by
Samuel Stein
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Different types of capitalists, however, make different demands on the state. Industrial landholders reject environmentally strenuous zoning that restricts the location of their operations in the city; real estate capitalists would welcome such regulations because pollution diminishes their property values. Industrial capitalists might demand affordable housing for their workforce in order to stave off demands for raises; real estate capitalists would object to any constraint on their ability to maximize rental or sale profits.
Even though manufacturing capital is less of a force in US urban politics than in the past, the industrial sector has certainly not disappeared. The world is more industrialized than ever, and the United States still produces plenty of goods. In fact, manufacturing remains the most important sector of the US economy in terms of total output.73 What has happened is a major geographical reorganization in production and distribution. Over the past seventy-five years, the United States has gone through three major industrial shifts: a movement of parts and assembly plants from older northern cities to newer southern cities and rural areas from roughly 1947 to 1973; a deeper set of national and international production relocations from 1973 through the 1980s and 1990s; and finally, in the 1990s and 2000s, an expansion of logistics clusters that coordinate the flow of goods into and out of population centers around the country.
As a result of these relocations, much of the United States’ industrial activity today takes place outside the big cities: giant food processing plants in exurban areas; energy extraction centers on Appalachian mountaintops and Gulf coast outposts; and, most importantly for big cities, growing import/export processing zones in major metropolitan areas.75 These distribution hubs employ enormous numbers of workers but, because of their demand for fast access out of central city traffic, their sprawling size, and the high cost and regulation of central city land, they tend to be located outside the political boundaries of the main cities they serve.76 Crucially, this means they make fewer land- and housing-based demands of city planners in places like New York, Los Angeles and Chicago than centrally located urban factory owners would. When these logistics clusters are located inside the political boundaries of major cities—like New York’s Hunts Point Market and JFK Airport—they often operate on public land, meaning the companies that depend on them are not particularly bothered by the cost of urban land and housing (particularly if they assume their workers will live in cheaper suburbs or exurbs). In fact, since publicly operated logistics clusters are largely financed through municipal bonds, city governments may see inducing gentrification—something bond buyers generally interpret as a sign of urban health and future wealth—as key to financing this increasingly important form of urban industry.
[...] In a private land market, all planning interventions will impact land and property values either positively or negatively. Where there is an inter-capitalist feud between manufacturers and developers, a number of possibilities arise. The presence of industry, for example, means there is a capitalist—not only a labor—demand for government-sponsored affordable housing and rent control. It also means there is a powerful constituency that values lower, not higher, land values, since industrialists tend to see land and buildings as costs rather than assets. With the decline of urban industry, as well as the real and aspirational rise of homeownership among working and middle class people, the demand for lower land values comes only from organized renters. While urban tenant movements have secured important victories, they face a constant struggle against difficult odds. Assessing this political landscape, many nonprofits, unions and community-based organizations have determined that the most likely way to secure gains is through political programs that align with factions of real estate capital, such as development schemes that pair the construction of luxury housing with a modicum of affordable units, or labor peace deals that secure union status for workers in upscale developments. In manufacturing’s absence, real estate holds something approaching monopoly power to shape the narrative around urban planning and urban futures.
As a result of these and other changes, during the second half of the twentieth century industry decamped from many first-world central cities in search of lower wages, looser environmental standards and wide-open spaces in northern suburbs, rural towns and international “free trade zones.” New York City is an extreme but telling example: from the 1950s to the 1990s, the city lost 750,000 manufacturing jobs while its land values soared from $20 billion to $400 billion.
In several cities, these trends coincided with a severe round of fiscal crises and capital strikes—moments when a state cannot raise the capital it needs to maintain its budgets and bond investors refuse to buy shares in its future.24 New York’s late-1970s recovery from the brink of bankruptcy was led by banks, real estate interests and municipal unions, who disciplined the city through a process of privatization and disinvestment from social services that continues to this day.25 Municipal wages and benefits were slashed; welfare payments fell by one-third; the city’s public universities started charging tuitions. Meanwhile, stock taxes were dropped, income taxes were halved and real estate taxes fell to historic levels.26 This became a model for neoliberal governments throughout the country and around the world.27
Gentrification, then, was a “spatial fix” for capitalism’s urban crisis: a way to profit from previous disasters and to find new places for investors to turn money into more money. Deindustrialization created the space for real estate’s revival, and redlining and urban renewal set the spatial patterns for disinvestment and reinvestment. What first appeared as an opportunistic venture for middle class movers and profit-seeking landlords—a building-by-building, block-by-block phenomenon—became a way to transform entire cities from places into products.
As cities destroyed their public housing, they chipped away at rent controls or abandoned them altogether. This helped cement the relationship between planning and gentrification. With strong rent controls in place, urban planning interventions like new parks, schools and transit do not necessarily produce elevated housing costs; while public investments in neighborhoods might widen rent gaps, rent controls would prevent landlords from closing them. With rent controls diminished or removed, however, landlords could more easily raise rents based on new neighborhood improvements; they market these planning interventions as amenities for their property, and thus immediately turn inclusionary public investments into exclusionary private gains. Today a weak form of rent control still stands in some California, DC, Maryland, New York and New Jersey cities, but these systems have been systematically undermined by landlord-backed legislators and under-enforced by regulators. Many US states have passed ordinances outlawing further controls.
By choice or by force, planners use gentrification to create the physical environments for capital to thrive. It is the process by which cities seek capital, and capital seeks land. Its endgame is a city controlled by bankers and developers, run like a corporation, designed as a luxury product and planned by the finance sector. What was public becomes private; what was common becomes enclosed; what was cheap becomes expensive; what was shared becomes traded. Through the real estate state, the city becomes gentrified. Through gentrification, the city becomes neoliberal.
This should not have come as a surprise. Simply adding housing supply does not necessarily drive down overall prices. In many cases, it does the opposite, since developers almost always build for the top of the market, not for the greatest need; real estate functions as plural—rather than singular—markets, meaning that increasing supply at the top of the market does nothing to reduce demand at the bottom; purchasers of luxury housing often do not live there full time, thereby creating an enormous market for empty apartments; people generally do not move frequently, so the kind of “self-sorting” required for residents to meet their “market equilibrium” does not actually take place; and in the absence of tight and universal rent controls, the rise of big flashy buildings is more likely to raise than diminish neighbors’ rents. Because luxury real estate is such a reliable and under-taxed investment in New York City, it is exceedingly rare for tall new buildings in gentrifying neighborhoods to rent or sell at rates that are affordable to those who live nearby. In most cases, they are the kinds of luxury projects that result in displacement—either directly through demolition, or indirectly by elevating rents in the surrounding area.
To beef up the stock of such land and properties, cities can adopt policies that facilitate the transfer of private land to the public.14 When property owners fail to pay taxes, cities can stop selling liens to speculators, as New York City currently does, and instead transfer tax-deficient properties into a scatter-site community land trust.15 Cities could pass “right to sell” bills, giving households at risk of foreclosure the opportunity to sell their home to the city, which would operate it as public housing.16 Cities could also institute a “right of first refusal” on home sales, as is being established in parts of Paris. Under this system, the city has a first pass at any property for sale, and can pay the seller market value for their home and convert it into social housing.17 Thanks to a ballot referendum, San Francisco’s Small Sites Program has started buying out rent-controlled buildings and transferring ownership from private landlords to community land trusts.18