price is a one-dimensional assessment of value and what is most prized is lost in translation. In the act of valuation, the substitution of price as a measure of worth focuses exclusively on a monetary transaction (Beckert and Aspers, 2011; Carruthers and Espeland, 1998). Making housing affordable does nothing to address the backlog of inadequate housing, overcrowding, or homelessness. It does nothing to improve the standard of accommodation, nor does it provide for security of tenure. All the concerns of housing need are condensed into an economic calculation of whether someone can pay the market price. Price transforms housing for need into a commodity for exchange. The strategic aim of policy is no longer to replace a stock of unfit properties, provide housing as a universal right, or prioritise those in need for rehousing. The concept of affordability values these policy goals according to their exchange rate with other commodities. Relation to price is the only determinant.
From Ends to Means
Price is a comparative reference. Home prices are the product of a market valuation of comparable property exchanges in a similar location. Affordability is a reference to market value and to the income required to pay the market price. These twin poles – the market value of property and the market value of labour – top and tail the slippery definitions of affordable housing. An assessment of affordability measures a household’s ability to pay the market value. Eligibility for affordable housing, or for housing assistance, is tested against household income levels, measured against median incomes, assessed in local labour markets, and influenced by minimum wage legislation. There are three metrics of affordability in use, and they all refer to a relationship between income and housing costs. These metrics are based on mortgage lending rates and the rationing of means-tested subsidies. They shift upwards as prices rise. The percentage of income spent on housing is the affordability rule favoured by economists. The original definition from the 1880s was that affordable housing should cost no more than 20 percent of income. This rule lasted until the 1950s when it rose to 25 percent. By the 1980s it had become 30 percent of income. Affordability is currently defined as housing that costs no more than 40 percent of income (Caturianas, Lewandowski, Sokołowski, et.al., 2020; Hulchanski, 1995). An affordable price is a market valuation of commercial return. As profit is extracted, and real estate values rise, so too does the threshold of affordability.
In today’s economic mainstream, in what is called neoclassical economics, home prices are not inflated, nor are they out of control. Price is not a problem. It is understood to be an outcome of supply and demand, and if demand exceeds supply, then prices will rise. The solution to rising prices, then, is to boost supply. This supply side story, with its narrative of a housing shortage is exported globally, but it bears little relation to any of the unending crises of housing need in the world. High-value properties that are not homes but assets for capital investment are thrown up according to the rationale that new supply at the top of the market will admit availability at the bottom. State policies to liberalise credit markets and license property development are justified by the construct of affordability as unmet demand. Public assets, in grants, loan guarantees and tax exemptions, are deployed to establish a niche market in affordable housing as a profitable sector of real estate commerce, with states providing the legislative framework, the regulations and affordability checks to guarantee minimal risk returns to capital markets, private developers, and landowners. The requirement to construct an affordable housing sector that can generate a dependable surplus in rents, sales, and interest payments, and still discount the price of exchange, means that homes are often built in low-value neighbourhoods, on peripheral land at unsustainable locations, of low-quality construction. Affordable rents offer only a marginal discount on market valuation and are in some cases higher than in the local profit rental market. The affordability discount may expire when subsidies are exhausted and the beneficiaries of affordable housing rise inexorably up the income scale as home prices continue their ascent. The purpose of affordable housing is not to reduce home prices but to uphold them.
The global crisis of housing need is a problem of distribution, not a problem of supply. When all housing is commodified, and access is determined by ability to pay, affordability is a meaningless term. When everyone, no matter what their income, no matter what their assessed needs, must compete in the same housing market, those with the least money will get the worst homes, or none at all, and pay more for them as a proportion of their incomes. Homes can be produced in any number, but that will not solve a crisis of housing need. Those with the most spending power will consume more housing and everyone whose income is too low to compete in this feeding frenzy will be simply left out. Unmet housing need worsens when homes are distributed only according to ability to pay. As the economist Christine Whitehead (1991: 872) commented, “Neither need nor affordability would require definition if private markets were able to achieve acceptable housing.” Affordable housing exists to shore-up the pretence that commodity markets can bring about equitable outcomes.
From Values to Exchange Value
Affordable housing has orchestrated an economic valuation of need. In economic terms, an act of valuation is a matter of putting a price on things and price entails a judgement about values. There should be, Professor of Sociology Marion Fourcade (2011b: 1721) says, some sort of “feedback loop from monetary values to social practices.” We need to inquire into the social consequences of an economic valuation; what has been achieved by the pricing of housing need, and its transformation into a problem of affordability? In this act of valuation, the value placed on housing need, and the goal of providing decent homes for all, has lost worth. The value of the price of housing has increased in worth. When value is measured in money, the only way to satisfy housing need is to pay for it.
When price is value, value is the money a consumer is willing to pay to get goods, in this case adequate housing (De Brunhoff, 2015). When goods are exchanged on the market, they are reduced to expressions of value (Mau, 2023). The proportions of this exchange are calculated in the form of the universal equivalent: price; what Karl Marx called the form of value in general. “What first of all, practically concerns producers when they make an exchange, is the question, how much of some other product they get for their own? in what proportions the products are exchangeable?” wrote Marx (1990: 74). As a commodity, housing bears value; it has a money price. Its value is commensurate with that of other commodities, and it can be exchanged for the money price of equivalent values. Housing need, on the other hand, is a social goal we care about, or should care about (Fourcade, 2011a: 45). To turn unmet housing need into a commodity it is necessary to think about it as something that can be standardised, and made comparable, so that it can be given an exchange value. This is a process of commensuration: “a complex social process. It often requires vast resources, elaborate coordination, and diligent and imaginative labour,” (Espeland and Levine, 2002: 120). Affordability is the process of making housing need commensurable. It transforms need into a measure of value that can be priced in exchange.
The fulfilment of housing need – a goal that is prized as the aim of housing policy – has been given a market value; it has been appraised in financial terms. A prized goal – the provision of decent housing for all – has been priced. This wordplay between prize and price is employed by the philosopher John Dewey (1939) to demonstrate the double meaning implicit in the act of valuation. A thing can be valued as in prized or held precious, and it can be valued and priced, as in given a monetary value. This last act of valuation implies an objective standard of measurement. Are the two forms of valuation separate or are they complementary? In his Theory of Valuation Dewey (1939: 25) argued that these dual activities can indeed be compared, and that the activity of pricing can be understood, and evaluated, as a means to a prized end or goal. Implicit in the act of valuation, Dewey said, is an attraction towards an improved situation. There is a means-end relationship between pricing and prizing, between valuation and the values to be attained. The act of valuation is an assessment of the labour and resources required to achieve a prized goal. There must be a “specifiable and testable relation between the latter as an end and certain activities as means for accomplishing it” (Dewey, 1939: 13). My aim in this book is to apply Dewey’s argument to the shift from housing need to affordability, to examine the relation of means to ends, and to evaluate the outcome. If the end of these means is the devaluation of housing need, then the book will demonstrate the failure of affordable housing and of affordability itself as a housing policy goal.
John Dewey regarded valuation as inseparably bound to the identification of a problem and the appraisal of the means necessary to solve that problem. “Valuation takes place only when there is something the matter; when there is some trouble to be done away with,” Dewey (1939: 34) maintained in his Theory of Valuation. This “trouble” could be a lack of something needed; a privation to be made good. An act of valuation must involve thoughts about the value of desirable ends, include an appraisal of the means that need to be invested to achieve those ends, and institute an evaluation of anticipated consequences. Valuation is an integrated process of defining “ends-in-view” (Chiapello, 2015: 16; Krüger and Reinhart, 2017). If affordable housing policies, as acts of valuation, have a desired goal, it is to fulfil need; to provide decent homes for all. As a valuation, we would expect affordability to price the resources and labour necessary to comprehensively address housing needs. Affordability does not do this. Affordability has not brought about an assessment of means to ends. It merely points to the existence of a commodity market in housing and attempts to enable an exchange. Affordability maintains that adequate housing will be available for all when the market price of housing is payable by all. What is valued – the provision of decent homes for all – is condensed into one value: price.
Value in Motion
Value for the famous classical economists, Adam Smith, David Ricardo and Karl Marx, was a measure of the labour and resources necessary to fulfil human needs. Value described a relationship between ends and means, and the dedication of productive activity to a task or problem. In his critique of political economy, in the first volume of Capital (1990: 125), Karl Marx follows this definition of value through the circuits of capitalism. In capital’s “immense accumulation of commodities,” value is a measure of the human effort required to meet need, but those needs are not met directly. The human productive activity necessary to meet need is sold as a commodity. It is sold to an employer in standardised units of labour-time and put to work in making commodities. Value – a measure of human dedication to valued needs – becomes the money price charged for a commodity sold to satisfy need. The value placed on the fulfilment of human needs is measured in social labour, but that labour is not mobilised directly to achieve a desired goal. Only by selling labour-power as a commodity in exchange for money, can money be exchanged for commodities to meet human needs. Value is no longer attached to the desired goal – to the fulfilment of need. Value is attached to the commodity (Marx, 1973: 252; Rubin, 1972). The possession of things that bear value – whether those things are money, commodities, or labour power to sell as a commodity – is now the condition for the fulfilment of need. The pursuit of value and the acquisition of value, in the form of money, commodities, or money as capital, becomes the primary goal and the fulfilment of need merely a means to this end.
In his theory of valuation, John Dewey (1939) maintained that the value attached to a prized goal was inseparable from an appraisal of the activity and resources necessary to obtain it. Value resides in action, in doing, making, and caring, and valuation is a judgement about means to ends. Marx’s critique of political economy connects value to social values in a means-ends relation. Value, in Capital, is a measure of the total labour of society dedicated to meeting social needs. The labour of society can be mobilised to produce housing in its decommodified form as a use value for need. Or labour can be sold as a commodity to produce housing as a commodity, which is exchanged for money, with price as its only measure of value.
Affordable housing is a valuation of need in a commodity that bears value. Affordability has transferred a valued goal, the fulfilment of housing need, to the value-form or price of a commodity called affordable housing. The value we place on meeting housing need is expressed in the value price of this commodity. To understand affordability, we need to examine the act of commodity exchange and the value-form of affordable housing, its production, circulation, and exchange. Affordable housing is a commodity produced for exchange at price, but that price is discounted to facilitate the exchange. It is not affordable because it is cheaper, but because value is added to subsidise the price. Affordable housing adds value to create more value in commodity production and exchange. There is no fall in price or profits, and housing costs continue to escalate. The purpose of affordable housing is to maintain the flow of value compelling house price inflation. Affordable housing makes housing unaffordable.
Trajectory of the Book
In this book I aim to follow the flow of value through the development and financing of new affordable housing, as it is produced, as it is realised in exchange, and as it circulates as capital in the global real estate market. Where does this value come from, who pays for it, and what is the effect of affordable housing on a global crisis of housing need? I contrast the policy construct of affordability, and the commodity known as affordable housing, with the priorities of housing need. The values of housing need are associated in countries around the world with the social provision of decent housing distributed directly as a universal service, regardless of ability to pay, and outside the process of commodity exchange (Scanlon, Whitehead, and Arrigoitia, 2014). In Chapter Two, I introduce the concept of decommodification, essential to housing strategies that address needs and that aim to counter inequality in wealth and income. I review the practical provision of housing as a use value, distributed directly to address need, irrespective of price, and removed from the circuits of commodity exchange. The rise of affordability as a housing construct is associated with the dissolution, disposal, and demolition of decommodified housing in all its socialised forms. The decimation of socialised housing made the fulfilment of need contingent on ability to pay, and the subsequent escalation of home prices exasperated the inequalities of the housing market. These soaring housing costs were presented as a crisis of affordability. The problem was how to maintain demand without reducing prices. Affordable housing is a response to this crisis. It is a commodity produced for exchange at price, but that price is discounted to facilitate the exchange, benefiting first those with the ability to pay and excluding many of those who cannot.
Chapter Three explores the meaning of affordability in an economy where the price is always right. Affordability puts an economic value on the priorities of housing need. It suggests that the unequal distribution of adequate housing can be remedied by the operation of supply and demand in the housing market. Affordability has become the justification for boosting housing supply and unleashing financial speculation in real estate. This chapter critiques the economics of supply and demand and explores the contingencies of these categories in the differing use values of housing. Its aim is to situate the dynamics of price and value within the circulation of capital. The chapter asks what it means to make affordability the goal of housing policy in a system where value is determined by price. If demand is social need with ‘money to back it up,’ as Marx said, what is need without money? Affordable housing is a commodity that produces value, realises value, and enables the extraction of value but at the same time – in its relation to need – changes the idea of value entirely. Drawing on Marx’s theory of value, I identify affordable housing itself as critical to the flows of value driving house prices to astronomic heights.
In Chapter Four I follow the flow of value into the construction and development of new affordable housing in its various commodity forms. Affordable housing transforms the social task of producing housing for need into the supply of a commodity exchanged at price. The value we place on housing is realised only in the act of exchange, expressed in the universal form of comparison, price. Affordable housing can only assuage need if it is acquired as a commodity. This chapter explores the production of affordable housing as a niche market in real estate investment. What makes affordable housing supposedly affordable is a package of public subsidies and private credit that is used to discount prices. Tracking the cost of this credit as it returns to investors as interest, I examine the way it transforms housing policy and practice, how it changes who gets housed, and what they must pay. As the flow of value undermines the quality of homes and the accountability of landlords, I ask, what happens to the goal of decent housing for all, when price becomes the decisive criteria.
Affordable housing is value in motion, generating returns on investment as interest-bearing capital or as surplus value extracted from land rent. Chapter Five follows the value of affordable housing as it flows through the land. Land values are propelling housing costs, but that same surge in value is diverted to subsidise the price of affordability. The allocation of land as a use value is the primary means to decommodify housing, but the provision of affordable housing depends on the treatment of land as a fictitious financial asset. Land values must be forced upwards to subsidise a supply of affordable homes, but affordability worsens as land prices rise. Affordable housing is marooned in the centre of circulating flows of value, appearing alternately as the remedy of land speculation, and as its beneficiary. In this chapter, I review the effectiveness of inclusive zoning policies and the use of planning obligations to acquire affordable housing as value diverted from the profits of real estate development. The provision of affordable homes depends on the viability of development; meaning that the providers must profit. Valuation and viability stake out a decisive battlefield on which rival claims to value are fought, but affordability is an illusory goal in a housing market dependent on continuously rising land rents.
Affordability put a price on housing need and the needs assessments of residual welfare systems are mediated by ability to pay. Chapter Six investigates the way affordable housing need is calculated, it compares municipal plans for affordable supply, examines the targets or lack of them, and the degree to which the resources required to address need are provided. It identifies the deliberate and systemic undercounting of need that is done to maintain the illusion that the market can deliver social goals. Affordable housing is rendered affordable by the addition of a price subsidy paid in value to discount the price of exchange. This value comes from three sources: profit on production, interest on credit and uplift on land rent. This subsidy is not a gift. Surplus value must be paid back in rents, fees, and labour. Chapter Six exposes the unaffordable prices extracted by the myth of affordability in the intermediate housing market where the affordable price exceeds market costs. This chapter exposes the part played by affordable housing in the conviction politics of social mixing and the landscape of segregation, exclusion and banishment that has resulted. Affordable housing provides a stigmatised safety net that prices out those most in need.
Chapter Seven comes back to the questions of ends, and to the goal of providing decent housing for all. That goal is not achieved through the commodification of need. The value form of affordable housing only feeds price inflation in the circuit of capital. The popular response to global housing unaffordability has been to demand a return to social housing, but that path may simply expand a residual and stigmatised service. How can social housing effectively disrupt the stratification of capitalist society and reduce dependence on the commodity market? How can its egalitarian effects be magnified and its co-operative and democratic achievements be advanced? I seek to map out new means to ends and to turn attention to what is valued, and what is valuable in the direct provision of socialised housing for all.