Europe and North America.
The dilemma of affordable housing and big cities
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.
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
