Capital City: Gentrification and the Real Estate State – Next City

A 2017 protest of gentrification in Sunnyside, Queens.

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Capital City: Gentrification and the Real Estate State

Tapping into the remarkable power of city planning to reclaim urban life for all residents.

Story by Samuel Stein

Published on Mar 4, 2019

EDITOR’S NOTE: Next City’s Oscar Perry Abello spoke with author Samuel Stein last week about his new book, “Capital City: Gentrification and the Real Estate State,” published by Verso Books. The following is an excerpt from the book’s introduction, in which the author digs into the ways the state uses and is used by capital — in particular, the $217-trillion real estate industry — and how urban planners often find themselves conflicted between the need to make cities “better” and more liveable and the pressure to make decisions in service to rising real-estate values.

On March 25, 1911, fire engulfed New York’s Triangle Shirtwaist Factory. The bosses had locked the doors and 146 workers were killed. Two days later, the Jewish socialist newspaper The Forward printed an impassioned plea from its editor, Abraham Cahan. After describing the pain felt throughout Manhattan’s Lower East Side, Cahan wrote that mourners were beginning to see a figure through their tears: the biblical Angel of Death. “Who is the Angel of Death? Who is the thug? Who is the mass murderer? Must we again say it is that gluttonous ravager of humans — capital?!”

Just over a century later, a public housing complex in West London called the Grenfell Tower burst into flames. Though residents had warned that the building was a firetrap, public authorities allowed it to deteriorate. When the fire started, it quickly accelerated due to the highly flammable cladding that management had added to the building’s exterior in order to make it more attractive to posh neighbors. The fire killed over seventy tenants.

Who is the Angel of Death? Who is the mass murderer?

Today, as a century ago, the culprit is capital, rushing in and out of spaces with abandon in search of profit and growth. In 1911, the arsonist was industrial capital, then the dominant force in urban politics. In 2017, it was real estate capital. Around the world, more and more money is being invested in real estate, the business of building, buying and renting land and property. You can sense it as you walk through most cities, and feel it every time you pay the rent or mortgage.

Global real estate is now worth $217 trillion, 36 times the value of all the gold ever mined. It makes up 60 percent of the world’s assets, and the vast majority of that wealth — roughly 75 percent — is in housing. There are a number of reasons why capital is converging on land and buildings: a long period of financial deregulation, low federal interest rates and “quantitative easing” in the United States; massive urbanization programs in China, the United Arab Emirates and several other countries; a proliferation of predatory equity funds scouring the globe for “undervalued” investment opportunities and finding them in housing; economic polarization around the world, with extremely wealthy and somewhat nervous individuals viewing property as the safest place to hide their money; and more. When capital gains rise while rates of profit plummet across many once-dynamic sectors of the economy, real estate becomes the latest stop on what geographer Cindi Katz calls “vagabond” capitalism’s eternal search for profitability.

In the United States, homes are changing hands at a rapid pace, but homeownership is at a fifty-year low. In 2016, a record 37 percent of home sales were made to absentee investors. While some of those buyers were pensionless seniors who needed a retirement strategy, most of them were banks, hedge funds and private equity firms like Blackstone — now the world’s largest landlord.

There is not a single county in the country where a full-time minimum wage worker can afford the average two-bedroom apartment. Rent burdens — the percentage of income tenants put toward housing — are becoming oppressive, particularly for people of color in segregated neighborhoods.

As renting rises, so do rents. Average move-in rents in the United States have more than doubled over the last two decades. Prices vary dramatically across the country, but the trend is clearly upward, with the fastest growth in mid-sized cities like Seattle, Portland, Denver and Cincinnati. Wages, however, remain stagnant, putting tenants in a bind. There is not a single county in the country where a full-time minimum wage worker can afford the average two-bedroom apartment. Rent burdens — the percentage of income tenants put toward housing — are becoming oppressive, particularly for people of color in segregated neighborhoods. Around the country, rent burdens in Black neighborhoods average 44 percent; in Latino neighborhoods, it’s 48 percent. Every month in New York City, almost two million people pass most of their income to landlords.

With wages flat, many people — even those with full-time jobs — simply cannot afford stable housing. Last year, as cities and states continued to pass punitive legislation against the poor, about 2 million people in the United States went homeless and 7 million more lived in precarious housing situations — doubled or tripled up, couch surfing or sleeping in shift beds. This opens the door to an entire industry of private homeless services, with philanthropic and real estate capital blended to find profits in extreme poverty.

The force behind these trends is the growing centrality of urban real estate to capital’s global growth strategy. Through this process, the price of land becomes a central economic determinate and a dominant political issue. The clunky term “gentrification” becomes a household word and displacement an everyday fact of life. Housing becomes a globally traded financial asset, creating the conditions for synchronized bubbles and crashes. Government, particularly at the municipal level, becomes increasingly obsessed with raising property values and redistributing wealth upward through land and rents. Real estate developer Donald Trump becomes first a celebrity and ultimately a president. Taken together, we witness the rise of the real estate state, a political formation in which real estate capital has inordinate influence over the shape of our cities, the parameters of our politics and the lives we lead.

The real estate state is not new, nor is it all-encompassing. Like the carceral state, the warfare state, the welfare state or the administrative state, it is an expression of government — a component, a bloc, a manifestation, a tendency — that has been around in one form or another for as long as states and private property have existed. Landowners have been determining the shape of cities for centuries, and the idea of housing as a commodity — even as a financial asset — is not exactly state of the art. What is relatively new, however, is the outsized power of real estate interests within the capitalist state. As real estate values have risen to absurd heights, so has the political force of real estate capital.

The real estate state is a feature of government at all levels, from the hyper-local to the global. It is most firmly grafted onto municipal governments, however, because that is where much of the capitalist state’s physical planning is done. City planners therefore sit uncomfortably at the center of this maelstrom. Planners manage the levers of urban change and make crucial decisions about land use, transportation, housing, the environment and more. Though most people have no idea what they actually do, planners have an immense impact on both capitalists and workers in cities and suburbs. In most places, planners are tasked with the contradictory goals of inflating real estate values while safeguarding residents’ best interests. Capitalism never made planning easy –organized money could always thwart the best laid plans — but today’s urban planners face an existential crisis: if the city is an investment strategy, are they just wealth managers?

This book is about planners in cities run by real estate. It describes how real estate came to rule, and what planners do under these circumstances. Planners provide a window into the practical dynamics of urban change: the way the state both uses and is used by organized capital, and the power of landlords and developers at every level of government. They also possess some of the powers we must deploy if we ever wish to reclaim our cities from real estate capital. Understanding planners is an important way to understand the capitalist state — how it is built, and what it would take to dismantle it.

While the nexus of planning and real estate is a powerful dynamic in nearly every city, I mostly focus on the United States, and often use New York City as a prime example. I realize there is some risk in focusing on New York: for a US city, it is exceptionally large, dense and expensive. But as the biggest city in the United States, it serves as an example for many other places. Planners from around the country look to New York for new patterns and practices. It is also a place where real estate’s rule is clearly seen and deeply felt. The rents are outrageous, and the cost of living is among the most persistent public issues. Most of all, though, I use New York because it is my home and the place from which I see the world. I know its gridded streets as well as its crooked politicians, and I’ve lived here long enough to feel like the city knows me too.

I am a planner. Though I don’t work for a government agency and I’m not in charge of managing any physical spaces, I was trained as a planner and I maintain elements of the planner’s worldview: to be simultaneously abstract and concrete, utopian and pragmatic; to imagine what doesn’t yet exist while figuring out how to get there; to care about systems and processes, the way things work and the way they ought to. Fundamentally, we believe it is a good idea to have a plan — an explication of the future. Planning is a way of knowing the world as well as a way of remaking it.

Like a lot of people, I became interested in planning because I was mad at planners. I loved my city, but I hated what it was becoming. I came to know New York at the start of the 21st century, when it seemed like construction cranes were as common as pigeons and scaffolding was the new streetscape. Gigantic glass towers were rising all over the place, reflecting the old city grotesquely through their distorted mirror facades.

Planning today is defined by incredible dreams and stultifying realities. A planner’s mission is to imagine a better world, but their day-to-day work involves producing a more profitable one.

I thought the architecture was stupid, but that wasn’t what really bothered me. I was working for a union, and though we were winning big victories, there was a growing sense that the city we were fighting for was disappearing all around us. The working-class people who made the city could no longer afford to live in it. Rents were skyrocketing and culturally important spaces were shuttering. I learned the rent laws’ limits when I was kicked out of a low-cost apartment. It was a stark lesson in landlord-tenant power relations: my landlord tried to kill the downstairs neighbors and torch the place, but he got to keep the building; the lessee had sublet the apartment to me without registering and we were served an eviction notice.

I was excited by some endeavors that New York City planners were undertaking at the time, like building public plazas and extending the bike network, but I knew these benefits were linked to larger plots: rezonings that brought luxury development; mega-projects that turned the urban fabric threadbare; and management schemes that turned public goods into private fiefdoms. I pursued planning because I wanted to understand how the city works, and to figure out how to preserve the best parts and change the worst. I believed in planning’s promise of better spaces and a better society, even if I understood intuitively that planners had not exactly delivered on it. I had two basic questions: First, how much planning will capitalism allow in market-based systems? And second, how can we improve our cities without inducing gentrification and displacement? I spent two and a half years studying planning history and theory, quantitative and qualitative methods, public finance, transportation, housing and more. I learned a little about planning, and a lot more about how planners think. There were tons of good ideas bandied about, and countless practical ways to reapportion space and rethink urban infrastructures. But I had a hard time answering my questions.

It seemed like the system allowed quite a bit of planning intervention when it benefited business, including massive infrastructure projects and tax incentives for development, but it imposed strict limitations on planners who aimed to alter the balance of power. These limits are especially hard drawn when it comes to private property and real estate, which meant answering my second question — how can we improve cities without sparking displacement? — wasn’t going to be easy, either. There appeared to be a close link between “good planning” and gentrification, since private property owners could capitalize on the value the state adds to land. By the end of my education, I realized that capitalism makes the best of planning impossible: any good that planners do is filtered through a system that dispossesses those who cannot pay.

Planning today is defined by incredible dreams and stultifying realities. A planner’s mission is to imagine a better world, but their day-to-day work involves producing a more profitable one. They almost universally espouse a commitment to pluralism and diversity, but the profession is 58 percent male and 81 percent White — demographics that are way out of step with the residents of the cities where most planners work. Though most planning offices are structured to build continuity across changing administrations, planners are still beholden to politicians and their political appointees. Their agendas almost always tend to favor their most powerful supporters — a group that usually includes some strain of real estate capital. And while planning is a public function, planners in capitalist cities are always at the mercy of the market, since most of what they do is regulate private actions. The money planners have to work with is largely derived from property taxes, an arrangement that incentivizes developer and homeowner-friendly policies and restricts the amount of land that is given over to truly public uses.

A private land market is essentially a spoils system — whoever owns the land keeps the accrued benefits, whether or not the owner is responsible for them. Until land is socially controlled, those who possess property, capital and access to power will shape planning priorities. With so much global capital invested into real estate, planners are facing enormous pressure to stoke land markets and enable gentrification. Their charge is to find creative ways to raise property values — either because they are low and landowners want them higher, or because they are already high and city budgets will fail if they start to fall. Any seemingly technical discussions of growth, density or urban form are always also shaped by this imperative. Planners are not just shills to real estate, though; they can and generally want to make spaces more beautiful, sustainable, efficient and sociable. But without control over the land, the result of their work is often higher land prices, increased rents and ultimately displacement.

As some places endure this kind of land market inflation, others fall prey to disinvestment: their land loses its exchange value, their residents are shut out of credit markets and their buildings fall into dangerous disrepair. This leads to a landscape of radically uneven geographical development between capital-flush cosmopolitan centers, like New York and London, and investment-scarce cities like Camden, New Jersey and Blackpool on England’s Irish Sea coast. Even within cities, the same inequalities are often evident from neighborhood to neighborhood. Gentrification cannot be a universal phenomenon; money tends to come from one place and go to another, creating chaos on both ends. On the disinvested side, communities face terrible choices. Many want the benefits of good planning — safe streets, clean air, decent housing — but not the catastrophic tide of capital it summons. In these places, residents will often reject planners’ interventions out of a well-founded fear that they will be kicked out of their neighborhoods before they ever enjoy the promised improvements.

One recent example: in March 2017, New York State Governor Andrew Cuomo announced a major new initiative for the poorest parts of Brooklyn. The plan promised jobs, park, health care and housing at a cost of $1.4 billion. But Brownsville resident Dayon Hopkins was skeptical. He had already been displaced from Bedford Stuyvesant after that neighborhood started to gentrify. Pointing to an ordinary building, he told a New York Times reporter, “They’ll take this right here, and put a glass door, a brick wall on one side of the hallway, and now it’s a loft, and now it costs way more than people are making around these parts. And I understand: It does get nicer. But where’s everybody else going to go? Down south? Where are we going to go?’”

Many want the benefits of good planning — safe streets, clean air, decent housing — but not the catastrophic tide of capital it summons. In these places, residents will often reject planners’ interventions out of a well-founded fear that they will be kicked out of their neighborhoods before they ever enjoy the promised improvements.

Hopkins says what most planners won’t: that as long as some people’s business is to profit off land and property, most people will not be able to enjoy the benefits planners promise. Of course, it doesn’t have to be this way. We can imagine a better world — in fact, we must. First, however, we need to understand how we got here and how the system works. I wrote this book for anyone who is frustrated with both the direction their cities are taking and the alternatives planners are offering. I put planners at the center of the story because they are uniquely positioned at the nexus of state, capital and popular power. On their own, however, planners cannot unwind real estate’s grip over our politics. For that, we will need organized people: mass movements to remake our cities from the ground up and gain control over our homes and lives.

Such movements have been a consistent feature of urban life, and have grown and adapted to face new challenges. Gentrification is brutal, but rarely total — not only because colonizers always rely on the labor of a local workforce, but also because people always fight back: as individuals, as families (of birth and of choice), as communities (local and international), as neighbors and as a class. Even after displacement, people find a way to remake their spatial cultures and rebuild their social ties — not just to survive, but to fightback anew.

Gentrification’s apologists will see this and claim displacement is not that bad — people are resilient, they move, they rebuild, they’re fine. My point is precisely the opposite: human beings will always resist regimes in which land ownership gives a small number of people enormous power over the lives of all others. People will fight back, and I believe that we will win. I hope this book contributes to that fight. It is made not only to be read, but to be used.

Excerpted from “Capital City: Gentrification and the Real Estate State,” by Samuel Stein. Copyright © 2019 Samuel Stein. Reproduced by permission of Verso Books, Brooklyn, New York.

Samuel Stein studies geography at the Graduate Center of the City University of New York and teaches urban studies at Hunter College. His writing on planning politics has been published by Jacobin, The Journal of Urban Affairs, Metropolitics, and many other magazines and journals.