Capitalism's housing crisis

Capitalism has left homes empty and people homeless, argues Leilani Farha, UN special rapporteur for housing. There are hundreds of trillions of dollars invested in residential property worldwide, the paper estimates. The effect has been to accentuate housing need: displacing poor residents (often through forced eviction), driving up wealth inequality, and creating social dead zones in the once-beating hearts of cities.


Leilani Farha, will highlight the impact of society’s tendency to view houses as financial commodities rather than homes for people, in her report to the UN this week. In a hard-hitting report [pdf], she details the shift in recent years that has seen massive amounts of global capital invested in housing as a commodity, particularly as security for financial instruments that are traded on global markets and as a means of accumulating wealth. As a result, she says, homes are often left empty – even in areas where housing is scarce.

“Farha uses the phrase “residential alienation” to describe this process:

“In Vancouver, people were telling me they live in neighbourhoods where this house is empty because it’s been bought as an asset, this is occupied, this one’s empty and this one’s empty. So you have no neighbours, you have schools closing down because there aren’t enough students to go to the school; so your children, if you live in one of these vacated neighbourhoods, are not going to school in your community any more.  Shops are closing, restaurants are closing,” Farha has told the Guardian, in an exclusive interview. 

The report warns about a rise in “dehumanised housing”: housing built as a high-yield commodity rather than for social use. A significant portion of investor-owned homes are simply left empty. In Melbourne, Australia, for example, 82,000 (or one fifth) of investor-owned units are unoccupied. In prime locations for wealthy foreign investors, such as the affluent boroughs of Chelsea and Kensington in the city of London, the number of vacant units increased by 40% between 2013 and 2014. In such markets, the value of housing is no longer based on its social use. Properties are equally valuable regardless of whether they are vacant or occupied, so there is no pressure to ensure properties are lived in. They are built with the intention of lying empty and accumulating value, while at the same time, homelessness remains a persistent problem.

The average income of local residents or kinds of housing they would like to inhabit is of little concern to financial investors, who cater to the desires of speculative markets. These are likely to replace affordable housing that is needed locally with luxury housing that sits vacant because that is how best to turn a profit quickly. For instance, Kensington & Chelsea is a hotspot for building luxury housing, and yet the borough also has the fourth highest number of households in temporary accommodation in UK, as well as the highest rate of out-of-borough placements(meaning when people become homeless, they are moved to different boroughs entirely).

 Escalating house prices have become key factors in the increase in wealth inequality. Those who own property in prime urban locations have become richer, while lower-income households become poorer. Surveys of ultra-high net-worth individuals show that over 50% have increased the proportion of their investments allocated to housing. The most common reasons are in order to sell at a later date and provide a safe return on investment, thus protecting wealth. The “economics of inequality” may be explained in large part by the inequalities of wealth generated by housing investments.

The impact of private investment has also contributed to spatial segregation and inequality within cities, Farha points out. In South Africa, private investment in cities has sustained many of the discriminatory patterns of the apartheid area, with wealthier, predominantly white households occupying areas close to the centre and poorer black South Africans living on the peripheries. That “spatial mismatch”, relegating poor black households to areas where employment opportunities are scarce, has entrenched poverty and cemented inequality. Similar patterns of racial displacement from urban centres and segregation can be found in large cities in the US.

This also creates gender segregation: in Australia, analysis has shown that average-income single female workers can afford to live in only one suburb of Melbourne, and cannot afford to live anywhere in Sydney.

 Governments have agreed to dramatically reduce or eliminate affordable housing programmes, privatise social housing and sell off real estate assets to private equity funds. The report argues that many governments are too deferential to unregulated markets and have failed to protect the right to adequate housing. Tax subsidies for home-ownership, tax breaks for investors, and bailouts for financial institutions have subsidised and encouraged the excessive financialisation of housing.

“I look up at these developments and I see gleaming towers of glass and steel, I see architects in their machismo building the best, funkiest, coolest buildings. I believe in good design, but I see this and I see huge, huge sums of money, for me staggering sums of money, being poured into these places not as homes but as investment,” says Farha. “How does it make me feel? One, too much inequality. People talk about income inequality: where it manifests so clearly is housing inequality ... I see a society that doesn’t care about the most vulnerable. It’s mind-boggling to me that people could spend so much money and know that at the same time none of that money is assisting the poorest people in terms of housing. It’s a pretty bleak picture.” She continues, to explain that things cannot carry on as they are when not just the very poor, but key workers like teachers, firefighters and police officers can’t afford to live in the city. “Are we going to have cities devoid of low-income people? I can’t figure out what the breaking point is. But it is not sustainable ... I don’t know what the future holds but it is looking pretty bleak to me.”