The Political Economy of Land: Rent, Financialization and Resistance 103224819X, 9781032248196

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Routledge Studies in Urbanism and the City

THE POLITICAL ECONOMY OF LAND RENT, FINANCIALIZATION AND RESISTANCE Edited by Mika Hyötyläinen and Robert Beauregard

The Political Economy of Land

Recent years have seen a gathering interest in the importance of real estate development to the growth and development of cities. This has included theoretical work on such topics as land rent and property rights as well as empirical studies on property investments, assetization, securitization, and the effects of changing property values on economic growth and the global status of cities. In the field of urban political economy, attention has turned particularly to the financialization of land and the built environment and to the globalization of property ownership, real estate development, and architectural design. This edited volume brings together a collection of original investigations of the current thinking on three broad themes: the assetization of land and buildings, the relationship of land rent to valuation and speculation in the markets for private and public properties, and the different ways in which land functions as a social relation. In order to ground the discussion, each chapter combines a theoretical perspective with empirical evidence. And, to convey a sense of the global nature of these phenomena, this book includes cases from Finland, India, Spain, Singapore, Hong Kong, Japan, Italy, China, and the United States. Although its prime goal is to solidify and extend the political economy of land, this book is also a celebration of the Finnish scholar Anne Haila who was a major contributor to this literature and, specifically, to the work of this book’s authors. Prior to her sudden death in 2019, she was a key figure in the discussions that are at the core of the political economy of land: this book, in part, is a public acknowledgment of her contributions. Mika Hyötyläinen is a Postdoctoral Researcher at the Institute for Housing and Urban Research, Uppsala University. His research concerns urban inequality, housing precarity, Nordic land and housing policies, and transformations in public real estate policy. He received his doctorate in 2019 from the University of Helsinki. He has published in journals such as Acme, Critical Social Policy, Geoforum, and the International Journal of Urban and Regional Research. Robert Beauregard is a Professor Emeritus at Columbia University where he taught in the Graduate School of Architecture, Planning, and Preservation. His most recent, authored books are Cities in the Urban Age: A Dissent (Chicago, 2018), Planning Matter: Acting with Things (Chicago, 2015), and Advanced Introduction to Planning Theory (Edward Elgar, 2020). He also co-edited Regulation and Planning (Routledge, 2021) and Planning for a Material World (Routledge, 2016).

Routledge Studies in Urbanism and the City

Overlooked Cities Power, Politics and Knowledge Beyond the Urban South Edited by Hanna A Ruszczyk, Erwin Nugraha and Isolde de Villiers The Walkable City Jennie Middleton Cities Without Capitalism Edited By Hossein Sadri, Senem Zeybekoglu Public Participation Process in Urban Planning Evaluation Approaches of Fairness and Effectiveness Criteria of Planning Advisory Committees By Kamal Uddin, Bhuiyan Monwar Alam Hegemony, Security Infrastructures and the Politics of Crime Everyday Experiences in South Africa Gideon van Riet Marketplaces Movements, Representations and Practices Edited by Ceren Sezer and Rianne van Melik Designing Healthy and Liveable Cities Creating Sustainable Urban Regeneration Marichela Sepe The Political Economy of Land Rent, Financialization and Resistance Edited by Mika Hyötyläinen and Robert Beauregard For more information about this series, please visit https://www.routledge. com/Routledge-Studies-in-Urbanism-and-the-City/book-series/RSUC

The Political Economy of Land

Rent, Financialization and Resistance

Edited by Mika Hyötyläinen and Robert Beauregard

First published 2023 by Routledge 4 Park Square, Milton Park, Abingdon, Oxon OX14 4RN and by Routledge 605 Third Avenue, New York, NY 10158 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2023 selection and editorial matter, Mika Hyötyläinen and Robert Beauregard; individual chapters, the contributors The right of Mika Hyötyläinen and Robert Beauregard to be identified as the authors of the editorial material, and of the authors for their individual chapters, has been asserted in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this book may be reprinted or reproduced or utilized in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library ISBN: 978-1-032-24819-6 (hbk) ISBN: 978-1-032-24820-2 (pbk) ISBN: 978-1-003-28025-5 (ebk) DOI: 10.4324/9781003280255 Typeset in Galliard by KnowledgeWorks Global Ltd.

Contents

List of figuresvii About the contributorsviii Acknowledgmentsx Introduction: The Political Economy of Land

1

MIKA HYÖTYLÄINEN AND ROBERT BEAUREGARD

PART I

The Assetization of Land and Buildings

19

1 Land as a Financial Asset: The Theory of Urban Rent as a Mirror of Economic Transformation

21

ANNE HAILA

2 Land as an Asset

40

ERIK SWYNGEDOUW AND CALLUM WARD

3 Buildings as Financial Assets

56

RENEE TAPP AND RACHEL WEBER

PART II

Rent, Real Estate, and Property Markets

73

4 The Risk Myth: Blackstone, Housing and Rentier Capitalism

75

BRETT CHRISTOPHERS

5 The Political Economy of Abandoned Property: Structure and Agency in Land Banking Practice in Muncie, Indiana JOHN WEST

92

vi  Contents

6 The Political Economy of Italian Public Real Estate Privatization: Austerity, Financialization and the “Enrichment Economy”

108

FÉLIX ADISSON

7 The Singapore and Hong Kong Property Markets: Lessons for the West from Successful Global Cities

125

ANNE HAILA

PART III

Land and Social Relations

141

8 Land Relations in Turmoil: Trans-Local Constructions of Home Among Rural Migrants in Xiamen, China

143

HAOXUAN SA AND JANI VUOLTEENAHO

9 Bridging Between Owners and Users in Japan’s Private Property Regime: The Case of Farmland Banking

160

MAIKO NISHI

10 Unauthorized Neighborhoods, Land Rent, and Working-Class Struggles in Indian Cities: The Slum Question Revisited

180

SAI BALAKRISHNAN

11 Public Land as a Social Relation: The Case of East River Park in New York City

194

ROBERT BEAUREGARD

12 Land Rent and the Struggle for the Urban Commons in Helsinki’s Suvilahti DIY Skatepark

211

MIKA HYÖTYLÄINEN

Conclusion: A Summary from the Perspective of Rent Theory

228

MIKA HYÖTYLÄINEN

Index

245

Figures

3.1 550 West Adams, Chicago59 4.1 Corporate structure of 2016 investment in Carnegie & Co. by Blackstone funds79 9.1 Scheme for the Farmland Banking System163 9.2 Agricultural landscape of District Nakamura165 9.3 Preceding area for land improvement167 11.1 East River Park re-design196 12.1 Skateboarders of all ages practice at Suvilahti DIY in 2018219

Contributors

Félix Adisson is Assistant Professor in the École d’Urbanisme de Paris – LATTS at Université Gustave Eiffel. An urban political economist, he studies the relationships between state restructuring and urban restructuring under permanent austerity and financialized capitalism. He is currently researching how the green transition of local welfare systems is financed. Sai Balakrishnan is Associate Professor of City and Regional Planning at the University of California, Berkeley. Her research and teaching broadly pivot around global urban inequalities, with a particular focus on urbanization and planning institutions in the global south and the spatial politics of land-use and property. Brett Christophers is Professor of Human Geography at the Institute for Housing and Urban Research, Uppsala University. Anne Haila was a Finnish Academy Professor who studied urbanization, specifically land policy, real estate markets, and property rights. She was the first female Professor of Social Policy at the University of Helsinki where she specialized in urban studies. Among other positions, she was Chief Editor of the Finnish Journal of Urban Studies, a Board Member of the International Sociological Association’s Research Committee on Urban and Regional Development, and a Corresponding Editor for the International Journal of Urban and Regional Research and Urban Studies. She is perhaps best-known for her work on land rent theory, particularly her book Urban Land Rent Theory: Singapore as a Property State (Wiley Blackwell, 2016). Sa Haoxuan  is a Researcher at the Faculty of Social Sciences, University of Helsinki. Her work concentrates on urban growth and land policies in China, including debates around property rights, urban villages, and inequality. Her doctoral thesis analyzed local mechanisms in real estate development in Chinese urban villages and the economic, social, and cultural consequences of a governmentally-sanctioned land and real estate investment boom in China. Maiko Nishi is a Research Fellow at UNU-IAS (Japan) engaging in research and capacity development activities mainly for the International Partnership

Contributors ix for the Satoyama Initiative (IPSI). Her research interests include social-­ ecological system governance, local and regional planning, and agricultural land policy. Her PhD is in Urban Planning from Columbia University (USA). Erik Swyngedouw is Professor of Human Geography, University of Manchester. He holds honorary doctorates from Roskilde University and the University of Malmö. His most recent book is Promises of the Political: Insurgent Cities in a Post-Political Environment (MIT Press, 2018). Renee Tapp is an Urban Studies Foundation Postdoctoral Research Fellow in the Department of Urban Planning and Policy at the University of Illinois at Chicago (USA). Her research interests include housing, real estate finance and property ownership, taxation, and urban politics. Jani Vuolteenaho  is a University Lecturer in Social Policy at the University of Helsinki. His work specializes in socio-spatial theory and both elite and marginal urban discourses, practices, and people-worlds. His current research focuses on urban land policies, waterfront transformations, the selling of spatial naming rights, and the image-led construction, popular reception, and contestation of event facilities. Callum Ward is LSE Fellow in Urban Planning and Geography, London School of Economics. He attained his PhD from KU Leuven in 2019 for a thesis that applied land rent theory to empirical cases of real estate financialization. Rachel Weber is Professor of Urban Planning and Policy at the University of Illinois at Chicago (USA). Her book, From Boom to Bubble: How Finance Built the New Chicago won the Best Book Award in Urban Affairs in 2017. She studies urban development, public finance, and the privatization of infrastructure. John H. West is Assistant Professor of Urban Planning at Ball State University (USA) and the founding chair of the Muncie Land Bank, a planning agency that seeks to address property abandonment.

Acknowledgments

Several people must be thanked for their generous help in putting this book together. First, Faye Leerink at Taylor & Francis – thank you for your help and guidance. Manisha Singh Pundir made the tasks of production easy. Many thanks to Lina Olsson, Patrice Derrington, Miguel Martínez, and Robert Lake who provided terrific insights on a number of the chapters and to two anonymous readers who did the same for the book prospectus. We are thankful for Andrew Kent at Antipode whose efforts allowed us to use Anne Haila’s (1988) article as the opening chapter for Part I. Mika would like to warmly thank Robert for collaborating on this book project and for all the mentoring along the way. And he thanks his colleagues from the Alternatives research group at the University of Helsinki where he began working on this book project, as well as everyone at the Institute for Housing and Urban Research, Uppsala University, for the opportunity to continue his research and finish this book in an encouraging and motivating environment. Robert thanks Mika for proposing this project. We dedicate this book to the life and memory of Finnish urban scholar, Academy Professor Anne Haila (1953–2019). Anne Haila was a major figure in the multidisciplinary field of urban studies. Her important contributions to the field were shaped around the notion that to understand the development of cities, we need to take their property regimes and real estate markets as serious objects of empirical analysis. Anne was an innovative thinker who fluently drew inspiration from social sciences and economics, and strived to develop her own political economy of land, what she called an urban land rent theory. Reflecting the wide intellectual influence of Anne’s thinking is how she was and is being remembered by international colleagues. To mention just a few, first, in 2019 a special issue was devoted to discussing her importance as an urban scholar by the Finnish Journal of Urban Studies. Second, her work on Asian urbanization was the topic of a keynote speech at the 15th Asian Urbanization Conference in Ho Chi Minh City, Vietnam. Third, a meeting under the title Alternatives: The Anne Haila Urban Studies Symposium was organized in Helsinki in 2020. The meeting hosted public lectures by leading urban political economists whose work is centered on land, rent, real estate, financialization, housing, and homelessness. Fourth, the American Journal of Economics and

Acknowledgments xi Sociology dedicated a special issue (2021) to discussing the implications of Anne’s work for Georgist research and thought. This edited volume is meant to remember Anne and her work and to begin thinking about future avenues of investigation for a political economy of land. These purposes materialize here as a collection of contributions from contemporary authors whose work acknowledges the extensive influence of Anne’s oeuvre on urban political economy. While varied in their approaches, the chapters mirror two central aspects that characterize Anne’s thinking: first, accepting the importance of understanding how land, its use and exchange are embedded in social relations and, second, of analyzing the curious role of land rent for urbanization in particular. We also wish to express the following personal acknowledgments of our friend, teacher, and colleague. From Robert: We met when we were young scholars, and our careers unfolded in parallel. She was a wonderful person to be around, respectful of others, and committed to living in a world where the welfare of society mattered. She was also a model scholar. Anne lived an intellectual life, one of which we should all be envious. Her scholarship, moreover, included others – her students, her ­colleagues – and she was generous not just in sharing ideas but in sharing opportunities to develop those ideas. As part of this life, Anne embraced a vision of the university where the pursuit of knowledge was paramount, where ideas could be debated unfettered by political concerns, and where young scholars would be nurtured. I deeply admired her and valued her as a colleague. From Mika: I was Anne’s student for a decade and her insightful lectures at the University of Helsinki sparked my interest in urban studies. Anne supervised both my Master’s and doctoral studies. She was a critical and generous supervisor. Our many discussions and her innovative texts and articles continue to influence both the way I think and what I think is relevant for urban scholars to consider. When my interests and thoughts do not align with what she may have said or written, I will always reflect on what her response might have been. I am grateful for all the support and guidance she provided and for helping me to take my first steps down the path of an academic career.

INTRODUCTION THE POLITICAL ECONOMY OF LAND Mika Hyötyläinen and Robert Beauregard

In the 1950s, faced with the need to build a new elementary school, a local government in Finland would have set aside a plot of public land to do so. Little thought would have been given to the land’s market value and none to whether the school should pay rent for its use. A young family in the United States, fleeing the city’s overcrowded housing market and hoping to purchase a new home in one of the burgeoning suburbs, would have applied for an amortized, fixedrate, term-limited mortgage from a local savings and loan association (S&L). For the next 30 years, until the mortgage was paid off, it expected to send monthly payments to the S&L (Beauregard, 2006, pp. 108–111). And an entrepreneur planning a retail store in Johannesburg’s commercial core would, like other business owners, have bought the property with a bank loan. The store’s gross sales would enable the owner to pay back the loan and this, and the present value of the property, were all that mattered to the bank. Today, the relationships and expectations built into these local transactions seem quaint. In Finland, public land is now under a property regime that considers it part of the real estate market and subject to market valuation and rent requirements (Hyötyläinen and Haila, 2018). In the United States, S&Ls have virtually disappeared under the onslaught of banking deregulation, while residential mortgages are securitized so that they can be traded in global financial markets, thereby severing the connection between the borrower and the original lender. And, in South Africa, individual owners of their place of business have been replaced by landlords with extensive property portfolios that treat properties as investment opportunities rather than basic to economic activity (Goga, 2003). Commercial property loans, much like home mortgages in the United States, have been financialized and their ties to use-values and the local features of place radically attenuated. Under finance capitalism, land has been issued with purposes far beyond the usefulness to the local community it serves. It has been made into a financial asset to be traded in global real estate markets according to the rent it yields. The ways that land and its improvements are valued, financed, and purchased have changed significantly since the mid-twentieth century.1 Consequently, scholars have been compelled to rethink their approach to land. Treating land as a factor of production having only a supportive economic function no longer DOI: 10.4324/9781003280255-1

2  Mika Hyötyläinen and Robert Beauregard makes either empirical or theoretical sense. Combined with a late-twentiethcentury emergence of real estate as a dominant sector of the global economy, land cannot be considered epiphenomenal to the dynamics of urban and regional development and national economies. For cities with global aspirations, attracting private real estate investment in, for example, architecturally prominent buildings, mega-projects, and high-end residential, cultural, and commercial space has replaced the pursuit of industry as a source of economic and demographic growth. Land rent and the related income flows have become as important as they were for the classical economists (such as Adam Smith) of the 18th century and the land use geographers (such as Johann Heinrich von Thünen) of the nineteenth century, both of whom theorized the relationship between land values, rent, and agricultural production. With the maturing of industrialization, this interest waned. By the late twentieth century, land had returned as a key moment in academic thinking. In economics, geography, urban studies (particularly housing), and economic history, numerous scholars have strived to make sense of the treatment of land as a financial asset. Particularly challenged have been those political economists wedded either to the anchoring of capital accumulation in production (with land as supportive and passive) or to selfregulating real estate markets whose price signals stem solely from the relation of the demand to the supply of space. The purpose of this book is to bring together current academic thinking on land as it has formed around a political economy perspective that treats it as a social relation deeply embedded in the workings of both finance capitalism and state policy.2 Emphasized is the centrality of real estate finance and property ownership to the performance of urban and national economies and the consequences this has for state revenues, politics, inequality, housing opportunities, alternative forms of ownership, and the spatial distribution of land-using activities. Major concerns include the extent to which the financialization of and state involvement in land transactions and development rebounds to the detriment of marginalized groups and the precarity of alternative property arrangements such as collective land management and the commons. In short, the perspective is a critique of economic thinking that is fiercely protective of private property rights, insensitive to social relations, and willfully disregards the dependence of finance capitalism on state policy. Our introductory chapter is intended to orient the reader to this book’s general themes. It begins with the historical events and conditions that gave rise to this critical perspective, briefly discusses that perspective’s major concerns, and ends with an overview of this book itself.

Historical background Prior to the 1970s, land was of marginal concern to twentieth-century political economists.3 The international recession of the mid-1970s marked the beginning of a radical transformation and retrenchment of the Keynesian welfare state and an end to the post-World War II run of economic prosperity. Successive waves of economic crises were triggered that contributed to the ever-deepening

The Political Economy of Land 3 sense that land was more central to political economy than was being acknowledged. This awareness also had a geographical dimension. Although the financialization of land is a global phenomenon, many of the major actors are located in New York City, London, and Frankfurt – the global North. There, banks, investment firms, pension funds, national governments, international development agencies, and such entities as the International Monetary Fund (IMF) and the World Bank are actively involved in maintaining and expanding financialized property markets. And, the effects fall unevenly across countries with highly developed real estate sectors such as the United States and Ireland, for example, experiencing financialization differently than less-developed real estate sectors in Yemen and Myanmar. That said, any country in need of large infusions of capital for highway networks or hydroelectric dams or to bolster a faltering economy or a fiscally precarious state makes a pact with finance capitalism. To be clear, land and buildings have long been enmeshed in financial r­ elations and state regulations. With the emergence of capitalism in late-seventeenthcentury England, large landowners built rental housing on their private estates (Derrington, 2021, pp. 54–57, 96–97). When the scale of their operations exceeded their capacity for self-financing, they turned to lending agents (often silversmiths, solicitors, and investment promoters) who would gather capital from wealthy aristocrats, merchants, or tradesmen guilds. The investors initially took ownership positions, although their equity contributions “functioned more as debt capital since the partners withdrew only a portion of the net revenues according to an agreed rate of return and the remainder was treated as retained earnings” (Ibid., p. 273). These relationships and subsequent property trading were made possible by new financial techniques for determining the capitalized value of commercial property, known as assetization. Sophisticated property markets were thereby integrated into the economic networks of trade and industrialization. Even prior to the seventeenth century, we find the signs of real estate financial activity in feudal land regimes where land was leased and rent was paid (Haila, 2016, pp. 27–33). In short, markets for land (treated as a commodity) operating on capitalist principles have existed for well over a hundred years. The contemporary history begins at the end of World War II when the nationstates of the world’s major economies (the Soviet Union being the exception) met in Bretton Woods (USA) to develop mechanisms for stabilizing exchange rates. The goal was to expand liquidity and dampen fluctuations in commercial trade and international finance (Krippner, 2011, pp. 88–92). Simultaneously in the United States, the fixed-rate, amortized, term mortgage developed prior to the war was fueling home-buying and mass suburbanization. The state support of home ownership and the development of new financial instruments expanded both lending and bank profits. In many European countries, by contrast, postwar housing demand was being met through the state in the form of public housing built on state land. Vast public housing development projects such as the Million Program of Sweden provided affordable rental housing for workingand middle-class families. Further reflecting the public-regarding tenor of this period, even in the United States, numerous postwar governments established

4  Mika Hyötyläinen and Robert Beauregard programs to compensate victims of unemployment, strengthen income supports to address poverty, expand public education, and extend public infrastructure to growing urban populations. Prosperity became the dominant theme with liberal, social-democratic nation-states committed to compensating for the social precarity of a rapacious capitalism. This “golden age” of Fordist-Keynesianism ended with a global recession in 1973–1975 that was precipitated in part by an embargo by oil-producing states and a steep rise in oil prices (Krippner, 2011, pp. 16–23). In addition, competition from newly industrializing countries led to an abrupt decline in the manufacturing industries of advanced economies including steel-making and shipbuilding in the United States and textile manufacturing in England. Coal mining in the US and United Kingdom also suffered. Heavy manufacturing shifted to countries like Korea and Brazil. Later, low-wage Asian countries, particularly China, would siphon off television, leisure shoe, and clothing manufacturing. As a consequence, many advanced economies suffered from stagflation; i.e., high unemployment coupled with a high rate of inflation. The combination proved devastating for national governments struggling with the political fallout of energy shortages and stagnant job growth. Local governments were sent into a downward fiscal spiral as tax revenues plummeted. With the cessation of the Bretton Woods agreement, a process that began before the recession but was not completed until 1979, national economies became more vulnerable to international flows of capital. Capital circulated more freely across the globe and exchange rates were now more volatile. Worldwide, foreign direct investment in constant dollars grew five-fold between 1975 and 1995 from US$25.2 billion to US$127.9 billion.4 Importantly, land and its improvements were becoming central objects of global investment. Foreign direct investment in the U.S. real estate market, for example, increased from US$600 million in current dollars in 1973 to US$24.5 billion in 1987 (Beauregard and Haila, 2000, p. 31). The mid-1970s recession also marked a shift away from the Keynesian policies that characterized welfare states such as Sweden and (less so) capitalist states such as England and the United States. Conservatives rose to power championing the free market, called for reducing corporate taxes, and characterized welfare provisions as unnecessary hand-outs that stifled peoples’ initiative (Hacker, 2006, pp. 35–60). In the United States, one form this right-wing ideology took was credit deregulation. This “breakdown in capitalist controls” (Harvey, 2004, p. 65) resulted in the rapid growth in commercial banking assets and corporate profits, rising corporate debt-to-equity ratios, and the expansion of the financial services sector in many developed economies (for the United States, see Krippner, 2011, pp. 31–33). The 1980s witnessed an expansion of rapid real estate trading by private investors, directly and through partnerships, that was triggered by a tax structure that rewarded losses. Margaret Thatcher became UK prime minister in 1979. One of her key policies was the Right to Buy scheme that allowed public housing tenants to buy their council apartments. By the year 1989 more than one million public housing units had been privatized. This set a precedent for European countries, which began to see privatization and

The Political Economy of Land 5 retrenchment of public and social housing. In the 1990s, further opportunities for investment were provided by another tax-advantaged vehicle, the real estate investment trusts (REITs), whose purpose was to invest in large, tradable real estate entities to evade paying corporate taxes. By 2021, REITs controlled US$265 billion in mortgages in the United States.5 The property sector grew in part by creating new vehicles that facilitated the global trading of land, heightening its importance as securitized assets to be traded in international real estate and financial markets. Because of this growth, central banks and the financial sector became more influential in policy circles. Stagflation and slow economic growth coupled with high interest rates, financial deregulation, and speculation and fraud in the late 1970s and early 1980s led to a collapse in mortgage lending in U.S. residential and commercial real estate markets. During what came to be known as the 1980s S&L Crisis, onethird of the S&Ls failed in the U.S. and the federal government had to intervene to manage the disposition of the large number of foreclosed properties and non-performing loans.6 Finland experienced similar events in the aftermath of its 1980s deregulation of savings banks. A serious recession in the early 1990s saw lavishly given mortgages and construction loans turn into bad debts, which were taken over by the state. Later, the state began selling public properties to pay off the debts, thereby beginning a trend of privatizing public real estate. Making matters worse for labor, conservative governments in advanced economies were reining in support for less affluent populations and touting the privatization of public services and public assets even as the crisis affected their economies. In addition, the 1980s crisis revealed capitalism’s inherent speculative tendencies and the inevitability of boom-and-bust cycles. The only question was when the next financial crisis would occur. In 2008, what the doomsayers had predicted came to pass. There was an asset bubble, and it burst. The financial crisis began in the United States and spread quickly through world financial markets (Coghlan, Hinkley, and McCorkell, 2018; Harvey, 2004, pp. 70–72). For years, U.S. lenders had been offering home mortgages regardless of the ability of purchasers to meet their loan commitments, a practice known as predatory lending. Commercial banks and investment firms had bundled individual mortgages in residential mortgage-backed securities (MBSs) and collateralized debt obligations (CDOs) that functioned as investment vehicles whose risks were mitigated by their diversity and whose potential returns were irresistible to investors. As long as house prices continued to rise and homeowners made their payments, conditions that enabled mortgages to continue to perform, investors were satisfied. But, this did not happen. Among the consequences were 16 million home foreclosures in the United States between 2006 and 2014 and numerous bank foreclosures – according to one count, 450 banks failed – along with the collapse of several major investment firms including Bear Stearns and Lehman Brothers. In addition, delinquency rates on single-family home mortgages jumped from 2.3% in 2007 to 11.6% in 2009.7 According to Reuters, from 2007 to 2009, the top banks in the U.S. and Europe lost more than US$1 trillion on toxic assets and bad loans.8

6  Mika Hyötyläinen and Robert Beauregard The U.S. government failed to stop the rash of foreclosures and housing values declined leaving many homeowners owing more on their mortgages than the homes were worth. As the crisis spread to other countries, international financial intermediaries mobilized to stave off a worldwide economic depression (Tooze, 2019). Abetted by the real estate industry and state deregulation, the financial services sector had crashed the global economy. Iceland’s economy was devastated when its three major banks failed, while housing markets imploded in the United States, Ireland, and Spain. Greece, Scotland, Italy, England, and Indonesia all experienced sudden and severe economic downturns. The global interconnectedness of finance spread the negative externalities of financial trading across country after country. Capitalism had realized the neoliberal promise of the 1980s (Metcalf, 2017; Peck, 2010). The financial services sector was ascendant and market principles were considered not only inviolable but also essential for governmental decision-­ making. States were cutting taxes on both corporations and the rich, deregulating (or, more accurately, regulating in a different way) business, and in as many ways as possible shrinking the government sector by relaxing public laws that hampered the flow of capital and labor while privatizing such publicly provided services as education, mass transit, and solid waste management. Capitalism was unfettered in ways that had not existed in the mid-twentieth century. And even though neoliberalism’s proponents touted laissez faire, governments were deeply implicated, as they have always been, in the furtherance of capitalism’s interests (Lake, 2002). When capitalism went into crisis – which it would inevitably do – states and international bodies, moreover, would assure that the costs would not be borne by those who had caused it. Most importantly, neoliberalism not only brought back the “free” market with a vengeance, but also “upgraded the price system into a kind of social omniscience,” with questions of value resolved economically rather than politically or democratically (Metcalf, 2017). The social capacity for people to reason among themselves was degraded and this contributed to a legitimation crisis expressed in the rise of an authoritarian, xenophobic, and racist populism. Central to our concerns, the treatment of land as a financial asset was underway more than ever before (Krippner, 2011; Lapavitsas, 2013, pp. 793–794).

Rent, property rights, and financialization The political economy approach to land evoked by the contributors to this volume grew out of a systematic critique of these material and ideological conditions. Its more specific roots lie in Marxist political economy. Of particular importance is rent theory and the financialization of the late twentieth century that reenergized scholarship in land and buildings (Yates, 2021, p. 22). These themes constitute the thematic core of what we call the critical political economy of urban land. Critical political economists are not satisfied with leaving land and improvements as commodities to be competitively traded. This places them at odds

The Political Economy of Land 7 with mainstream economists who treat real property as an absolute right, a commodity that yields profit through direct sale and leasing, and an asset that can enter financial markets. In contrast, critical political economists view land as embedded in social relations where they become a focal point of class conflict. Land is also considered central to generating and attenuating many of the periodic crises to which capitalism gives rise, deeply implicated in the uneven spatial development, as well as inseparable from the state policy that supports capital accumulation. First, class conflict. From the origins of capitalism, land was put to use mainly for accumulating wealth; sustaining life was a lesser objective. People had to be available for employment in factories and dependent on the factory owners for their wages. To turn farm workers into wage-laborers, people had to be dispossessed of their land and uprooted from the countryside so that they would migrate to the cities for employment. The catalyst was the enclosure movement of the eighteenth century in England (Polanyi, 1957, pp. 77–85), and other countries where capitalism was being entrenched. Farmland and the means of production came to be owned by fewer and fewer people with increasing percentages of the working population dependent on hourly wages. Capitalists exploited workers and extracted surplus value from the difference between what they paid in wages and what they earned from the products that they sold. Capital accumulation took place in the spheres of production and social reproduction. Wage exploitation and land dispossession, elements of class conflict, were fundamental to capitalism’s formation and expansion and continue today as countries across the world industrialize. Today, class conflict around land has manifested in the struggle for working-­ class people to occupy decent housing in inner-city neighborhoods accessible to well-paying jobs. This is often discussed in terms of gentrification and occurs when rising housing costs displace existing residents and transform once working-class neighborhoods into middle-class enclaves (Lee, Slater, and Wyly, 2008). Capital enters this dynamic through a real estate industry pursuing the difference between existing and potential rents, what is known as the rent gap (Smith, 1979). Closing that gap involves new rounds of capital investment, often speculative in nature, in disinvested urban land. These investments are made with the purpose of maximizing land rent, which here can be understood as an interest on the capital invested. The conflict between capital and labor materializes as working-class residential space is turned into more profitable middle-class and eventually even luxury housing thereby displacing ­working-class households. Second, property is often deeply implicated in the many crises of capitalism. Consider the periodic speculative bubbles in land and housing markets and their subsequent collapse. During the 1920s in the United States, real estate promoters in Florida stoked a frenzy of land purchases. Promoters laid out subdivisions and sold lots at “bargain” prices. The boom inflated land values and, as the economy overheated, culminated in a bust that bankrupted many purchasers as well as the banks that had provided them with mortgages. Initially, though, Marxist

8  Mika Hyötyläinen and Robert Beauregard theory cast land not as a contributor to periodic crises but as a safety valve for fending off economic collapse. The argument is rooted in the idea that surplus value emerges out of the exploitation of wage labor. Thus, the major destination of capital is the productive sector – the primary circuit of capital – where the best profits can be made. However, when production falters, excess capital is invested in land and buildings; i.e., the secondary circuit of capital (Beauregard, 1994; Harvey, 1982, pp. 407–410). (Surplus capital can also be channeled into social expenditures on education and scientific research.) To this extent, land and property enable investors to keep accumulating even if production has slackened. The secondary circuit dampens the potential for crisis. Third, capital also derives profit from a process known as uneven spatial development (Harvey, 1982, pp. 415–422). It does so by disinvesting from existing areas where buildings are becoming obsolete (thereby causing profits to fall) and searching for areas where new investment is expected to yield higher returns. The resultant unevenness spatializes class conflict as “old” labor (e.g., farmers, coal miners, steel workers) clash with urban professionals in regional and national political arenas. A good, contemporary example of uneven geographical development is residential and commercial investment in urban peripheries where land and development costs are much lower than in the urban core. When developers attract households to these areas and retailers and office uses follow, capital establishes a new node of investment opportunities to replace a node, usually the inner city, that is now financially obsolete (explaining the above example of gentrification and how the inner city becomes disinvested in the first place). Such speculative behavior also occurs in cities when investors expand or generate new office districts and abandon older ones (Weber, 2015, pp. 38–63). The result is an uneven landscape with areas of growth and decline. As has occurred in the United States, Germany, and Scotland among other countries, that experienced urban collapse in the late twentieth century, capital might eventually cycle back and rejuvenate land values. Capital’s ability to do so is constrained by the fixity of real estate, a barrier it attempts to overcome with securitization and financialization. Fourth, state policy is deeply implicated in and dependent for revenues on the monetary value of real property (Becher, 2015). No matter how much effort mainstream economists put into forcing land into the category of pure economic goods, calling for the state to step aside so that their theoretical principles remain inviolate, the fantasy remains unfulfilled. How land can be used and traded is very much subject to state regulations. Zoning and various development controls restrict land to certain activities and not others and protect existing land uses from adjacent developments that might diminish their value. And although landowners can petition governments to relax or even abandon these controls, and too often succeed in doing so, regulations cannot be ignored. Zoning and development rights can also create value for developers and property owners by changing what uses and what densities are allowed. Not to go unmentioned, state regulations are essential to finance capital and its investments in land, property, and MBSs. The state sets or relaxes controls over capital flows, rewrites tax laws to favor developers and property owners, and upholds property rights. By

The Political Economy of Land 9 doing so, it limits or expands investment opportunities. And, when a financial crisis strikes, the state often ensures that the financial sector’s problems do not lead to an economy-wide crisis. The state also plays a role in the property market by distinguishing between public and private ownership and uses (Fainstein, 2019). Here lies the issue of privatization as it applies to land. Should highways be public, open to all, or privately owned, managed, and accessible only to those who can pay the toll? Should the state build public housing or leave housing provision to the private sector? Should governments build their own office buildings or lease from a private owner? From a different perspective, to what extent should the state encourage various forms of non-governmental public ownership such as worker-owned factories, cooperative housing, and various kinds of commons? As regards land, private ownership seems to be one of the barriers to dampening uneven geographical development and providing affordable housing, while contributing to financial crises. At issue again is land rent. Crudely put, land rent is “a payment made to landlords for the right to use land and its appurtenances (the resources embedded within it, the buildings placed upon it and so on)” (Harvey 2006, p. 330). It denotes the social relationship between the user and owner of land. This is a relation of power and control exercised by the landowner over its user. The theory of land rent thus resolves the problem of how land, which is not a product of human labor, can have a price and be exchanged as a commodity. As Harvey (2006, p. 367) has argued, land rent, “capitalized as the interest on some imaginary capital, constitutes the ‘value’ of the land. What is bought and sold is not the land, but title to the ground-rent yielded by it. The money laid out is equivalent to an interest-bearing investment. The buyer acquires a claim upon anticipated future revenues, a claim upon the future fruits of labour.” The price of land, then, is determined by the anticipated future rent with the purpose of land rent in the capitalist economy comparable to that of interest; i.e., it coordinates activities, in this instance land use, as landowners seek the highest and best uses. In short, land rent coordinates urban development, and serves as a mechanism for allocating property to individual users, and expands capital accumulation. Of particular interest in the contemporary literature is how rent figures in the creation and distribution of value as when high rents make locationally advantageous land accessible only to the wealthiest households and corporations. Of even greater concern is how land and property and the values that they embody contribute to capital accumulation through securitization and financialization and are subsequently used by national and local states to meet housing needs and manage economic development. In addition, because these scholars are interested in land as a financial asset that can be bought and sold in various forms, rent also refers to the exchange value of land and how the state enters into and utilizes this value (Haila, 1988). The value of a plot of land does not emanate simply from the land’s location and its physical characteristics, but from the improvements upon and uses of adjacent areas, prevailing financial and construction technologies, social relations, the power of owners, and state policies.

10  Mika Hyötyläinen and Robert Beauregard The classic approach to rent divides it into types: absolute, monopoly, and differential (Haila, 2016, pp. 46–48; Harvey, 1982, pp. 349–358). Absolute rent is the minimum rent that landowners are willing to accept. It establishes the benchmark that encourages hoarding and speculation when owners refuse low offers and await future development (Haila, 2016, p. 60). Monopoly rent materializes when a land or property owner controls a property with high prestige value, a strategic location, a stunning vista, or can hold out for a higher rent when demand exceeds supply. In effect, the landowner requires rents “totally out of proportion to the economic advantages stemming from the location of the property” (Krätke, 1992, p. 259). Monopoly rent is related to the corporatization of real property ownership and the ability of investors with large portfolios to wield power relative to renters and buyers. For monopoly rents to be realized, owners need renters and buyers who are either desperate or who have excess capital that needs to be invested. These conditions seem increasingly to characterize the affluent residential enclaves and world-class office districts of global cities. As monopoly rents increase, “more and more capital will circulate in unproductive real estate and land transactions and will be withdrawn from actual production” (Krätke, 1992, p. 259). Differential rent recognizes that land that might be used in similar ways can vary in its qualities. A piece of agricultural land might have better soils than an adjacent parcel or a retail location might be better situated for attracting customers. Such differences can be overcome with technology (e.g., better fertilizers, larger signage) or with strategic social practices (e.g., more frequent sales events). In effect, this type of rent is the difference between the costs of production (or distribution in the case of retailing) on the worst comparable land and the cost of production on the improved land. Differential rents appear with the vertical extension of land through higher densities as in global office districts and with the subdivision of large parcels of land into smaller ones for separate sale and development (Haila, 2016, pp. 60–61).9 Owners who can tap into differential rent can expect excess profits (Harvey, 1982, pp. 353–354). Contemporary critical political economists are concerned with how property values are created through private sector manipulations and abetted by state policy. They further consider how values are often encased in cultural understandings, guide real estate development, mediate among different property markets (e.g., housing, office), and become assets in financial markets that are central to uneven geographical development. The focus is often on the social embeddedness of rent: the interactions of investment companies, large landowners, banks, households, labor unions, states, cultural norms, racial and ethnic groups, public authorities, real estate firms, and developers; to wit, the many agents of real estate, some of whom operate internationally – and the conflicts around land in which all actors participate. Rent is a social relation that can only be understood in its institutional and political setting (Jäger, 2003). This thinking has led urban scholars to think in terms of property regimes and property states. Haila (1991), for example, has proposed four, ideal-types of property regimes that she labeled bazaar, jungle, organism, and circus. In

The Political Economy of Land 11 a bazaar, serendipitous actors use their own money to invest in land for its use value; i.e., as a factor of production. In a jungle, and as a temporary expedient, investors switch capital out of production and into rents. Governmental planners are the main actors in organisms. There, public revenues are allocated to producing infrastructure and coordinating land uses. Lastly, in the circus, speculators borrow money and invest in land for capital gain. All four types can exist simultaneously in advanced economies. Property markets are differentiated. Haila (2016, 2000) also developed the idea of a property state that combines public ownership of land with partnerships between the state and transnational property and development companies. This enables the state to capture value from development, control the allocation of land, and provide affordable housing for its citizens. Her primary examples are Singapore and Hong Kong. Critical political economy is also characterized by its opposition to the property rights argument. Although its proponents accept that “the appropriation of rent and the existence of private property in land are socially necessary for the perpetuation of capitalism” (Harvey, 1982, p. 358), they consider the ideological weight of private property and the associated, liberal notion of property rights to be barriers to overcoming land as a commodity and thereby directing land toward the common good. Haila (2016, p. 58) accuses property rights advocates of treating land as stripped of its social relations and solely meant to circulate through real estate and financial markets. The classical notion of private property rights involves clear ownership (i.e., a secure title) that enables landed property to be leased and traded and used as a financial asset (Ryan-Collins, 2021). Under the property rights argument, rents and sales proceeds are due to the owner as-of-right. Because the owner can do with her property as she wishes, she can derive income from it. Additional rights include the right to dispose of the property as she sees fit, control how the property is used (within the regulatory limits of the state), prevent people from encroaching on the property, and setting the conditions for rental agreements and sale. These rights, moreover, can be unbundled and managed separately. For example, the owner can allow a utility company to run infrastructure across the site without giving up other property rights (an agreement known as an easement) or cede ownership for a set number of years as with a long-term ground lease. According to its advocates, private property rights eliminate destructive competition with “market values of property reflect[ing] the preferences and demands of the rest of society” (Alchian, n.d.). For advocates, such rights additionally constrain an interventionist government whose actions might degrade efficient markets. For its proponents, property rights are the key to economic prosperity, social security, political stability, and environmental sustainability (Kelley and Graglia, 2017). Strong property rights allow land and buildings to participate in markets that efficiently allocate them to their highest and best use. In turn, they provide owners with an asset that might appreciate over time, thereby accumulating wealth, and that can be used as collateral for loans to start businesses or make other investments. The World Bank views this latter benefit as a way of

12  Mika Hyötyläinen and Robert Beauregard empowering women (Tuck and Zakout, 2019) and further claims that legalizing Indigenous peoples’ land rights can protect their land from encroachment. And although proponents acknowledge that such rights can be shared beyond a single person, socialized and commonly owned resources are viewed as “weakened private property rights” (Alchian, n.d.). To treat land as a something that can be privatized and to which rights of control can be attached and conceded to individuals or corporations is to cast it as a fictitious commodity. Commodities are objects (e.g., chairs) and services (e.g., dental care) produced for circulation and eventual consumption in price-sensitive markets. Land is not produced in this sense (Polanyi, 1944, pp. 72–73). It preexists real estate markets and like labor and money, as a commodity, it is entirely fictitious. Dis-embedded from social relations and abstracted, simplified, and standardized, land becomes property and a commodity (Ghertner and Lake, 2021, pp. 6–8). As property, it is essential to and a “vital organizing principle” for market economies. As Harvey (1982, pp. 368–369) points out, only by making land into a tradable commodity can capital be allocated across the primary and secondary circuits, thus averting crises and shaping the “geographical structure of production, exchange and consumption.” Moreover, only in this form can landed property be “treated as an open field for the circulation of interest-bearing capital” (p. 371). Once land and buildings are financialized and de-localized (Beauregard and Haila, 2000, pp. 30–35) and property rights secured, the basis for speculation is established. Critical political economists have moved well beyond land as a factor of production or as a withdrawal from the stock of surplus capital and a drag on capital accumulation. The financialization of land and property is what looms large in their worldview. It represents not just the growth of the financial sector in advanced economies, but a phenomenon that has left land decoupled from production and use and set firmly within financial and speculative valuation; i.e., alienated from social relations (Krätke, 1992, p. 346). This makes life more precarious for households whose economic fate is increasingly caught up in financialization and whose lives are supported increasingly by debt, the latter instrumental in the income and wealth inequality that became pronounced in the early 21st century (Konczal, 2014). More and more, finance shapes capital investment and household behavior. Governments are also affected when they utilize financial instruments to balance their budgets and pay pension obligations while de-regulating to attract investment and tax revenues. To this extent, financialization and neo-liberalism are intertwined (Lapavitsas, 2013). Financialization is basically a process by which capital is circulated through the economy (Aalbers, 2016, pp. 1–3; Davis and Kim, 2005; Derrington, 2021, pp. 303–304). Excess earnings are turned into savings and retained earnings and, subsequently, with the support of banks, transformed into loans that can be used to invest in housing, public works, and businesses. Land and buildings function as assets that attract capital and against which capital can be borrowed. Most importantly, property has become increasingly packaged into financial

The Political Economy of Land 13 instruments that can be rapidly and easily traded; i.e., securitized (Jobst, 2008; Rosen, 2007). Under securitization, the owner of a set of assets (for example, a mortgage origination firm) bundles these assets into a single vehicle (e.g., a mortgage-backed security) available to a multitude of investors. The investors receive payments from the underlying loans on the individual properties via the monthly payments on the principle and interest and the original lenders either relinquish any future involvement or simply collect and pass through the payments. Such securities can be made up of assets with various degrees of risk (called, tranches) and investors can decide whether to purchase high-risk tranches that promise high returns or low-risk tranches less vulnerable to nonperformance of the underlying asset but also potentially less lucrative. Rabid securitization is essentially what happened in the U.S. mortgage market in the late 2000s. When the economy slowed and the bubble of ever-rising housing prices burst, the underlying mortgages began to fail and the related securities collapsed. At the center of this crisis was housing. Critical political economists generally agree that this introduced a new stage of capitalism. Land and its associated rent have strayed well beyond fictitious capital to become an asset with no ties to the social relations and needs of users. Furthermore, the financialization disease has infected businesses (particularly large corporations) with consequences for income and wealth inequality. When combined with the ideological scrim of neo-liberalism, the financialization of government is particularly bothersome. Critical observers envision dire consequences for state support of housing and public services and hold little hope for successful resistance to the exploitation by and crisis tendencies of capitalism.

Overview of book This book is organized into three parts, each representing a different dimension of the political economy of land. The first part focuses on the assetization of land and buildings, the second on rent, real estate, and property markets, and the third on land and its social relations. Part I deals with the question of how land is made into an asset and the implications this has theoretically and empirically. The opening chapter, Anne Haila’s classic article from 1988, argues that rent has a coordinating role for land use under capitalism and illustrates her point with the case of the development of Helsinki’s central business district in the 1980s. Haila put forth the idea that land rent theory is particularly pertinent for analyzing urban land use. Drawing on Haila’s work, Erik Swyngedouw and Callum Ward further explore the notion of land as an asset within the Marxist framework of capital circulation and its particularities in today’s financialized capitalism. Behind land rent lies the curious process of fetishization of land, a process through which the fundamentally social relations of land are transformed into anonymous exchanges of landed commodities on the market. The dynamics and implications of this assetization of land are further analyzed by Renee Tapp and Rachel Weber. Tapp and Weber look in detail at how a single office building in Chicago was developed as a

14  Mika Hyötyläinen and Robert Beauregard financial asset and seek to understand the tension between the materiality of land and buildings and the immateriality of finance. Part II adjusts our focus on the dynamics of rent, real estate, and property markets. When land and buildings are traded in the real estate market, what is traded are not the physical structures as such, but the promise of future rent revenue. It is rent itself that has increasingly become a means of accumulation under capitalisms contemporary rentier mode. Brett Christopher analyses the actions of Blackstone, a transnational real estate investor and rentier capitalist. He critically explores the dominant narrative that the high rewards on real estate investment are justified by the investors’ high risks. Christophers deconstructs this narrative and shows how Blackstone’s profits accrue from calculated avoidance of risks and from its political and economic power. Municipalities in advanced capitalist countries also participate in the assetization of land by selling public land and real estate. John West investigates how in Delaware County, Indiana (USA), tax-foreclosure sales for distressed properties result in local governments awarding properties to speculators. Property ownership thus moves from individual hands to limited liability corporations and from the local community to out-of-county owners with detrimental consequences for the residents. Félix Adisson also considers the government’s role in property management and real estate transactions. His concern is how the public sector in Italy delivers public properties to the private real estate market. At a time of fiscal austerity, land privatization is viewed as a mechanism for financing welfare provision and spatial development. Contributing to the growing literature on public real estate privatizations in Europe, Adisson introduces the concept of financialized public real estate policy. He shows how the privatizing of public real estate is not simply about divestment of public surplus, but, for example, the turning of cultural heritage buildings into high-end holiday resorts. The final chapter in Part II is Anne Haila’s analysis of how land use regulation has supported the enduring success of Singapore’s global city status. In a global city, according to Haila, the danger is that property prices will so increase that companies will leave or no longer locate there. To counteract this, Singapore has kept land as public property. It leases the land to developers to deter speculation and ensure affordable housing. Part III analyses various social relations of land. Haoxuan Sa and Jani Vuolteenaho investigate China’s internal migration in light of recent housing reforms. In their case study of Xiamen, they pay special attention to the different mental and social constructions of the notion of home among rural migrants and reflect on how changing land relations affect migrants’ bond to their places of origin and destination. Maiko Nishi examines how the rights to farmland in Japan have been rearranged through the adoption of a Farmland Banking system meant to mitigate a severe drop in the farming population and large-scale farmland abandonment since the 1980s. This system gives prefectural governments new power to sublet privately owned farmland to third parties and facilitate farmland aggregation. Sai Balakrishnan continues the focus on social relations in her study of how non-propertied working classes in India make claims on the city and on urban amenities via land occupancy. She analyses the proliferation of

The Political Economy of Land 15 insurgent land occupations alongside the swelling ranks of casualized and informalized workers in Bengaluru in the 1970s. In doing so, Balakrishnan reframes unauthorized housing not as a slum or housing question, but as a question of labor and working-class struggles over land occupations. Using a case study of New York’s East Side Coastal Resiliency project, Robert Beauregard looks at social relations a bit differently. He concentrates on how park users describe their relationship to the park, the state’s involvement with those publics, and the importance of materiality to these social relations. He thereby directs our attention to how people relate to land in the absence of compelling economic or ownership obligations, a situation that poses a number of critical questions for the political economy approach. Finally, Mika Hyötyläinen explores the dialectical relationship between the urban commons and capital, and the mediating role of the state in this relationship. His case is the Suvilahti DIY skatepark in Helsinki. Built and managed as urban commons on vacant city land, the city government has decided to demolish it and sell the land for a real estate development project – a high-end cultural event facility. While the urban commons provided a free and autonomous cultural space, managed through solidarity, it also created an atmosphere and image of culture and creativity for the area. Pitting use values against exchange values, that image is now being abused for land rent maximization. We conclude this book with Mika Hyötyläinen’s reflections on the contributions of each of the chapters, as he discusses them particularly from the perspective of the theory of land rent.

Acknowledgments We are grateful to Patrice Derrington, Robert Lake, and Lina Olsson whose thoughtful comments greatly improved an earlier draft.

Notes 1 On the early shift in land relations engendered by the Industrial Revolution, see Yates (2021, pp. 30–39). 2 Throughout, we use land to refer to land that is owned, been improved, and is traded in a price-driven market. The critical political economy literature has little interest in raw land. Land can be considered one part of a rentier capitalism perspective that encourages attention to a broad range of rent-generating assets, such as intellectual property and long-term service contracts (Christophers, 2021). 3 Using the concept of bid-rent, economists such as William Alonso, however, made advances in scholarship regarding land and land rent. 4 Data are from The World Bank accessed August 7, 2021 at http://data.worldbank. org/indicator/BK.KLT.DINY.CD.WD and deflated using the U.S. Consumer Price Index. 5 https://fred.stlouisfed,org/series/REITSMA 6 Savings and loan crisis, accessed August 7, 2021, https://en.wikipedia.org/Savings_ and_loan_crisis 7 https://fred.stlouisfed.org/series/DRSFRMACBS, accessed August 8, 2021.

16  Mika Hyötyläinen and Robert Beauregard 8 www.reuters.com/article/banks-witedowns-losses-idCNL554155620091105? rpc44, accessed August 7, 2021. 9 This is essentially differential rent 1 and differential rent 2 discussed by Harvey (1982, pp. 353–358) and others.

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PART I

THE ASSETIZATION OF LAND AND BUILDINGS

1

LAND AS A FINANCIAL ASSET THE THEORY OF URBAN RENT AS A MIRROR OF ECONOMIC TR ANSFORMATION1 Anne Haila

The restructuring and globalization of economies and especially the concomitant changes in the financial system have had enormous effects on real estate markets. In recent discussion, these effects have so far remained almost completely neglected. This is unfortunate, because it may be argued that it is precisely real estate markets, which transmit the effects of general economic change on space. On the other hand, in the discussion of rent theory, the spatial consequences of economic transformation have been ignored. Again, this situation is to be deplored, since the theory of rent may be used in explaining the land use allocation brought about by the functioning of real estate markets. In recent years, there have been several proposed reformulations of the rent concept (Harvey, 1982; Ball, 1985a; Bentivegna, 1985; Katz, 1986). So far these proposals have remained sketchy and serious theoretical discussion is only beginning. These formulations, however, reveal that there is a need for a new theory of rent, which, I think, reflects recent changes in real estate markets. In this paper, I try to outline some points for the development of a new theory of urban rent. After a brief excursion into the history of rent theory and a look at the attempted reformulations, I identify the basis of a new theory and then examine the extent to which it may be supported by evidence concerning some actual changes in real estate markets using the case of Helsinki as an illustration.

Towards a new theory of rent The rapid increase of land and housing prices in the early part of the 1970s inspired a lively discussion on rent theory in many countries such as Britain (Broadbent, 1975; Bruegel, 1975; Tribe, 1977; Murray, 1978), the USA (Harvey, 1973, 1974; Walker, 1974, 1975; Ive, 1975; Edel, 1976, 1977; Markusen, 1978) and West Germany (Neef, 1974; Behnke et al., 1976; Brede et al., 1976). Marx’s theory of rent was investigated and developed while the neoclassical concept of rent was criticized. Special emphasis was laid on attempts to apply rent theory to urban questions. I will call these contributions ‘the old theory of rent’. Toward the end of the 1970s and in the early 1980s these ‘old’ conceptions were criticized and reassessed. New questions and points of view were introduced in a few important works (Ball, 1977, 1985a; Scott, 1980; Bandyopadhyay, 1982; DOI: 10.4324/9781003280255-3

22  Anne Haila Fine, 1985). Reconceptualizations and germs of a new theory were suggested in some publications (Harvey, 1982; Ball, 1985a; Katz, 1986). The term ‘a new theory of rent’ has already been used and a comparison between the old and the new version of rent theory has been made (Bentivegna, 1985). The terms overemphasize the distinction between past and present work, but are retained for analytical convenience. The transition from the ‘old’ to the ‘new’ rent theory is more a change of emphasis and focus than a whole rewriting of a theory. There are, however, some significant differences which can be characterized as follows. In the old theory, rent was regarded as a non-capitalist and pre-capitalist remnant, whereas in the new theory rent is seen as an organic and endogenous ingredient of the capitalist system; the old version ascribed rent no active role in accumulation, the new version gives it a functional role. While in the old theory, the focus of interest was on the barriers posed by landed property to rational land use and the conflicts arising from these barriers, in the new theory, the question of rational land use is put into a new perspective and it is postulated that there exists a tendency toward rational land use. Whereas the old theory emphasized social relations, rent as a distributional category, and the role of absolute and monopoly rent, in the new theory the focus is on differential rent and the coordinative role of rent. An important step toward a new theory was Michael Ball’s (1977) emphatic focus on questions of differential rent. In the old theory, differential rent was considered non-problematic and greater interest was directed to absolute and monopoly rent. Ball also shifted the interest from the question of distribution to that of production and outlined an agenda for urban rent theory. Bandyopadhyay (1982) – paying attention to landowners’ ability to withdraw land from use and create scarcity of land – denied that absolute rent is a feudalist remnant and argued that it is ‘an endogenous characteristic of the capitalist mode of production and not a leftover of the forms of appropriation of surplus product in pre-capitalist modes of production’ (Bandyopadhyay, 1982, p. 184). In several writings in the 1980s, the dysfunctional role of rent in capitalist production and rent only as a barrier were called into question. Michael Ball (1985a) argued that land rent could also have a positive effect; Ben Fine (1985) showed that the forms of ownership can facilitate the development of an industry; and Allen Scott (1980) claimed that a historical transformation has occurred in the relationship between rent and accumulation. In contemporary society rent is no longer a barrier, unlike during earlier stages of capitalism. Once rent is accumulated, it ‘enters immediately into the stream of new investments generally, where it contributes directly to the accumulation process. In this sense, the phenomenon of land rent can no longer be said to set up barrier to the general process of capitalist production and accumulation, as it no doubt did, in England, in the early stages of capitalism in the seventeenth and eighteenth centuries, when an essentially parasitic landed aristocracy dissipated the surplus labour that it appropriated as land rent in extra-capitalistic expenses’ (Scott, 1980, p. 30). Michael Ball has suggested that a ‘reformulation of the theory of urban ground rent requires the integration of rent with the notion of structures of

The Theory of Urban Rent as a Mirror of Economic Transformation 23 building provision’ (Ball, 1985b, p. 518). By structure of building provision, he means ‘the social agents involved in the physical provision of a built structure’ and by provision he means ‘the production, exchange, distribution, and use of a built structure’ (p. 504). Ball emphasizes the role of the historically specific social relations associated with land rent. Hence, he denies the possibility of a universal theory of rent. Ball is also suspicious of the existence of an urban land market ‘as a universal entity across all urban space’ (p. 523).

Land as a financial asset One of the most interesting guidelines for a new theory of rent, by far, is in David Harvey’s book The Limits to Capital (1982).2 Harvey’s presentation serves as a fruitful point of departure for an elaboration of a new theory of urban rent, because, first, it connects the theory of rent to the analysis of land markets and land speculation, and second, it concerns some essential transformations of these markets. Harvey also succeeds in incorporating the notion of finance capital in rent theory through the concept of fictitious capital. I will in the following formulate two statements which, I think, constitute the essential message of what can be called Harvey’s new theory of rent. After that I will elaborate the first statement further and consider how it may be supported by evidence concerning some recent changes in real estate markets. The two statements are: A. There is a tendency of landowners to treat their property as a pure financial asset. B. Rent has a coordinative function in capitalism. Statement A does not express a completely new idea. The question of whether landowners behave rationally or non-rationally has been for a long time a contentious issue among economists. Neoclassical economists assume that landowners, like any other agents, behave ‘rationally’, in the sense of maximizing the money reward from their property. This assumption has not, however, been supported by empirical evidence, but on the contrary several empirical investigations show that landowners, in actual decision-making situations, are not rational in the above sense. For example, Denman (1957) in his empirical research found that the motives of landowners are remarkably diverse. Denman and Prodano (1972, p. 178) have suggested that besides monetary rewards the behavior of landowners is also inspired by non-monetary rewards, which are subjective, non-­ quantifiable and specific to each landowner. Epping (1977, p. 137) has listed different kinds of situations in which subjective valuations could have an impact on decision-making by landowners. An important investigation by Massey and Catalano (1978) reconciles the seemingly contradictory positions of neoclassical economists and of researchers emphasizing subjective values. There exist several different kinds of landowners (large aristocratic estates, the Church, banks, insurance companies, pension

24  Anne Haila funds, individual owners, corporate owners and government agencies), and these different groups have distinct interests and modes of behavior. Harvey admits this diversity but he also claims that there is ‘the increasing tendency to treat the land as a pure financial asset’ (Harvey, 1982, p. 347). What does it mean to treat land as a pure financial asset? Harvey gives the following answer. For the buyer of a plot of land, ‘the rent figures in his accounts as the interest on the money laid out on land purchase, and is in principle no different from similar investment in government debt, stocks and shares of enterprises, consumer debt and so on. The money laid out is interest-bearing capital in every case. The land becomes a form of fictitious capital, and the land market functions simply as a particular branch - albeit with some special characteristics of the circulation of interest-bearing capital. Under such conditions the land is treated as a pure financial asset which is bought and sold according to the rent it yields’. (Harvey, 1982, p. 347.). Statement B is no less contestable than statement A and its origins also go far back in the history of rent theory. Contrary to B, it is a common view in the history of rent theory, all the way from Ricardo to Schumpeter, Henry George and many Marxists in the 1970s, to regard rent as having a negative and dysfunctional role in the capitalist accumulation process. Landowners have been blamed for using their revenue for conspicuous consumption and not investing it profitably. Capitalism has been thought of as lacking sufficient incentives for promoting the efficient use of land. Therefore, different measures have been proposed to remedy this state of affairs, such as Henry George’s suggestion for a land value tax. By claiming that rent has a coordinative role and that landowners have an active role, Harvey takes a position, which is not generally accepted. Harvey notices the problem that there are no incentives for a capitalist to put a piece of land into its most profitable use, if the benefits accrue to landowners. But the situation changes if land becomes a form of fictitious capital and if ‘interest-bearing capital circulates through land markets perpetually in search of enhanced future ground rents’ (Harvey, 1982, p. 368). In this situation, there will emerge an incentive for efficient use. The owner who treats his landed property as a pure financial asset ‘promotes activities on the land that conform to the highest and best use, not simply in the present, but also in anticipation of future surplus value production’ (p. 368). Harvey is not only claiming that rent is functional, but also that it is necessary. ‘Capitalism cannot do without land price and land markets as basic coordinating devices in the allocation of land to uses’ (p. 371). The problem of barriers posed to accumulation by private landed property and fixed capital has previously occupied Harvey (e.g. Harvey, 1978). I would like to suggest that Harvey has now perceived that there exists a solution to this problem, namely that there is one form of landed property, which promotes efficiency and accumulation. This form of landed property is ‘that kind of landownership that treats the land as a pure financial asset … All other forms of landed property must give way. The land must become a form of fictitious capital and be treated as an open field for the circulation of interest-bearing capital’ (Harvey, 1982, p. 371).

The Theory of Urban Rent as a Mirror of Economic Transformation 25 I consider statements A and B fruitful, although contestable, points of departure for a discussion on the new rent theory. I suggest that a new theory of urban rent should be elaborated, first, as the theory of urban real estate markets, and second, as the theory which explains land use allocation. Statements A and B fulfill these requirements. These requirements do not necessarily contradict Ball’s (1985b) reformulation. Ball emphasizes the variety of landed property relations and therefore denies the possibility of a universal rent theory. I do not think that we must give up in the face of this diversity and stop theorizing on rent in general. I would like to suggest that within this variety there exists one group of landowners whose behavior can be captured in a theory which could be called general. It is general in the sense that, first, it describes the use of land in its purest capitalist form; second, it describes the economic behavior of landowners without any invocation of the ideological functions of private landownership;3 and third, it concerns landowners as economic agents (‘character masks’, cf. Marx, 1967, ch. 2 and Cohen, 1982, p. 162), as representatives or personifications of economic relations) and not as individuals which are susceptible to subjective valuations. Landowners of this kind treat their property as a pure financial asset.

Landowners and changed conditions for using land According to statement A, there is a tendency for landowners to treat their property as a pure financial asset. How is this statement to be understood? Harvey demands historical evidence in support of his statement when he writes: ‘How far capitalist social formations have advanced down such a path is a matter for historical investigation’ (Harvey, 1982, p. 371). But although there are no investigations of this kind, he seems to believe that the realization of the tendency is a necessity. ‘Land must become a form of fictitious capital’, he says, and ‘capitalism cannot do without land price’ (p. 371), and again ‘landowners must necessarily take an active role in the pursuit of enhanced rent’ (p. 369). These kinds of statements have led to Harvey being accused of ‘capital logic’ by which is meant, roughly, a theorizing which derives almost everything from the functional needs of capital, ignores the mediations and complications of real life and undervalues the role of individual and group action. One recent criticism of this kind is that of Michael Ball (1986). Ball refers to Harvey’s statement that ‘land must become a form of fictitious capital’ and comments that it ‘contradicts empirical work that has been done on the differentiation within landed property’. In defense of Harvey, it must be said that this criticism does not reach the point. Harvey is well aware of the empirical investigations on the diversity of landowners, and therefore formulates his claim as a tendency (which may not yet have manifested itself fully). But as a criticism, it must be said that the weak link in Harvey’s reasoning is the interpretation of the tendency as a necessity. A plausible statement deserves a better interpretation, in order not to be thrown away for irrelevant reasons. I would like to interpret statement A as a testable hypothesis concerning the tendential development of capitalism; it is a task of empirical research to establish

26  Anne Haila the actuality of this tendency. Statement B is conditional upon statement A: when and where land is treated as a pure financial asset, rent has a coordinative role. The existing empirical evidence concerning the behavior of landowners does not confirm statement A. This does not, however, falsify the statement, I suggest, because the evidence has not been gathered in the right place (city centers) and at the right time (1980s). I think there are many good reasons to believe that statement A is a good hypothesis. Because no directly relevant evidence is yet available in support of statement A, I will consider its adequacy with indirect evidence. In order to open the discussion on statement A, I will, instead of the notion of tendency, use the concept of power, elaborated by Rom Harré.4 Power is the intrinsic characteristic of an individual or a substance to do something, to behave in a certain way. Harré differentiates the existence and the exercise of a power. The existence of a power is based on the nature or kind of an individual. The behavior of the individual is the exercise of the power. In my application, the focus is on the power to treat landed property as a pure financial asset (to buy, sell and use land according to rent it yields). The entity having the power is a landowner as a receiver of rent revenue. This means that the concept of a landowner is dependent on the concept of rent. The power under consideration is a causal power in that it has effects on the use of space. The existence and exercise of a power is conditional upon stimuli and other conditions. Harré identifies a variety of conditions. Enabling conditions will ensure that a thing or an individual is in a state of readiness to act. But readiness does not by itself lead to action. Stimulus conditions will bring about action as a response, given that a thing or an individual is in a state of readiness. Enabling conditions are further divided into intrinsic enabling conditions which concern the identity of the thing, the possession of a power by this thing or individual; and into extrinsic enabling conditions which make possible the exercise of powers already possessed. Stimulus conditions, identified as changes which actualize this possibility, are further divided into those within an entity and those which take place outside it. In addition to enabling conditions and stimulus conditions that are conditions in the environment (‘opportunities’, ‘background’) which are necessary for the exercise of a power (Harré, 1978; Harré and Secord, 1972).5 Harré’s power concept invites us to focus on the above variety of conditions in studying the behavior of an agent. In recent years, the conditions of land use and of the behavior of landowners have changed remarkably. I will identify five kinds of changes related to (a) the locational behavior of firms, (b) public intervention in land use and development, (c) the identity and nature of landowners, (d) the formation of rent and (e) investment markets. In what follows I would like to open a discussion on whether these changes have developed the existence and manifestation of the power of landowners to treat their property as a pure financial asset. I will use Harré’s concepts of conditions flexibly in discussing the nature and role of these different changes.6 I will argue that the locational behavior of firms forms extrinsic enabling conditions in influencing the demand for land. Public intervention in land use creates

The Theory of Urban Rent as a Mirror of Economic Transformation 27 conditions in the environment in molding the framework for landowners to rent, sell, buy, use and develop land. Changes in the identity and nature of landowners are the enabling intrinsic conditions; they concern directly the agent or subject that is making land-use decisions. Changes in rent formation and investment markets form stimulus conditions for rent-maximizing behavior of landowners. The very preliminary discussion that follows is illustrated mainly by some examples from Helsinki. During the 1980s especially, the city center of Helsinki has experienced several changes culminating in a planning contest for developing a whole new core for the city. What is striking in these changes are the similarities between what is happening in Manhattan, London and Helsinki, irrespective of the completely different backgrounds of these cities. It should be emphasized that the area to be discussed is the one that is relevant for the new theory of rent, namely the CBD (the central business district), the central area of a big city, or, put in terms of land use, the area which is used for offices, hotels, retail shops and entertainment services. I do not claim that all buildings, such as houses in suburbs, are becoming pure investment objects, or that all landowners treat their property as a pure financial asset.

Changes in the locational behavior of firms The demand for land by firms can be understood as belonging to the extrinsic enabling conditions. The demand for land is a necessary condition for landowners to be able to rent or sell their property, and is a prerequisite condition for the use value of land. During the recent years these conditions have changed considerably, so as to encourage landowners to treat their property as a pure financial asset.7 Industries have moved away from the central areas of big industrial cities to suburbs, small cities and peripheral areas. Headquarters, banks, hotels, restaurants, offices, travel agencies and retail stores have remained in the central areas and grown in number. In New York City the next phase of the move is already going on: support staff and back-office staff of offices are being relocated away from Manhattan to Brooklyn and New Jersey (The Economist, April 4, 1987). In different areas, the exodus and relocation of firms have produced different kinds of pressures on landowners. Two cases can be distinguished. On the one hand, because of the increased range of locational choices of (‘footloose’) firms, big cities and their centers, suburbs, small cities and peripheral areas have become more equal in their capability to attract firms. This has increased the competition between cities and regions and thereby the monopoly and negotiating powers of landowners have been undermined. The intensified interregional and interurban competition is so pervasive in the world economy that they affect not only Manhattan but also Helsinki. Espoo, the neighboring city of Helsinki, has carried out an advertising campaign for its CBD to attract offices, headquarters and firms, Helsinki has been compelled to compete with its neighbors for enterprises. Those that benefit from this situation are the firms that are able to receive extra advantages (better lots and more building rights) just by hinting that they would otherwise go elsewhere.

28  Anne Haila On the other hand, in city centers, the monopoly power of landowners and hence their ability to appropriate high monopoly rents has increased. The activities which occupy these central areas are those whose productivity and consequently rent-paying ability cannot be directly measured. It follows that there is more room for negotiations between a landowner and an occupier, and there are increased possibilities for monopoly rents, due to the increased demand for central locations. This leads to differentiation of rents. Rents are further diversified by the fact that these central areas are increasingly segregated as spaces for different consumer groups, for which the prestige and symbolic meanings of space are important. Advertising has an important role to play in the creation of these segregated symbolic spaces and monopoly rents. In the core of Helsinki a new shopping complex (called Forum) began an advertising campaign years before it opened; the campaign was directed to the young urban consuming segment of the middle class. Changes in the economy and the behavior of firms have thus strengthened the power of landowners to treat their property as a pure financial asset by developing the competition between landowners, by introducing new courses of action for landowners (advertising), and by increasing the possibilities for monopoly rents.

Changes in the form of public intervention Public authorities, in their different roles (planning, financing, legislating, constructing8), create conditions in the environment, necessary for landowners to rent, sell, buy, use and develop their property. In the 1980s, significant changes have occurred in these roles. Some of the changes have contributed to the power of landowners to treat their property as a pure financial asset. The search for new forms of planning was generated by the coexistence of several phenomena. Criticism of land-use planning paralleled cutbacks in welfare state spending. The criticism was reinforced by the coincident theoretical criticism of planning. The needs, motives and principles of planning were reassessed. The attack did not, however, lead to the abandonment of planning. Only the forms of planning changed. In Finland, comprehensive and long-term planning (regional and general plans) have a long history and an established position, but now they were increasingly questioned. Directly implementing planning was favored and spoken for instead. In the US, the city of Houston was praised by developers because of its weak building code and the total absence of zoning regulations. ‘In a city with stricter zoning and planning it might take a year or two to get a plan for a mega-structure project approved and finished. In Houston it takes six months. Zoning tends to slow down development’ (Feagin, 1984, p. 117). In the same manner, the mayor of Helsinki, echoing the voice of the Finnish business world, has criticized comprehensive planning for retarding the development process. What is important is that the favoring of implementing planning enhances the possibilities for putting a parcel of land flexibly to its most efficient use and opens more possibilities for direct influence of the business

The Theory of Urban Rent as a Mirror of Economic Transformation 29 world on city development. In Helsinki, one manifestation of the increased influence of the business world was the thesis concerning the development of ‘post-industrial’ Helsinki announced by the Chamber of Commerce in 1982.9 This kind of public and overt interest is unprecedented, although the business world, in practice, has probably influenced planning for decades. Some authors view the increased public intervention in land use and spatial arrangements as a precondition for the whole restructuring of economy in the present phase of capitalism (cf. Fainstein and Fainstein, 1983, 1985; Mollenkopf, 1983). The activities which facilitate the economic restructuring include redeveloping huge central urban areas, constructing massive officeshopping-­entertainment complexes and rearranging traffic. In Helsinki, this task has been understood thoroughly. The city and the state have embarked upon an enterprise for developing a whole new core for the capital. In April 1985 a prize contest was declared for architects to plan a new ‘21st century core for Helsinki’. This is not the first endeavor for there has been a plan (although unimplemented) in almost every decade for the same central area (by foremost Finnish architects Eliel Saarinen 1918; Oiva Kallio 1924; Pauli Blomstedt 1930; Lindegren-Krastrom 1954; Alvar Aalto 1964), but in the 1980s the new needs of the economy called for a new plan. The focus of planning and construction has also changed. While in the 1960s and 70s the focus was on developing sub-centers, in the 80s an increased emphasis is placed on the development of the core. This change suits the Chamber of Commerce which recommends developing the core. It also suits the needs of the building industry in the situation where there is a scarcity of investment opportunities. The chairman of the European Organization for Building Industry (FIEC) Fernando Piccinini suggested (in 1984) that the future is in the redeveloping of the cores of old cities. In Finland, the sudden and considerable decrease of construction work abroad in 1983, after many booming years, put the industry in a difficult situation. Investing in the development of the cores of Finnish cities turned out to be a way out from these difficulties. The state and the city of Helsinki have increased the demand for land and have also facilitated the crisis of the construction industry by developing a new office concentration (called Pasila) at the fringe of the CBD. Some new forms of the planning and negotiation process have increased the commodity nature of land and building rights. It has been said that it is characteristic of cities in the latter part of the 20th century that the economic allocation of land has been replaced by a political mechanism (Edel, 1972). Political allocation is thought of as being necessary in situations where the market mechanism does not work, e.g. expelling the homeless from the areas of consuming office workers (Mair, 1986). In Helsinki, firms and planning authorities have negotiated about building permissions; permissions for headquarters and offices have been allowed on condition that housing is also included. In sum, changes in public intervention have increased the power of landowners to treat their property as a pure financial asset by making the planning and developing process more flexible and speeding it up (to be more in accord with

30  Anne Haila rapidly changing economic conditions), by permitting greater and more direct influence by business, by increasing the demand for land, and by increasing the commodity nature of land parcels.

The appearance of new groups of agents During recent years, there have been two significant changes concerning the nature and identity of landowners: the first is the appearance of a new group of calculating agents who treat their property as a pure financial asset, and the second is the spread of a calculating attitude among the set of already existing landowners. These constitute the enabling intrinsic conditions. Doreen Massey defines ‘restructuring’ as ‘the reorganization of the ownership of capital, primarily through processes of centralization’ (Massey, 1978, p. 39). This is clearly manifest in real estate markets and in building production. Market exchange of urban real estate has been active in the 1980s. Productive and trading capitals have sold their properties, while investors in real estate business (banks, insurance companies and construction firms) act in the role of buyers. In building production during the 1970s and 80s new kinds of agents and groupings of agents have appeared. Different organizations, trusts, banks and insurance companies have put together their capital and jointly built shopping and office complexes, renting floor space to entrepreneurs who are no longer capable of building themselves and are getting increasingly reluctant to own the space they use. In Helsinki, the owner of the new commercial shopping complex (called Forum) is a joint stock company (called Oy City Forum Ab) founded by two banks (HSP and SKOP) and one society (Forening Konstsamfundet publishing the newspaper Hufvudstadsbladet and maintaining the Amos Anderson Art Museum). The organizers of the building project in the subcenter called Itakeskus (10 kilometers east of the CBD) have been two building companies (Haka and Polar) and two big central stores (Elanto and Tuko). The financer and owner of the complex is a bank (SKOP). In these new shopping-office complexes, the calculations of the maximum rents and the decisions on the most efficient use of space are made by employed managers. The behavior of these real estate professionals differs from that of private landowners. The latter are more susceptible to subjective values. The professionals, in contrast, are led by rent maximization. They try to create segregated symbolic spaces by advertising: a specific space for each specific consumer group. Public opinion in Helsinki has blamed these real estate managers for raising the rent level. In 1980, the highest rents were about 50 marks (about US$11) per square meter. At that time the manager of the new shopping complex Forum announced the rent level for this new structure (to be opened in 1985) to be 200 marks per m2 and launched an advertising campaign in newspapers. Many thought then that this rent level, four times as high as the previous maximum, was too high and that the Forum would not achieve full occupancy. Contrary to expectations, all the space was rented. Following the example of Forum private

The Theory of Urban Rent as a Mirror of Economic Transformation 31 landowners in adjacent areas raised their rents, and after a while this high rent level spread to the neighborhoods. This has led to the closing of many small shops in the area which had been in business for years. Not only have there appeared new species of calculating owners and professionals in the real estate business, but also the calculating (rent-maximizing) attitude has spread among other landowners. Firms have begun to require maximum profitability also from their real property which has until now served as a framework for activity. The successful and flexible selling, exchanging and buying of real estate has become a necessity for a prosperous firm. Firms have begun to employ professional real estate managers, and private landowners, following the example of these professionals, have started to ask for higher rents. Rent-maximizing behavior is not alien even to the state and city authorities. In their role as landowners, they have recently begun to pursue a new kind of rationality. In the situation of rising land prices and positive real interest rates the public authorities have begun to raise, considerably, the calculated shadow prices of their landed property. The consequence of this has been more efficient use of public landed properties, e.g. in Helsinki the construction of housing in the green areas around hospitals.

Changes in the formation of rent The changes in the enabling conditions, in the conditions of environment and in the identity and nature of landowners do not by themselves lead to the rent-­ maximizing behavior of landowners. Stimulus conditions are needed to activate the exercise of the power. Some structural changes in the formation of rent and land prices form the stimulus conditions within the entity, and could be expected to help activate the power of landowners to treat their property as a pure financial asset. The increased internationalization of the economy has raised rent levels. At the time when cities were more self-sustaining and the economy was more local in its nature (the flows of commodities, payments, wages, profits, capital and investments circulated inside the city boundaries (cf. Broadbent, 1977), rent was determined locally, from surplus, production differentials and rent-­ paying ability, which were determined inside city boundaries. But the increased dependence of cities on other cities, on national and global economies and on big multinational enterprises and financial institutions (the flows of commodities, payments, wages, profits, capital and investments now circulating through regional, national and global centers), has ensured that rent is no longer determined by locally defined differentials, but on a regional, national or global level. For instance, the headquarters of international corporations, whose rent-paying ability is much higher than that of activities operating only on a local level, can outbid these last named. The increased globalization of the economy has enhanced the opportunities for monopoly rents. One recent example of rising rent levels due to contact between two different economies is New York. The Japanese have increased their investments

32  Anne Haila in Manhattan’s prime commercial property. According to a report in The Economist, the rise in property prices has been magnified by Japanese willingness to pay up to 5% above the prevailing market values. The willingness to pay more is due to a long-term view the Japanese take. ‘They rarely “trade” property, preferring to hold commercial buildings often for decades. They can also afford to pay a little more. Many Japanese investors have more dollars than they know what to do with, and the yen’s strength has made even prime commercial property in Manhattan look cheap to them’ (The Economist, April 18, 1987). In Helsinki, the flow of foreign capital is still in the future. The new forms of public intervention have also influenced rent levels. By having offices constructed, public authorities have redistributed tax revenues. The improvements have been capitalized into land values and benefited landowners in the neighborhoods. By intervening politically in the allocation of land use, e.g. by ordering the inclusion of housing in the ‘office zones’, public authorities have thereby introduced two different rent levels (related, respectively, to offices and housing) on one and the same site. The effect of this has been an increase both in the general rent level and in the rent differentials between land parcels. As regards public authorities’ haphazard influence on rent we in Finland speak about the ‘zoning lottery’. People buy vacant land like a ticket in a lottery without knowing what they can win. Planning authorities zone some parcels for office use (the winning ticket) whereas other parcels are appropriated for green areas and roads (the losing ticket). In sum, the changes in the formation of rent have helped to activate the power of landowners to treat their property as a pure financial asset by increasing the rent level and making the amount of rent more haphazard.

Changes in the investment and real estate markets It has been characteristic of the situation in the latter part of the 1980s that there is a lot of money in the market, seeking investment opportunities which have grown in number and in kind. The popularity of stocks and bonds among ordinary wage earners has increased rapidly. Urban real estate has more often become a considered alternative, and ‘the real estate business’ is growing explosively. Changes in the investment and real estate markets create stimulus conditions outside an entity, and have been conducive to actualize the power of landowners to treat their property as a pure financial asset. One of the most important changes concerns the interest rate. Real interest rates have risen all over the world in the 1980s. In Finland, they rose rapidly in 1982–83. The value of land is extremely susceptible to changes in interest rate. In the U.S., real estate values have changed dramatically, both increasing and decreasing. In Finland, the real estate prices have so far remained stable or risen. Some economists regard this (the absence of declining prices) as a bubble that can burst any day.10 In addition to banks and insurance companies (the veterans in the real estate business, obliged by the law to invest in real estate), some new groups have

The Theory of Urban Rent as a Mirror of Economic Transformation 33 become interested in investing in real estate: trusts, foundations, trade unions and building companies. As far as Finnish construction companies are concerned their operating strategy has changed. In the 1960s they bought vacant land, often in huge amounts; in the 1970s they purchased sites; and in the 1980s they are buying real estate. From the point of view of a building company the real estate business is defined as follows: purchase – improvement – sale. In earlier times it was regarded as a sign of bankruptcy if a building company was selling its real property. Today, however, real estate has become increasingly an object of exchange. In the 1980s, the popular investment objects have been offices and shopping centers. Built space is rented to users who are increasingly reluctant to own the building they use. The theory of rent and land markets has traditionally emphasized the monopoly characteristics of land and land purchase. Every piece of land and each transaction is thought of as forming its own monopolistic market, an absolute monopoly island (Harvey, 1974) or an element in a continuum of land markets (Bandyopadhyay, 1982). The unique and monopoly characteristics of land imply that there exist as many land markets as there are land parcels. It seems to me that this kind of theory provides an adequate picture of earlier land markets and also of most of the present land markets. But a remarkable change has occurred concerning one fraction of land markets, small in areal terms (the most central urban) but not at all small in its significance. The change is that markets which were previously separated have begun to integrate. I would like to differentiate two elements in this integration process: first, the integration of different land markets (e.g. housing and office), and second, the integration of different investment markets (e.g. bonds and land). In the US real estate market, the integration process has probably proceeded furthest. Anthony Downs (1985) argues that a revolution has occurred in the U.S. real estate finance and institutions during the late 1970s and the early 80s. This revolution is connected to changes in investors’ perceptions, economic conditions, public policies and communications technology. The revolution has two main effects. The first is a higher level of both real and nominal interest rates. This heightens pressure on using space more intensively than before. The second is the ‘institutional integration of housing capital markets with other formerly separate components of the general capital market’ (Downs, 1985, p. 3). Before the revolution, the nation’s capital markets were divided into two segments, one concerning mainly housing and another related to other types of investments (non-residential real estate, corporate stocks, corporate bonds, state and municipal bonds, federal government bonds, private placements and investment banking). Deregulation of financial markets has removed many institutional and legal barriers between these two segments. The integration of the markets into a single market intensifies competition. (Downs, 1985, pp. 54–56.) In sum, changes in investment markets, that is, the increased attraction of these markets, the coming into being of the positive real interest rate, and the integration of different markets have a role in contributing to the manifestation of the power of landowners to treat their property as a pure financial asset

34  Anne Haila by increasing the demand for real estate, by increasing the maintenance costs of landed property (due to the increase of considered alternative investment options), and by making the general maximizing attitude more common. It looks as though the conditions for landowners to treat their property as a pure financial asset are fulfilled to an increased degree at least in Helsinki. This is not the final justification for statement A, but it provides it with important indirect support. It also justifies attempts to directly test the manifestation of landlords’ power to treat their property as a pure financial asset. Empirical research on the behavior of urban landowners is therefore needed. Some important questions that need to be studied include: who owns the land and real estate in the central areas; are titles changing hands frequently; what is the size of returns of real estate investments as compared to returns on other investment opportunities; what kind of investment and decision strategies do these landowners have and what kind of other investments belong to their portfolio; and what are the possibilities of public authorities to interfere and regulate the development. Finally, I would like to make a remark concerning legislation, which has an important role in allowing or hindering the power of landowners to treat their property as a pure financial asset. As the matter now stands, real estate is not as convenient an investment object as stocks and bonds. There exist several restrictions concerning real property (e.g. those related to the minimum time period of ownership in order to avoid the profit tax). These kinds of restrictions restrain land from becoming a pure financial asset. Rapid changes in the financial system and real estate markets have created numerous pressures on legislation. In Finland, the existing laws concerning investments and stock markets lag behind these changes, and new laws which would facilitate the fluent channeling of monies are under preparation. Professional real estate brokers demand removal of the old restrictions and creation of new real property laws that would help create a real estate unit that is easy to parcel out and sell. In December 1986, a new law (on investment funds) which would promote and facilitate investment activities was presented to the parliament in Finland. This law did not, however, give way to the demands of real estate brokers and investors in real estate; real estate was excluded from the law.

Conclusion As a conclusion, I will put together the main features and changes in the urban land market and outline some effects of these on urban land use. The most important new features in the land market are: a the appearance of rationally maximizing landowners; b the integration of previously separate investment markets and the emergence of a new kind of real estate market; c the increased role of public authorities and finance capital in developing urban space and in land-use allocation.

The Theory of Urban Rent as a Mirror of Economic Transformation 35 The most important effects of these changes on space and land use allocation can be described as follows. These, to my mind, clarify Castells’ (1985) exciting phrase, space of flows substituting for space of places. d There is a tendency to more frequent alterations in the use of space. Enterprises, retail stores and restaurants stay in a cityscape a shorter time than before, and they are more rapidly replaced by others. The economic life of a building (the period over which an improvement contributes to the value of the property), as distinguished from its physical life, becomes shorter, and the demolition of usable urban space becomes prevalent. e There is a tendency to increasing displacement of use values and development of an abstract space. The form of constructed space has changed, i.e. there is a tendency for it to become more flexible in regard to the needs of enterprises and investors. Edwards (1985) argues that the increase in importance of land and property-related assets and the need to exchange, sell and buy these assets, have produced a tendency to produce buildings of a pure commodity form, as homogenous products, as abstract space for hypothetical tenants; no more buildings with special characteristics suitable to one special use, but buildings whose physical appearance would not reveal their use. ’Taken to its logical extreme this would mean an investor could telephone from New York and buy “prime London offices” with as little need for further information as when buying gold or government stock’ (Edwards, 1985, p. 212). These changes and tendencies have implications also for the different social agents involved in building provision (which, according to Ball (1985b) are landowners, developers, building firms, building workers, building owners and final users). The increased influence of economic and monetary factors on land use, the integration of investment markets and the growing internationalization of the financial system, or what may be called the substitution of a logic of exchange value for a logic of use value in land-use decisions, constrain the power of all these agents. The use of space in Helsinki, for example, is not only influenced by local owners, developers and investors, but also by the U.S. budget deficit and by the fluctuations of stock prices in New York. Citizens’ struggle for better urban environment encounters new kinds of challenges (should workers, for example, purchase shares of office complexes in order to influence the use of space?). In Finland, the development projects in the CBD seem to have been left untouched by protests. There have been protests aimed at protecting lakes and forests and against the demolition of historically valuable buildings. But there have not been any protests against massive office buildings or against the creation of segregated consumption spaces. Without undervaluing citizens’ struggle, it can be stated that so far the rescue of use values in the historically valuable city centers in Finland has resulted from a lack of capital and the behavior of landowners who are attached to subjective use values of the environment. Unfortunately, these constraints seem to be vanishing in the 80s.

36  Anne Haila A lot of elaboration, both empirical and theoretical, will still be needed in developing a new theory of urban rent. At the empirical level, the postulation of the tendency of landowners to treat their property as a pure financial asset and the integration of ground rent and the financial structure invites us to do empirical research, because this integration is in no way necessary, but contingent. At the theoretical level, it is interesting and important to study the similarities between a new theory and the neoclassical theory with its notion of alternative costs. Recalling the generalization and the extensification of the rent concept and the disappearance of land as having any special role in neoclassical theory, the great challenge in developing a new theory of rent is to retain the special and distinct role of the theory of land rent irrespective of the fact that land is conceptualized as a pure financial asset.

Disclosure This chapter is reprinted with the permission of John Wiley & Sons. It originally appeared in 1988 in Antipode 20(2):79–101 (ISSN 0066 4812).

Notes 1 Earlier versions of this paper were presented at the Symposium of the Nordisk Sommer Universitet in Stockholm, February 1987, and at the ‘Technology, Restructuring and Urban-Regional Development’ Conference, organized by the Interuniversity Centre of Postgraduate Studies, Dubrovnik, 25–30 June 1987. I would like to thank Uskali Maki, Neil Smith and two anonymous referees for their valuable comments and Joe Doherty for editing my paper. 2 During his kaleidoscopic career, Harvey has time after time reverted to the rent question. In Social Justice and the City (1973), he criticized neoclassical concepts of rent and explored Marx’s rent concepts. Connected to the empirical housing markets study on Baltimore, he presented an original concept of ‘class monopoly rent’ (Harvey, 1974; Harvey and Chatterjee, 1974). In the Limits to Capital (1982), he connected rent theory to the theory of capitalistic land markets and to the concept of financial capital. 3 Keith Tribe (1977) has criticized Marx’s theorization of ground rent for identifying only historical and legal conditions of existence for landlords’ possession, not economic conditions. The possibility of the transfer of money from the pocket of the capitalist to landowners, writes Tribe, ‘is not theoretized at an economic level by Marx, although he continues to treat rent as a form of surplus value; instead the existence of ground rent is left as an effect of a distribution of means of production which depends on the invocation of historical accident, both for its appearance and continued existence’ (Tribe, 1977, p. 79). 4 Harré (1978, p. 215) defines ‘power’ in the following way: ‘X has the power to do F = if X is subject to stimuli or conditions of an appropriate kind, then X will do F, in virtue of its intrinsic nature’. Powers in this sense are akin to activated abilities, inclinations, tendencies, grounded dispositions, etc. 5 Harré gives example that illustrates these concepts. ‘The presence of an engine is an intrinsic enabling condition for a car to have the power to move … The presence of the driver is an extrinsic enabling condition, while the actions performed by the driver to set the car in motion are extrinsic stimulus conditions’ (Harré, 1978, p. 217). Among the conditions in the environment is a street or a terrain fit to drive.

The Theory of Urban Rent as a Mirror of Economic Transformation 37







6 Using the example of a car having a power to move as an analogy, what I am doing in this paper is analogous to attempting to establish that a car has the power to move by showing that the appropriate conditions obtain, but without having direct empirical evidence about the car moving. 7 The much-discussed change of the economy has been depicted in different terms. For example, as the restructuring of the economy, a change away from the previously dominant industries toward high-technology production and services (Fainstein and Fainstein, 1983); as the post-industrial revolution, a displacement of goods production by management and service production (Mollenkopf, 1983); or as the changes in production and labor process (Massey, 1984). 8 In Finland, the state and the cities are also significant landowners. For instance, in the year 1978, the city owned 59.1% and the state owned 15.3% of the landed area of Helsinki. 9 The thesis consisted of guidelines and recommendations for the development of ‘post-industrial’ Helsinki to serve the new needs of industry and capital, or as it is put in the thesis ‘to develop a metropolis for international communication, business, trade, culture and tourism’. The following recommendations, for example, are included: to increase the role of the state in city development; to facilitate all kinds of development and construction; to check planning which hinders and retards construction; to support the location of international enterprises to Helsinki; to increase the supply of construction land by zoning it more than previously; to prefer fast construction instead of a long preparation for ‘ideal’ plans; to accept the change of use of floor space from housing into offices; to have a more flexible attitude toward land use changes; and to promote tourism. 10 An important reason for high and not decreasing prices is the cutting off of Finnish construction projects abroad and the numerous land purchases (at high prices due to haste on the part of the buyer) made by the building companies in order to avoid taxes on their magnificent surpluses from foreign construction.

References Ball M (1977) Differential rent and the role of landed property. International Journal of Urban and Regional Research 1:380–403. Ball M (1985a) Land rent and the construction industry. In M Ball, Bentivegna V, Edwards M, and Folin M (eds.) Land Rent, Housing and Urban Planning. London and Sydney and Dover: Croom Helm, pp. 71–86. Ball M (1985b) The urban rent question. Environment and Planning A 17:503–25. Ball M (1986) The built environment and the urban question. Environment and Planning D Society and Space 4:447–464. Bandyopadhyay P (1982) Marxist urban analysis and the economic theory of rent. Science & Society 46:162–196. Behnke H J, H-J Behnke, K-G Evers, and K Moller (1976) Grundrente und Bodenspekulation. Fallsfudien zum stadtischen Veranderungsprozess in Hamburg 1948– 1975. West Berlin: VSA. Bentivegna V (1985) Theory of urban rent and the working-class movement: The case of Italy. In M Ball, Bentivegna V, Edwards M, and Folin M (eds.) Land Rent, Housing and Urban Planning. London and Sydney and Dover: Croom Helm, pp. 191–202. Brede H, B Dietrich, and B Kohaupt (1976) Politische Okonomie des Bodens und Wohnungsfrage. Frankfurt am Main: Suhrkamp. Broadbent T A (1975) An attempt to apply Marx’s theory of ground rent to the modern urban economy. London: Centre for Environmental Studies Research Papers 17.

38  Anne Haila Broadbent T A (1977) Planning and Profit in the Urban Economy. London: Methuen. Bruegel I (1975) The Marxist theory of rent and the contemporary city: A critique of Harvey. In Political Economy and the Housing Question. Political Economy of Housing Workshop. London: CSE, pp. 34–46. Castells M (1985) High technology, economic restructuring, and the urban-regional process in the United States. In M Castells (ed.) High Technology, Space, and Society. Beverly Hills and London and New Delhi: Sage Publications. Cohen J (1982) Class and Civil Society: The Limits of Marxian Critical Theory. Oxford: Martin Robertson. Denman D R (1957) Estate Capital. The Contribution of Landownership to Agricultural Finance. London: Allen and Unwin. Denman D R and S Prodano (1972) Land Use. An Introduction to Proprietary Land Use Analysis. London: George Allen & Unwin. Downs A (1985) The Revolution in Real Estate Finance. Washington: The Brookings Institution. Edel M (1972) Planning, market or warfare? Recent land use conflict in American cities. In M Edel and Rothenberg J (eds.) Readings in Urban Economics. New York and London: Macmillan. Edel M (1976) Marx’s theory of rent: Urban applications. Kapitalistate 4–5:100–124. Edel M (1977) Rent theory and working class strategy: Marx, George and the urban crisis. The Review of Radical Political Economics 9:1–15. Edwards M (1985) Planning and the land market: Problems, prospects and strategy. In M Ball, Bentivegna V, Edwards M, and Folin M (eds.) Land Rent, Housing and Urban Planning. London and Sydney and Dover: Croom Helm, pp. 203–216. Epping G (1977) Bodenmarkt und Bodenpditik in der Bundesrepublik Deutschland. Berlin: Duncker & Humblot. Fainstein N and S Fainstein (1985) Economic restructuring and the politics of land use planning in New York City. Paper presented at the annual meeting of the Association of Collegiate Schools of Planning, Atlanta. Fainstein S and N Fainstein (1983) Economic change, national policy, and the system of cities. In S Fainstein, Fainstein N, Hill R, Judd D, and Smith M (eds.) Restructuring the City. New York and London: Longman, pp. 1–26. Feagin J (1984) Sunbelt metropolis and development capital: Houston in the era of late capitalism. In L Sawers and Tabb W (eds.) Sunbelt Snowbelt: Urban Development and Regional Restructuring. New York and Oxford: Oxford University Press. Fine B (1985) Land, capital and the British coal industry prior to World War II. In M Ball, Bentivegna V, Edwards M, and Folin M (eds.) Land Rent, Housing and Urban Planning. London and Sydney and Dover: Croom Helm, pp. 107–125. Harré R (1978) Powers. In R Tuomela (ed.) Dispositions. Dordrecht: Reidel, pp. 211–233. Harré R and P F Secord (1972) The Explanation of Social Behaviour. Oxford: Basil Blackwell. Harvey D (1973) Social Justice and the City. London: Edward Arnold. Harvey D (1974) Class-monopoly rent, finance capital and the urban revolution. Regional Studies 8:239–55. Harvey D (1978) The urban process under capitalism: A framework for analysis. International Journal of Urban and Regional Research 2:101–131. Harvey D (1982) The Limits to Capital. Oxford: Basil Blackwell. Harvey D and L Chatterjee (1974) Absolute rent and the structuring of space by financial institutions. Antipode 6(1):22–36.

The Theory of Urban Rent as a Mirror of Economic Transformation 39 Ive G (1975) Walker and the ‘new conceptual framework’ of urban rent. Antipode 7:20–30. Katz S (1986) Towards a sociological definition of rent: Notes on David Harvey’s the Limits to Capital. Antipode 18:64–78. Mair A (1986) The homeless and the post-industrial city. Political Geography Quarterly 5:351–368. Markusen A (1978) Class, rent and sectoral conflict: Uneven development in western U.S. boomtowns. The Review of Radical Political Economics 10:117–129. Marx K (1967) Capital Vol. 2. New York: International Publishers. Massey D and A Catalano (1978) Capital and Land, Landownership by Capital in Great Britain. London: Edward Arnold. Massey D (1978) Capital and locational change: The UK electrical engineering and electronics industries. The Review of Radical Political Economics 10:39–54. Massey D (1984) Spatial Divisions of Labour: Social Structures and the Geography of Production. London: Macmillan. Mollenkopf J (1983) The Contested City. Princeton: Princeton University Press. Murray R (1978) Value and theory of rent. Capital & Class 4:11–13. Neef R (1974) ‘Die okonomische Venvertung stadtischen Bodens und ihre Wirkung auf die Stadtentwicklung’. Unpublished PhD dissertation, University of Marburg. Scott A (1980) The Urban Land Nexus and the State. London: Pion. Tribe K (1977) Economic property and the theoretisation of ground rent. Economy and Society 6:69–88. Walker R (1974) Urban ground rent: Building a new conceptual framework. Antipode 6:51–58. Walker, R. (1975) Contentious issues in Marxian value and rent theory: A second and longer look. Antipode 7:31–53.

2

LAND AS AN ASSET Erik Swyngedouw and Callum Ward

One of Anne Haila’s major contributions to rent theory was her close scrutiny of Harvey’s proposition that there is an inherent tendency within capitalism to treat land as a financial asset (2006). This is the claim that land is increasingly mobilized for its exchange value as opposed to its use value. This, in turn, permits land to become fungible and function as a form of fictitious or interest-bearing capital. Her rigor and clarity of thought in insisting on the importance of considering land as a financial asset in rent theory and her problematization of the concept as an empirical proposition to be tested (as opposed to Harvey’s theoretical deductions) challenged existing Marxist approaches to land rent (Haila, 1988). In this chapter, we continue to refine the Marxist theory of land rent through the challenge laid out by Haila’s sympathetic critique. This is motivated by our assessment that the empirical question of whether there is a tendency to treat land as a financial asset has been settled as land financialization has become a ubiquitous feature of the global economy (albeit always contested, uneven, and with contingent countervailing tendencies) (Hyötyläinen and Haila, 2018). In this context, we argue that a focus on assetization is indispensable to understanding rent theory and addressing the problem that Haila set out around the treatment of land as a financial asset. In the spirit of Haila’s work, assetization brings into focus the contingent power relations and related social struggles necessary for turning the use value of land into an abstract exchange value while fully asserting its systemic basis through a rigorous critique of the political economy of land rent. In this contribution, we start by rehearsing the Marxist approach to land rent with a focus on the challenges Haila elucidated, before moving to the specifics of understanding land within a financialized global economy and arguing that to do so requires a specific focus on the process and implications of its transformation into a financial asset.

The vexed question of land value Land represents an irreducible heterogeneity of contested cultural meanings, social practices, and economic uses (Williams, 1976; Haila, 2015; Li, 2014a,b). Land and its appurtenances are central to organizing socio-economic systems, with social relations invariably strongly articulated through land’s diversity of DOI: 10.4324/9781003280255-4

Land as an Asset 41 meanings and uses. As Haila (1990) put it in her definitive statement of the land value problem, the main theoretical questions related to the vexed problem of rent are (1) how does rent arise? why does land have a price expressed in a lease agreement or land sale? why and how does land rent vary over space and in time? (2) who or what are its agents, what are their behavioral patterns and mutual social relations?, and (3) what is the economic role of rent in the process of capital accumulation and coordination? The first principle to establish is the strange role of land under capitalism. It is only through fetishization that the fundamentally social relation of land can be turned into a pseudo-commodity for exchange on a market. As such, all manner of ‘metaphysical subtleties and theological niceties’ (Marx, 1990, p. 163) infuse the modalities through which land becomes enrolled in the process of expanded reproduction. This fetishization – transforming the multiple meanings and values of land into the singular objectified metric of exchange value – is crucial since land and its appurtenances have always been central to and, in recent years, pivotal for sustaining the capitalist accumulation process. In particular, the relationship between financialization and the appropriation/transformation of land (in the form of urban land, extractive resources, agricultural production, solar or biofuel or wind energy capture, or ecological services) has been propelled to the forefront of both local and global accumulation tactics over the past few decades (Gunnoe, 2014; Turner, 2015). In Mexico, for example, intense conflict has emerged over the appropriation of land and landscape to build windmills to capture wind energy in an effort to nurture a sustainable energy transition (Alonso, 2021). Furthermore, as we shall demonstrate, analyzing the appropriation of value from land in the form of rentier relations opens the theoretical terrain for considering how a wide range of other ‘stuff’ (like water, air, or ecosystem services) is mobilized in a similar manner (Birch and Muniesa, 2019), thereby casting light on some of the most intricate dynamics of contemporary, financialized capital circulation. In addition, this great transformation of land unfolds through intense conflict over its ownership and use and class struggle over access, appropriation, and distribution of the gains obtained through financialization. Indeed, class struggle under capitalism is not only animated through the production of value and surplus value, but also equally importantly, unfolds over the distribution of value. Karl Polanyi (2002) argued in The Great Transformation in 1944 that land (as well as labor and money) are fictitious pseudo-commodities because they are treated as market commodities, but not produced for the market. This echoes Marx’s view that land has both use value and exchange value but no value (in the sense of embodied socially necessary labor time) and so has a unique place in the political economy of capitalism. Marx defined value as the socially necessary labor time to produce a commodity. This is the average labor time it takes to produce a given commodity under given technical and social conditions. Value in this sense mediates between the exchange value of a commodity (rendering it universally exchangeable) and its particular use value which is specific to the thing at hand.

42  Erik Swyngedouw and Callum Ward In other words, land is not a commodity like any other, and this requires particular theoretical attention and political consideration (Haila, 1990; Ward and Aalbers, 2016). While it possesses all manner of often radically heterogeneous use values as well as an exchange value that makes it commensurable with any other commodity, land (without capital invested in it or labor performed on it) lacks value as socially necessary labor time. It constitutes a gift of nature (like oil, gas, or Coltan – the precious metal necessary for smartphone production) on which ultimately all production is based as the ‘universal instrument of labour’ (Marx, 1990). Land requires particular socio-institutional embeddings within specific socio-technological regimes for it to also possess exchange value (like property laws, the regulation of exchange, access to financial markets, etc.) (Haila, 2015). For Marxists, socially necessary labor time is the mechanism through which use values are rendered commensurable on the market as exchange values. This unfolds through a production process that simultaneously secretes new use values, exchange values, and surplus value. A good can be consumed for its use value (but then cannot realize its embodied exchange value) or can be exchanged on a market (and then its use value cannot be enjoyed any longer by the seller). Use value and exchange value are thus mutually exclusive characteristics, yet a commodity must embody them both in order to have value and so function as a commodity. Land clearly possesses both use value and exchange value and both cannot be realized at the same time. They are mutually exclusive. The great riddle is why and how it is possible for the very diverse social, cultural, and material lives of land to have a singular exchange value. Or, in other words, how it is possible for a strawberry field, a summerhouse in Cape Cod, a lake with spiritual meaning, a Coltan mine, a Wall Street office, or a peasant’s livelihood to be transfigured into the universal sign of money. Over time and across space, land possesses indeed an extraordinary range of use values. Land is often part of cosmological systems that assign forms of divine symbolisms, which are often central to the social and cultural life of many communities. Land-signifiers (Prithvi, Gaia, and Pachamama) are fundamental vectors through which meaning is assigned to the relationship of land with social activities and cultural rituals and through which all manner of practices are regulated. Land often carries deep historical and emotional meaning, affective attachment, and/or a range of cultural use values that both support and transcend the purely material mobilization of land. Of course, the matter of land matters too. Land is the site of dwelling and homemaking, the source of all manner of organic and non-organic materials vital for production and/or social reproduction, a necessary means for securing accumulation, and a continuously shifting terrain of conflict and struggle. The sheer endless range of use values infused in the many meanings of land and the practices articulated through it over time are etched into a variegated and complex landscape. These use values are often radically incommensurable, fundamentally heterogeneous, and historically changing. They can, in Lefebvrian terms (Lefebvre, 1991), be absolute in the sense of the intrinsic characteristics of a particular plot (as land in the Champagne region or a beautiful landscape), relative in the sense of a location

Land as an Asset 43 with respect to another location (e.g., a housing plot near a nice beach), or relational in that particular social relations are expressed through it (as in a historical monument carrying particular affective attachments). This wide range of use values has given rise to complex, often arcane, and frequently highly normative scholarly debates over the value of land and the competing or contrasting use values that are assigned to it. The very particular manner in which these use-­values are rendered commensurable as exchange values is the problem for analysis. Indeed, economists and investors constantly attempt to make these incommensurable use values commensurable through a common denominator (a universal equivalent) (Alonso, 1964; Muth, 1969). Such homogenization became standard following the marginalists’ rejection of the tension between use value and exchange value (Ward and Aalbers, 2016). However, things are rather more complex than the resulting models allow. The exchange value of land, as we shall discuss later, is determined by a complex set of independent but interdependent forces that include the existence of generalized market exchange, rendering land as private property through class dynamics of dispossession and primitive accumulation, the qualities of existing or potential use values of the land, past capital invested in the land, the exchange value of the commodities produced in or through the land, anticipated future returns, and so on. But the prime condition, of course, is to render land titles fluid, moveable, and transportable. This requires, first and foremost, its privatization and commodification. These, in turn, may lay the foundations for an intense social struggle to render land fictitious in the sense that Karl Marx understood it and further refined by David Harvey (2006). As Haila’s body of work emphasized, this treatment of land as an asset cannot be assumed but appears through forms of socio-institutional organization that have to be constructed and are struggled over (Haila, 1988; 1990; 1991; 2017). In contrast to Polanyi, Marx, in the third volume of Capital, introduced the notion of fictitious capital, defined as ‘the capitalization of property ownership’ or, in our terms, as assetization. Such fictitious capital is nothing else than a tradeable claim to future wealth. For example, if I buy a flat in, say, Amsterdam for a given price, I can hope and expect that, without any investment of my part in its improvement, it will appreciate and I can sell it on in a few years’ time at a higher price. Under financialized capitalism, land functions as an asset and thus as a form of fictitious capital. Historically, with the generalization of market exchange, land acquired exchange value. This specifically refers to the possibility to alienate land in exchange for another use value or for money as a universal equivalent. This is now so generalized that a price (an exchange value) can be assigned to practically every nook and cranny of the earth’s surface. The process through which land acquired exchange value was a long, difficult, and often bloody and violent movement to enclose – and thus render private – particular portions of the earth. This has always been and still is a major arena of intense and often deeply emotionally charged, class struggle. Class struggle is not limited to the terrain of production, but entails struggle over the entire capital circulation and distribution processes.

44  Erik Swyngedouw and Callum Ward The very possibility of exchanging (and thus alienating) land is fundamentally predicated upon establishing (private) property relations and, therefore, exclusive (Marx would call it monopoly) control over specific portions of the globe (Marx, 1990). With the signifier ‘monopoly’, Marx does not refer to the concentration of land in the hands of a single person or a few people, but rather to the fact the individual or collective owner of the land has exclusive control over whether or not to sell it or to use it (unless the iron fist of the state is mobilized as, for example, in eminent domain laws). This process unfolds not primarily through the rules of exchange, but requires politico-institutional processes through which private ownership is legitimized, legally codified, and policed by an authority. The capitalist land economy, then, consists in the first instance of the construction and maintenance of the institutional configurations necessary to perpetuate the fetishization of land as exchangeable, private property. For example, Haila’s (2015) concept of a property state in her empirical studies of Hong Kong and Singapore illustrates this intertwinement between state institutions, land, and their specific sociopolitical manifestations In sum, the variegated and fundamentally collective use values constituting land are central to its potential to acquire exchange value; yet, the latter is predicated upon turning land into a commensurable and exclusive, hence privately owned, good. What Marx called primitive accumulation and David Harvey (2003) later dubbed as the continuing process of ‘accumulation by dispossession’ is precisely the double movement whereby ownership over land is established and through which exchange value is inserted in the complex relational composition of land. In this, a particular use value – that of commensurability with the money commodity – is injected into the variegated use values of land, so abstracting away from, yet being intrinsically bound to, the specific use values that pertain to a particular piece of land. In fact, the quality to possess exchange value that can be realized in the market becomes precisely its use value to landowners, and, later, the basis on which financialization can occur. Acquiring exchange value is the first and necessary step in the process of de-territorializing the territorial object par excellence and ultimately rendering it liquid. Land itself cannot move, but the titles to land are freely exchangeable. Consider, for example, the fact that 40% of all newly built condominium flats in Manchester (England) are currently bought by a range of investment funds from the Middle or Far East (Silver, 2018). The unfolding of capitalism is indeed predicated on the liquefaction of fixed matter, a process fraught with all manner of tensions and conflicts. Yet, land having exchange value is in itself a conceptual problem. As a pseudo-­commodity, the exchange value of land constitutes a puzzle that classical political economists attempted to untangle through the theory of land rent.

Valuing land: the production of rent Access to land as well as the ability to cash in on its locational, symbolic, or material characteristics through market exchange is structured largely by rent when the process through which specific qualities or use values embodied in place are

Land as an Asset 45 transformed into the concrete abstraction of exchange value and appropriated by a variety of social classes, but primarily landowners. The sale price of a plot of land is nothing else than the discounted rent over a certain period of time. The production of rent and its appropriation by landowners (themselves increasingly embroiled with financial capital) have become one of the driving forces that animate contemporary spatial restructuring as well as all manner of social conflicts. For example, the spectacular neoliberalizing urban transformations of the late twentieth and early twenty-first centuries, which have attempted to reorder the urban landscape within the new coordinates of a financialized capitalist urbanity, centers on the production, appropriation, and financialization of urban land rent (Haila, 1990; 2015). Entire new urban landscapes ranging from New York’s High Line Park to Singapore’s skyline and Istanbul’s many mega-projects are produced in many of the world’s cities precisely with a view toward the generation of rent and the subsequent possibilities for an intensified circulation of financial capital and rent capture through the built environment. The Marxist analysis of land rent is one of the most tantalizing, contested, and debated themes in both the history of Marxist intellectual thought and progressive political strategies (Amin, 2018; Coronil, 1998; Tse Tung, 1937), not least because Marx never completed a full analysis of rent and limited his remarks mainly to agricultural land and resources. The spatial unfolding of capital operates through and actively produces a complex rent-map that directs the distribution of activities, and triages socio-spatial and socio-ecological functions. Rent is mobilized through processes of land financialization and articulates with the dynamics of both state policies and a variety of social conflicts and class struggles. The theoretical difficulty resides in explaining why land (and its appurtenances) possesses exchange value and use value (and, therefore, functions as a commodity), but apparently not as value defined as socially necessary labor time. This necessitates accounting for its apparently anomalous character in the process of capital accumulation. While land rent constitutes a potentially major source of income for landowners and can be turned into fictitious financialized capital (as in the mortgage or speculative land markets), the private and exclusive ownership of land also obstructs the accumulation of capital. Indeed, land ownership is a significant barrier to access a vital means of production and prevents the universalization of the law of value across space as landowners often refuse to submit to the diktats of the market or devise tactics to prevent access to land for a range of economic, affective, or political reasons. Of course, such conflicts often have to confront the state and its legal capacity to enforce eminent domain or similar legislation to transfer ownership forcibly or impose certain uses while preventing others. Consider, for example, conflicts over new oil infrastructure such as the Keystone XL-Pipeline controversy in the US or most conflicts over resource extraction in Africa or Latin America that assemble many of these tensions and conflicts (Andreucci et al., 2017). Moreover, the payment of land rent constitutes a major drain on profits. Capitalists, workers, and other social groups need access to land for production and reproduction and, consequently,

46  Erik Swyngedouw and Callum Ward have to recompense landowners for access to land with particular use values. Nonetheless, competition over and the mobilization of land of different absolute, relative, or relational qualities play a pivotal role both in allocating capital flows and in generating extraordinary profits as, for example, the global real estate bubble during the 2000–2007 period testifies. Combined land rents in the urban environment act as a gigantic and expanding reservoir for sequestering surplus value as well as constitute an immense asset that sustains expanding fictitious capital formation (Ward and Swyngedouw, 2018). Marx’s theory of rent radically reformulates Ricardo’s classical theory of agricultural land rents (Fine, 1979). For Ricardo, who takes an embryonic marginalist position, the origin and level of rent are determined by the differential fertility (naturally given and/or socio-physically improved through capital investment) of agricultural land. Farmers will cultivate new land until the point that the least fertile land will not yield a profit. For Ricardo, this marginal land generates no rent and the difference of yield between the most and the least fertile land accrues to the landowner, thus explaining both the origin and magnitude of land rent. In other words, for Ricardo, the origin of rent resides fundamentally in the intrinsic, albeit possibly humanly transformed, characteristics of the soil (its fertility). This theory was later extended by Johann Heinrich von Thünen (1826) who spatialized rent further by including location in his analysis. For von Thünen, land rent is not only determined by the natural characteristics (given or produced) of the soil, but also by the cost of location or, rather, the cost of overcoming distance and other obstacles (like topography) between the market and the particular plot of farmland. In the 20th century, William Alonso (1964; see also Muth, 1969) would bring this perspective to the theorization of urban land prices and use and, in doing so, account for urban social and economic spatial triaging and differentiation. Ricardo and von Thünen’s proto-marginalist theories of rent were radically revised and reformulated by Marx. For Marx, value does not arise from the natural characteristics of things. These characteristics are a gift of nature. Value, in contrast, arises from the socially necessary labor time required to produce a given commodity under capitalist social relations of production. The starting point for Marx is that land rent, like interest on capital for the owner of money-­ capital, is an entitlement to the landowner in return for surrendering the use of that land to someone else. Rent is a social relationship between landowners and tenants (Ball, 1977; 1985) rather than representing any inherent value. As Marx put it: ‘Landed property is based on the monopoly by certain persons over definite portions of the globe, as exclusive spheres of their private will to the exclusion of all others’ (Marx, 1959, p. 461). The owner of the land will not surrender ownership without proper recompense. Rent, therefore, is a distributional process; it transfers value from one agent to another without adding an iota of additional exchange value. It is a drain on both capital and wages and accounts for why landowners were often considered to be parasitic holdovers from feudalism (Haila, 1990), as they are able to appropriate exchange value without either working or investing capital in the production of commodities.

Land as an Asset 47 This redistributional aspect also accounts for the intense socio-economic struggle that unfolds over who is entitled to appropriate what part of the rent. In case of mortgages or debt-based house ownership, for example, financial institutions reap the overwhelming share of the produced rent. However, this understanding of rent as originating through social relations around land does not reveal anything about the magnitude of land rent, the ­origin of landed property, or the role of rent in capital accumulation and coordination; and, consequently, in producing concrete geographical and socio-­ ecological constellations and assigning or changing use values through these processes. Obviously, different pieces of land with different locational, symbolic, or material characteristics have competing uses, different prices and play, depending on the social relations and struggles that unfold around them, different roles in different places and at different times. Determining the magnitude of rent, however, remains theoretically complex and empirically intractable (Farahani, 2021). Marx, in his dispersed writings on the rent question, basically distinguishes between four forms of rent: monopoly, absolute, differential rent I, and differential rent II (Harvey, 2006). Together, these different but interrelated forms of rent determine the magnitude of land rent. However, each form plays a different role and has a different origin, although the landowner appropriates all of them. Monopoly rent, as the word suggests, relates to the specific and unique characteristics of a particular piece of land. For example, an ice cream stall near a tourist attraction or a vineyard in the officially designated Champagne region in France. Absolute rent, in contrast, derives from the imperfect mobility of capital as a result of landownership itself. For Marx, explaining the existence of absolute rent in the agricultural context, fragmented landownership, and imperfect capital mobility through land blocks the equalization of the profit rate and so leads to a situation whereby a lower value composition implies that products tend to trade above their price of production and, therefore, yield absolute rent (Fine, 1979). This explains, for example, why archaic activities and functions or the provision of high-price, low-quality commodities can still exist in high-value urban environments (Aalbers, 2011; Anderson, 2019; Harvey and Chatterjee, 1974). It also explains why small scale and less productive farmers (compared with, say, largescale plantation agriculture) can persist over time. Such, often petty, producers can, for a variety of reasons, trade their goods at a price which is above their value, thereby cashing in on absolute rent (Purcell, 2018). While many Marxists argued that absolute rent would gradually disappear as the law of value imposed its iron logic across the globe, more recent observers argue that absolute rent is a persistent and occasionally very important source of rent (Purcell et al., 2019). Consider, for example, thriving land markets in favelas or other slum settlements in the periphery of cities in much of the Global South, or less favorably positioned, extractive reserves of gold, silver, or coal that still generate an exchange value (a rent) even if not exploited. Until the 1960s, and under the influence of the persistent political and socio-­ economic importance of the peasant question under capitalism in postcolonial

48  Erik Swyngedouw and Callum Ward states, Marxist thought on rent focused on these two forms. The political implications of this were significant (Kerr, 1996). From Keynes’ ‘euthanasia of the rentier’ (Keynes, 1973: 376) onwards, most Marxist scholars of the land question considered landownership to be an archaic feudal remnant that constituted a parasitic drain on and barrier to capital accumulation (Haila, 1990) that acted as an impediment to the proper functioning of the law of value. The rent debate has changed considerably since the late 1970s when greater attention began to be paid to the other two forms of rent that Marx had identified, forms that fundamentally choreographed much of the struggles over urban space. Indeed, the levels of differential rent one and two derive from an entirely different process. These forms of rent refer to the way in which the enrolling of a particular piece of land within the capital circulation process affects the value of the commodities produced on or through it. In other words, differential rents are parallel to the role of technological and organizational change in determining value as socially necessary labor time and play similarly important roles in inter-capitalist competition. Differential rent one is related to the absolute, relative, or relational qualities of land as a means of production or reproduction: it refers to the different qualities of land with equal amounts of capital invested in it. These result from given, historically produced, differences between plots of land that enhance surplus value production or social reproduction. In this, differential rent one is relational, depending on comparison to all other possible positions within a larger geographical configuration (Swyngedouw, 1992). Consider, for example, the premium on urban land with better infrastructural amenities or connectivity, agricultural land located close to a market or port, or a flat near a wide range of key consumer services like shops, theaters, parks, and transport nodes. What is intriguing here is that superior location does not derive from naturally given characteristics but from historically and socio-spatially produced conditions that are the combined outcome of previous rounds of (often collective) investments. The historical-geographically produced configurations place a specific location in a distinctive (advantageous or disadvantageous) position vis-à-vis other places. Take, for example, the difference in rent (or land price) between a Silicon Valley location and a rival location on the outskirts of, say, Cairo. Or consider a flat with a given construction cost in central London versus one with the same construction cost in crisis-stricken central Athens or in downtown Johannesburg. Such locational effects open a vast terrain of possible trade-offs for capitalists. For example, capitalists can decide either to invest in superior technologies or relocate to cheaper locations (or do both simultaneously). Much of the changing geographies of capital accumulation and its associated dynamic mosaic of uneven but combined geographical development derive exactly from the space/ technology trade-offs that capitalists make on a daily basis (Swyngedouw, 1992). In the remainder of this section, we shall primarily focus on th notion of ‘ground’ rent, which these three forms of rent make up. Finally, differential rent two also derives from different qualities of land but is generated by differential capital investments in pieces of land of equal quality. In other words, the

Land as an Asset 49 qualities of land can be enhanced (and over time greatly so) by capital investment (engineering, infrastructural improvements, new or upgraded buildings, ground improvement, soil engineering, state regulation, new investments for new functions in the built environment, etc.). This form of investment is comparable to capital investment in technological or organizational improvements in the production process. To the extent that this capital investment reduces the socially necessary labor time required for production on that plot, extra surplus value is generated. Now that we have summarized Marx’s theory of the origins and magnitude of land rent and some of its applications, we are in a position to explore the vital but highly contradictory roles that ground or land rent play in the capital accumulation process. Rent constitutes a drain on capital accumulation in the sense that, while value is generated through the labor process, rent is appropriated by the landowner purely by virtue of his or her ownership of the land. From this vantage point, landownership is fundamentally parasitic. Moreover, it pits landed capital against both productive and financial capital, often resulting in frenzied inter-capitalist struggles between landowners and other capitalists. In addition, it also pits landowners against those who wish to make use of the land for reproduction (like housing or gardening) (Kaika and Ruggiero, 2013). However, this parasitic function is complemented by a series of vitally important functions performed by landownership and render it pivotal to the everyday functioning of a capitalist economy. First, the enclosure of agricultural land was necessary to separate workers from their means of subsistence and thus underpinned the process of proletarianization (Marx, 1894). This is an on-going process that partially accounts for the accelerating migration of landless workers to the megacities that characterizes the so-called Urban Age. Consider also, for example, the extraordinary privatization and accumulation by dispossession that has taken place in post-socialist states like Russia or in China where millions of people lost their attachment to land. Land under capitalism is indeed characterized by a continuous change in ownership and control. Second, land rent also plays powerful economic and regulatory roles in capital accumulation. The rent relation coordinates landscapes of production and consumption through market allocation. Thirdly, through this allocation mechanism, the land market assigns capital to distinct locations and activities, thereby driving uneven development (Harvey, 2006). Fourth, rent mediates and helps to regulate decisions about the allocation of investment across interest-bearing (financial), productive, and landed capital. Finally, landownership serves also a decidedly ideological function as it helps to legitimize the commodification and private ownership of everything as the basis of and for social organization. Private property as the basis of land as a commodity secures attachment to the fundamental liberal principles that regulate capitalist culture. Although landownership constitutes a barrier for capital accumulation, since productive capital would be more profitable and the cost of reproduction of the labor force would be lower if part of the profits and wages did not have to be surrendered

50  Erik Swyngedouw and Callum Ward to landowners, ownership of land is one of the central ideological and socio-­ material pillars of a system of generalized commodification and private ownership of means of production and reproduction (Harvey, 2006). These functions demonstrate that land rent is one of the most powerful and contradictory aspects of the geographical political economy of capitalism. While creating conflict between industrial and financial capital, it determines competing uses of the land. Yet, insofar as rent regulates these conflicts, it does so according to the maximization of exchange-value and so introduces the fundamental contradiction of exchange value undermining existing use values and producing new ones. Managing this requires the state or another extra-­ economic institution to regulate land in order to contain conflict while facilitating accumulation. Thus, not only is landownership subject to strict regulation in the planning system, but also the state itself is active in land markets. As even small changes in the regulation of land can have major impacts on the appropriation and distribution of surplus value, intense class struggle unfolds over land’s use and regulation.

The treatment of land as a financial asset In recent years, attention has moved to the increasing importance of land’s exchange value as a claim on future rents and the related role of urban land as a financialized asset. As David Harvey argues, titles to land function and circulate increasingly as forms of fictitious capital, comparable (albeit not identical) to other financial assets (such as shares, bonds, or carbon-credits). Rent has become one of the possible forms of generating future claims on value, and land titles have become integral parts of capital investment portfolios (Harvey, 1974; 2006); something Haila (2015) captured well in her proposed concept of derivative rent. Land markets have become an integral component of fictitious capital (Andreucci et al., 2017). In this way, entitlements to land value can circulate purely as a financial product while adding (speculative) value through land’s deracinated circulation. Nonetheless, the underlying socio-material (use) value constellations on which this title is based continue to matter. The 2007–2008 financial crisis arose out of the extraordinary speculative carousel of increasing rents while turning the promise of these ballooning exchange values into fictitious capital assets circulating through complex, derivative financial instruments. As with all forms of fictitious capital formation, these speculative carousels are sustained as long as the promises for securing future value entitlements are maintained, though eventually build up to an inevitable crash. The recent history of global capitalism conclusively shows how land and land rent play a pivotal role in capital accumulation while intensifying the very contradictions that are the signature hallmark of mature capitalism. It is not a surprise, therefore, that class and other social struggles unfold precisely around the dynamics and processes through which the spatial distribution of rent is reorganized and the modalities through which rent articulates with other forms of capital circulation. Recognizing the class dynamics of the land-finance nexus in

Land as an Asset 51 the present configuration of advanced capitalism is vital, therefore, to strategies for transforming the uses of land in a more socially equitable and ecologically sane manner. Assetization, the process of creating an asset, involves assigning exchange value to things that would otherwise not be exchangeable, often doing so without a direct sale (Birch, 2015, p. 122; see also Ouma, 2018, p. 3). It involves a process of real abstraction (Mann, 2018; Toscano, 2008) in which the qualitative, concrete, and specific attributes present in land are stripped down to quantitative, homogenizing, and generalizable market metrics. This abstraction is real in the sense of representing concrete socio-technical practices and in having its own material effects. Land today circulates on financial markets as real abstractions (in the form of digital or paper entitlements) with its treatment as a financial asset conflicting with other actual or possible use-values for the land. The creation of an asset involves the institutionalization of regulatory frameworks, particular calculative models (Mann, 2018), and cultural norms. Indeed, particular and specific legal and socially recognized dispositifs that regulate ownership and exchange are required, while agreed-upon accountancy metrics and transferable calculating, including the organizations and institutions that organize the system of calculation methods, facilitate and render possible the process of assetization. This is, of course, embedded in a cultural frame through which land ownership, exchange, and assetization are not only normalized, but also naturalized as self-evident common sense. The socially-embedded, inherently political nature of this engenders struggle over the process of abstraction itself: who will suffer the risks and who will reap the rewards? Landowners have to engage with the state at a variety of scales (Ward and Swyngedouw, 2018) and confront intense social contestations. Because the socio-legal embedding of land is a necessary corollary for it to function as circulating fictitious capital, the process of treating it as an asset is intrinsically political. As Haila’s institutionalist perspective on treating land as a financial asset extensively demonstrated, the treatment of land as a financial asset requires specific socio-institutional configurations. Thus, land’s use values are repackaged into real abstractions, permitting the appropriation and re-distribution of rent while imposing exchange value maximization over land’s manifold use values. This process has become a pivotal terrain through which the circulation of capital operates today. The analysis of the exchange value of land and, in particular, its treatment as an asset, therefore, casts new light on the dynamics of contemporary capital accumulation. The analysis of assets and assetization extends beyond the land. Through assetization, a class of rentiers is increasingly ‘profiting without producing’ (Lapavitsas, 2013, p. 793) in their ability to gather derivative rents (Haila, 2015). Arguably, therefore, value grabbing, the appropriation of (surplus) value, rather than the creation of new value is increasingly central to the reproduction of contemporary capitalism (Andreucci et al., 2017). This perspective allows us to account for a wide range of new societal conflicts over institutionalized property regimes and entitlements as well as those over the distribution and appropriation of the flows of value that circulate in and through assets. Conflict over rent

52  Erik Swyngedouw and Callum Ward unfolds through struggles over ownership of assets and the payment for the right and modalities of their use. Unpacking the rent relation inaugurates a vast new terrain of class struggle that we must understand to grasp the vexed role of land in contemporary capitalism. Rent, understood as a social relation (Haila, 1990), unleashes conflicts while struggles arise over the modalities of property-formation, the configuration of use values, and the distribution and appropriation of the subsequent rents. Here, the treatment of land as an asset is integrally bound up in the multiple tensions, contradiction, and conflicts that animate the uneven and combined development of financialized capitalism. The proliferation of private property relations over everything imaginable under the sun significantly expands the terrain for rent extraction, asset formation, and related struggles. This includes things as diverse as intellectual property rights, mining rights, ecosystem services, carbon credits, rights to software, and the use of big data. The very possibility of rent relations is predicated on the further generalization of capitalist markets and establishing private property rights as a central nexus in the struggle over rent appropriation. Thus, escalating socio-ecological and political conflict around property regimes and the appropriation of a variety of assets are unfolding over who captures rent and who pays it. These conflicts are expressed both through inter-capitalist struggles between owners of extractable rent and productive capitalists (Kaika and Ruggiero, 2015) and in popular struggles over the appropriation of surplus value outside of the traditional workplace-based capital–labor relation and occur through the distributional dynamics of capital instead. Such distributional forms of class conflict are one of the central axes of the domestic political turmoil in numerous countries today. Crucially, such struggles over value distribution enabled by the rent relation are, strictly speaking, class struggles over rent. Here popular classes can exploit the contradiction between productive and rentier capital in order to force a downward redistribution of value by, for example, demanding that public institutions capture and redistribute land values. Second, conflicts over the mode and legalities of property are instances of struggles against pseudo-­commodification manifesting as struggles for and over ‘the commons’ in which this commodification itself is rejected.

Land as an asset In this chapter, we have built on Anne Haila’s work on the mobilization of land as a financial asset, teased out key features of land under financialized capitalism, and argued for a continuation of her theoretical and empirical interrogation of rent theory through a focus on assetization. The first being that land embodies no value in the sense of socially necessary labor time, but embodies and is defined through a multiplicity of socio-spatial use values; the raw material of production and social reproduction (Marx, 1894; Lefebvre, 1991). Land gains exchange value as the means of private appropriation of the rent embodied in

Land as an Asset 53 land (Swyngedouw, 1992): in this sense, land does not embody socially necessary labor time, but is a means of capturing it through enclosure. The role of land in capitalism, then, is a tension-laden one to the extent that its exchange value represents a claim to capturing part of the sum of material human metabolic interaction, parcellized as a private property relation and traded as a pseudo-commodity. Establishing private property relations over land permits the capturing of land rent. It is precisely this production of rent that renders land amenable to assetization. The latter constitutes the process through which land titles begin to circulate as purely fictitious assets within the circulation of financial capital. Indeed, enclosed as property and imbued with exchange value, land is abstracted as an asset. Real abstraction (Mann, 2018; Toscano, 2008) entails a socio-­technical process of transforming heterogeneous, qualitative social flows into quantified, exchangeable, material representations. Under financialized capitalism, this process of assetization (Birch and Muniesa, 2019) becomes aligned with the practices of the money management industry (Ouma, 2018). Having been mobilized as a pure financial asset (Haila, 1990; Harvey, 2006; Kaika and Ruggiero, 2015), land is tendentially utilized for exchange value maximization as opposed to enjoying its use values. Such pseudo-commodities appear like commodities in circulation, but have no basis in value production. The generalization and extension of these dynamics, as some have recently argued, characterizes an era of asset-manager capitalism (Braun, 2016) or an asset condition (Muniesa et al., 2017), paralleling Haila’s (2017) argument as to the institutionalization of the property mind. The way that this value grabbing is institutionalized produces particular class-antagonisms that entail intensely political struggle over the modalities of property. Such processes of assetization are central to all manner of social conflicts and are crucial to understanding the place of land and rent within a financialized capitalism.

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54  Erik Swyngedouw and Callum Ward Ball M (1985) The urban rent question. Environment and Planning A 17:503–525. Birch K (2015) We Have Never Been Neoliberal. Winchester: Zero Books. Birch K and F Muniesa (2019) Turning Things into Assets. Cambridge MA: The MIT Press. Braun B (2016) From performativity to political economy: Index investing, ETFs and asset manager capitalism. New Political Economy 21(3):257–273. Coronil F (1998) The Magical State: Nature, Money, and Modernity in Venezuela. Chicago, IL: University of Chicago Press. Farahani I (2021) Land Rent, Capital, Rate of Profit – A Critique of Harvey’s Model of Urban Land Rent. Doctoral Dissertation. Lund: Lund University. Fine B (1979) On Marx’s theory of agricultural rent. Economy and Society 8(3): 241–278. Gunnoe A (2014) The political economy of institutional landownership: Neorentier society and the financialisation of land. Rural Sociology 79(4):478–504. Haila A (1988) Land as a financial asset – The theory of urban rent as a mirror of economic transformation Antipode 20(2):79–101. Haila A (1990) The theory of land rent at the crossroads. Environment and Planning D: Society and Space 8(3):275–296. Haila A (1991) Four types of investment in land and property. International Journal of Urban and Regional Research 15(3):343–365. Haila A (2015) Urban Land Rent: Singapore as a Property State. Oxford: John Wiley. Haila A (2017) The institutionalisation of the property mind. International Journal of Urban and Regional Research 41(3):500–507. Harvey D (1974) Class-monopoly rent, finance capital and urban revolution. Regional Studies 8(3–4):239–255. Harvey D (2003) The New Imperialism. Oxford: Oxford University Press. Harvey D (2006, orig. 1982) The Limits to Capital. Oxford: Basil Blackwell. Harvey D and L Chatterjee (1974) Absolute rent and the structuring of space by governmental and financial institutions. Antipode 6:22–36. Hyötyläinen M and A Haila (2018) Entrepreneurial public real estate policy: The case of Eiranranta, Helsinki. Geoforum 89(2):137–144. Kaika M and L Ruggiero (2015) Class meets land: The social mobilization of land as catalyst for urban change. Antipode 47(3):557–828. Kaika M and L. Ruggiero (2013) Land financialization as a ‘lived’ process: The transformation of Milan’s Bicocca by Pirelli. European Urban and Regional Studies 23(1):3–22. Kerr D (1996) The theory of rent: From crossroads to the magic roundabout. Capital and Class 58:59–88. Keynes J M (1973, orig. 1936) The General Theory of Employment, Interest and Money. London: Macmillan. Lapavitsas C (2013) Profiting Without Producing: How Finance Exploits Us All. London: Verso. Lefebvre H (1991, orig. 1974) The Production of Space. Oxford: Blackwell. Li, T M (2014a) What is land? Assembling a resource for global investment. Transactions of the Institute of British Geographers 39(4):589–602. Li, T M (2014b) Land’s End: Capitalist Relations on an Indigenous Frontier. Durham, NC: Duke University Press. Mann G (2018) Equation and adequation: The world traced by the Phillips Curve. Antipode 50(1)184–211. Marx K (1959, orig. 1894) Capital: Volume III. New York: International Publishers. Marx K (1990, orig. 1894) Capital: Volume I. London: Penguin Books.

Land as an Asset 55 Muniesa F, L Doganova, H Ortiz, A Pina-Stranger, A Paterson, A Bourgoin, V Ehrenstein, D Juven, D Pontille, B Sarac-Lesarve, and G Yon (2017) Capitalization: A Cultural Guide. Paris: Presses des Mines. Muth R (1969) Cities and Housing: The Spatial Pattern of Urban Residential Land Use. Chicago, IL: University of Chicago Press. Ouma S (2018) This can(‘t) be an asset class: The world of money management, ‘society’, and the contested morality of farmland investments. Economy and Space A. DOI: 10.1177/0308518X18790051. Polanyi K (2002, orig. 1944) The Great Transformation. Boston: Beacon Press. Purcell T (2018) ‘Hot chocolate’: Financialized global value chains and cocoa production in Ecuador. The Journal of Peasant Studies 45(5–6):904–926. Purcell T, A Loftus, and H March (2019) Value–rent–finance. Progress in Human Geography. https://doi.org/10.1177/0309132519838064. Silver J (2018) From homes to assets: Housing financialisation in Greater Manchester. Working Paper, Sheffield, UK: The Urban Institute, Sheffield University. Swyngedouw E (1992) Territorial organization and the space/technology nexus. Transactions of the Institute of British Geographers, New Series, 17(4): 417–433. Toscano A (2008) The culture of abstraction. Theory, Culture, and Society 25(4): 57–75. Tse Tung M (1937) On Practice. https://www.marxists.org/reference/archive/mao/ selected-works/volume-1/mswv1_16.htm (accessed 6 April 2019). Turner A (2015) Between Debt and the Devil: Money, Credit, and Fixing Global Finance. Princeton, NJ: Princeton University Press. Von Thünen J (1826) Der Isolierte Staat in Beziehung auf Landwirtschaft und Nationalekonomie. Hamburg: Wartenberg. Ward C and M Aalbers (2016) ‘The shitty rent business’: What’s the point of land rent theory? Urban Studies 53(9):1760–1783. Ward C and E Swyngedouw (2018) Neoliberalization from the ground up: insurgent capital, regional struggle, and the assetisation of land. Antipode 50(4):1077–1097. Williams R (1976) Keywords: A Vocabulary of Culture and Society. London: Fontana Press.

3

BUILDINGS AS FINANCIAL ASSETS Renee Tapp and Rachel Weber

Valued at approximately US$16 trillion dollars, the United States’ commercial real estate market is one of the largest in the world (NAREIT, 2019). It is divided into hundreds of millions of public stock shares and commercial mortgage-backed securities but underlying those financial assets are actual brick and mortar buildings that serve a variety of uses. Commercial real estate – ­industrial, multifamily, office, retail, and niche property types like senior and student housing – provides work, home, and consumption space for users as well as cash flows, tax shelters, and capital gains for investors. Compared with the vast number of real property equities and securities circulating in financial markets, experts estimate that there are 5.9 million commercial buildings in the United States (US Energy Information Administration, 2021). How, though, does a single building multiply into many assets? For decades, scholars have argued that real property, defined as land plus improvements or buildings and a legal category distinguished from personal or intellectual property, are financial assets (Haila, 1988; Harvey, 2007). Most contributions in this vein describe the practice of assetization as one of abstracting and dis-embedding real property from its specific social relations, particularly with the help of the state (Polanyi, 2001). Recent contributions from urban planning and economic geography look to theorize the proliferation of new real property assets. This work sheds light on the ways in which real property is “reduced to a discrete, measurable, and marketable object” to make it better suited for market exchange (Ghertner and Lake, 2021, p. 8; see also Fields, 2018; Ward and Swyngedouw, 2018). While this approach emphasizes the legal and tax institutions foundational to splintered asset creation and dissolution (Kay and Tapp, 2021), the framework has yet to be applied to a single building. As a result, scholars are left with an incomplete picture of the scale and scope of real estate markets and their concrete, material articulations. This chapter develops a theory of assetization that shows how a single building is converted into multiple financial assets. We focus on a single, ordinary example of commercial real estate: an 18-story office tower in Chicago’s central business district located at 550 West Adams. Set up as a series of guiding questions, we address the different aspects of real property that contribute to its assetization. By examining how a building is disaggregated into its DOI: 10.4324/9781003280255-5

Buildings as Financial Assets 57 component parts, our framework reveals the varied, global markets in which investable revenue streams from spatially embedded buildings are circulated and exchanged.

Assetizing real property Following the 2008 global financial crisis, scholars have increasingly come to view property markets through the lens of financialization. In its most narrow form, financialization refers to an economy’s shift away from commodity production and toward financial channels of exchange (Krippner, 2005). Others expand the term to include the dominance of financial narratives and strategies among non-financial firms (Aalbers, 2020). While disagreements about the precision of the concept abound (Christophers, 2015), most scholars agree that a dramatic restructuring of the economy has occurred in the last few decades. Replacing what they consider an “anachronistic lens through which to understand the present-day economic restructuring,” Adkins et al. (2020, p. 15) propose that the asset replace the commodity as the building block of the economy. From an investor’s perspective, the logic underlying the asset economy is not blind and wild speculation, but rather intentional and strategic capital investment (Birch and Muniesa, 2020). While investors have long chosen real property as a place to park their capital, there has been a significant uptick in capital flows to land and buildings. For example, institutional investors have steadily increased their targeted allocation in property markets to 10.7% in 2021, up 180 basis points since 2013 (Hodes Weill and Associates, 2021). Today, real property increasingly shows up on the balance sheets of corporations, asset managers, pension and hedge funds, and university endowments. Everything from former public housing estates and school buildings to office parks and luxury apartment towers to resource-rich farmland and forests are now “productive asset[s] that moonlight as financial asset[s]” (Fairbairn, 2014, p. 779; see also Fairbairn, 2020; Ouma, 2020). As real property has increasingly come to be treated as a financial asset, there is a “blurring of the boundary between physical and financial assets” (Haila, 2015, p. 184). Investors and lenders abstract the physical asset to treat buildings as they might a stock or bond; i.e., as generators of cash flows, rents, and capital gains that can be harvested and appropriated. Commensurability between real property and stocks and bonds is possible only if real property undergoes a transformative process where it is smoothed and broken apart. Land and buildings must be molded into safe assets by investors (Knuth, 2021). Assetization renders real property into homogenous assets to improve their liquidity and speed up their exchange. For an apartment complex, warehouse, or office building to be fungible in the eyes of a distant investor, it must first be reduced to a set of measurements that suppress their inherent individuality and heterogeneity. Unique material aspects of a building like its age, condition, design, and use are transformed into metrics and statistics that measure existing and project possible cash flows, appreciation, tax rates, and yields.

58  Renee Tapp and Rachel Weber Once legible as numbers on a spreadsheet, the distinct financial attributes of a single property can be partitioned through clearly defined property rights. Once considered “unlike other financial assets” because of their “indivisibility” (Coakley, 1994, p. 700), buildings can now be divvied up into ownership interests through legal inventions like syndicates, limited liability companies (LLCs), limited partnerships, and real estate investment trusts (REITs). These ownership vehicles aggregate the equity contributions of multiple investors that entitle the contributor to an ownership stake in the building. Members of these legal entities and partnerships negotiate over how to share the operating cash flows, tax bills and benefits, profits, and liability for the losses and debts incurred. Buildings are further dematerialized through new debt instruments and processes like securitization that circulate debt payments to investors in distant locations. Fractional and fragmented ownership means the question is always “who owns property, what precisely they own, and how they own it” (Tapp, 2020, p. 4; see also Ashwood et al., 2020). By considering real property as “bundled financial assets where rights unravel into discrete investable streams for the highest bidder” (Kay and Tapp, 2021, p. 3), we can better see the scope of and entanglements that characterize real estate markets. Freed from the materiality of the physical structure – almost always with the help of the state – commercial buildings are disassembled. This process of disassembly distributes parts to investors, increases the number of stakeholders dependent on the property’s performance, and entangles those near and far in interlocking and occasionally adversarial relationships.

How to look at a building as a financial asset The materiality of buildings and their embeddedness in particular places contrasts with the invisible, spatially disembedded yields these assets generate for investors. To better witness how commercial real estate operates as a financial asset, we develop the following framework for understanding a single building. We use as an illustrative example an office tower at 550 West Adams in Chicago (see Figure 3.1).

Where is it? Scanning the landscape, investors need to decide on the market where they wish to place their capital. Few wish to be alone in a market and instead follow their peers’ behavior. Like the asset itself, the location must be easy to fathom, not just by potential occupants, but also by the distant purchasers of asset-backed securities built on debt secured by the property. 550 West Adams is located in Chicago, the third largest city in the United States. As is the case with Chicago, heavily populated urban regions generally have the most demand for the utility provided by buildings and therefore the highest pricing that reliably meets investors’ targeted returns. For the most part, these cities have modest zoning and building restrictions, with enough choice building sites to allow for new construction, but not so many as to dampen any appreciative effect from it. Investors

Buildings as Financial Assets 59

Figure 3.1  550 West Adams, Chicago. Photo credit:  Rachel Weber.

are thus able to capture quasi-monopoly returns from a site. Investors also want to diversify the geographic holdings in their portfolio to be able to weather a downturn or oversupply in any one market. Large investors stick to legible locations and standardized products as they look for buildings that they can sell easily; i.e., global “gateways” with “institutional-grade” properties (Weber, 2015).

60  Renee Tapp and Rachel Weber These are code words for places and assets believed to hold their value and appeal to risk-averse institutional investors due to the volume of capital they control. Developers seek to satisfy the requirements both of their direct sources of capital and more abstract consumer and investment markets. Once they have decided on a particular urbanized region, financial capital is drawn to those tested micro-geographies where it can capitalize on the benefits of agglomeration. Certain addresses are well-known and command premium rents and land values if they exhibit a consistency of land use, a condition often supported by government controls. Submarkets change over time as capital flows into and out of them, and only local brokers who possess the requisite knowledge of pricing and leasing dynamics can steer investors to up-and-coming locations and away from those that hold less promise for differential rents. The specific location of a site is the key to surplus profits for a commercial development; for a retail developer, a site even a few blocks away from a main thoroughfare will be rejected. When financing is available, investors are willing to pursue more aggressive sites in riskier submarkets that literally break new ground when, for example, moving toward the edge of fully built-out areas (Weber, 2015). 550 West Adams sits on the fringe of Chicago’s historic central business district or Loop, which is the largest agglomeration of economic activity in the region. The West Loop submarket that hosts 550 West Adams has seen a major shift since the turn of the last century as commercial warehouses have given way to “creative offices,” high-end retailers, and luxury apartments. Promotional materials highlight the area’s new vibrancy as well as the building’s high walk and transit scores and proximity to health clubs (HFF, 2014).

What’s its use? The building at 550 West Adams was constructed in 2006 by Fifield, a Chicagobased developer. It provides utility (use value) for its primary tenant, the headquarters of US Gypsum (USG), a corporation that makes drywall and which was acquired in 2019 by German building materials giant, Knauf (Ecker, 2021). The year before the company moved in, USG emerged from Chapter 11 bankruptcy protection with a multibillion-dollar settlement plan for asbestos-related litigation. USG ostensibly enjoys more utility from 550 West Adams than it did from its previous location, another Loop tower built in 1989. Other large tenants in the building include Humana, a healthcare services company, and a law firm. Two restaurants occupy space on the ground floor. When USG moved into the building, it signed a 15-year, US$88 million lease with its then owner, Fifield (Joravsky, 2006). The property’s utility is determined by the kinds of activities that can take place in or on it. Is it a good place for working? For living? Not all uses can or should occur in every part of the city. Municipalities that regulate land use only permit certain uses in certain places. In doing so, they alter the price of land. Depending on the city and submarket, the same square foot of land zoned for office uses will cost more to buy than that square foot zoned for industrial,

Buildings as Financial Assets 61 assuming office uses are more in demand. Or is there more need to build e-commerce fulfillment centers or apartments for workers at the fulfillment center? If there are only a few kinds of industrial users but the potential for population and employment growth, offices and apartments may be more valuable. When municipalities wish to influence the use of space beyond their regulatory capacities, they may provide incentives to developers. They negotiate, providing additional floor area, development rights, and subsidies for public benefits like a small atrium and economic development (Chen, 2020). Developer Fifield, for example, requested and received almost US$10 million in property tax incentives from the City of Chicago to assist USG with the move from its prior Loop location and subsequent build-out of the interior of 550 West Adams. The City granted this subsidy after the company threatened to move its more than 500 employees to the suburbs (Joravsky, 2006; Corfman, 2004). Neither USG nor the developer reimbursed the City for its US$10 million subsidy when the building sold. Occupant demand for particular land uses is critical for both cities and owner-­ investors. Use and exchange values, material buildings, and abstract finance converge around the need to tenant the physical structures, preferably with high-profile, rent-paying occupants. The short-term horizons of most investors lead them toward assets that are cash-flowing and away from buildings without a stable tenant base that cannot guarantee respectable capital gains from an imminent sale. The promotional materials drafted by the 550 West Adams’ investment broker boasted that 79% of the tower’s total rentable area was occupied by publicly traded companies (HFF, 2014).

Who owns it? Land acquisition is one of the first steps in the development process. If a developer were to build on a parcel of land or renovate a building to which they did not have clear title, they would not be able to rent or sell the final product. Title insurance and surveyors guarantee that the parcel’s legal boundaries and ownership are uncontested so property rights can be conveyed to the owners. For legal purposes, buildings are considered improvements or appurtenances that are affixed to the land they sit on. Even the structures and appliances (e.g., water tanks) that tenants might add to them cannot be removed as they become part of the property. Appurtenances may also include rights to the natural resources found in the parcel of land, such as water, minerals, or oil, as well as easements. Property cannot generate rents unless someone or some legal entity owns it. Property rights for land extend from the center of the earth to surface and to the sky. As long as interested parties can access the equity and debt needed, a continuous cycle of sales keeps that asset’s price current and attuned to that of the market of comparable properties. Sometimes developers and their financial partners hold on to the buildings they construct, but more commonly the original developer sells the building upon completion. Profits from previous projects acquired from management and development fees, capital gains, and building

62  Renee Tapp and Rachel Weber revenues provide a portion of the equity investors and developers need to build and acquire additional assets. Before construction began in 2004, Fifield purchased the land, then a surface parking lot, for $7.5 million (City of Chicago, 2004). After it developed 550 West Adams with its money partner (Los Angeles-based CB Richard Ellis Investors LLC) in 2006, Fifield sold the new building to a German real estate fund, SEB Immobilien-Investment GmbH, for approximately US$168 million (Corfman, 2006). SEB considered the building to be an important contribution to its US$6.5 billion portfolio of assets. A few years later, in 2014, SEB sold the building to another German investment fund GLL Real Estate Partners for US$178 million (Ori, 2014). Frequently shifting money around from one asset or fund to another has become a sign of financial acumen and, if the timing is right, a way to increase short-term returns from the capital gains generated by the sale of buildings.

What’s its value? A property’s market value renders its land and improvements investable and taxable. Investors bet on it going up or down by different gradations. But what is the source of a building’s value? This value cannot be seen; it is immaterial, that is not expressed directly in the world of things. It depends on “how valuation is done, when, by whom, and for what purpose … The value of an asset is, so to say, entirely in [the practitioner’s] hands” (Muniesa, 2011, p. 28). In other words, values are defined by the methods used to measure, exchange, and extract them. The most common property appraisal methods emerged at start of the 20th century and continue to be used today. These methods include the cost approach, the comparable sales or “comps” approach, and the income approach. Different methods, actors, and contexts for comparison, what Bigger and Robertson (2017) call “valuation regimes,” produce separate estimates of value for the same property, none any more the true market value than others. Appraisers inventory the physical qualities of a building (daylighting, floor-to-ceiling heights, location on a specific block), decide how much to weigh or emphasize each quality, and establish equivalencies and distinctions with other buildings. As economies have become more financialized, a building’s market value has become less dependent on its use and physical qualities (and thus its replacement cost) and more based on its expected income and expected sales price (Chiapello, 2015). This means that a building’s value is more sensitive to the markets in which its revenues are traded as assets. In contagion-like fashion, value estimates that capitalize sales prices inflated by cheap credit and speculative bubbles become reasonable data points for appraising other buildings. Once stabilized, a building’s appraised value becomes affixed to and follows it through the financial food chain. Constructed for US$123 million in 2006, 550 West Adams sold for US$168 million the same year. The sale generated an estimated profit of US$45 million for the developer (Corfman, 2004). Eight years later it sold for US$178, and

Buildings as Financial Assets 63 the building was on the market in 2021 for US$225 million (Ecker, 2021). The contrasting valuation regime used by the Cook County Assessor estimated that the building’s market value was closer to US$195 million; its assessed valuation for the purposes of estimating the owner’s tax bill was only $44.9 million. Value becomes the basis for the mortgage and the degree of leverage that current owners can obtain. Owners can borrow against a building’s value; i.e., treating it as security for loans. For the advance of a loan, a property owner executes a mortgage contract conveying an interest in the property to the lender on a temporary basis as security for repayment of the loan. The contract stipulates that the lender will reconvey this interest upon repayment on the specified due date. If the borrower is delinquent in their repayment and defaults on the loan, the lender can seek to retain the asset. Real estate is a highly leveraged business. Over time, property owners have decreased their reliance on savings and retained earnings and sought out debt financing through increasingly complex channels (Derrington, 2021; Weber, 2015). They shop for large amounts of “other people’s money” to underwrite their construction projects and the continued operation of their buildings. When GLL acquired 550 West Adams from SEB in 2015, it used a $92.5 million loan to cover 52% of the purchase price (Ecker, 2021), an unusually low leverage ratio. Commercial banks see the mortgages they own as assets and thus streams of future cash flows. They may provide construction loans, short-term debt that has one- to three-year terms and carry higher interest rates than longer-term commercial mortgages, to developers. Interest accrues on the growing principal as the developer compensates members of the development team for work completed. Construction lenders typically require that developers have a pre-­ committed permanent loan in place to pay back the construction loan. This practice protects banks from providing credit to a project that does not make it to the point where it can be leased, refinanced, sold, or securitized. Permanent loans for commercial projects amortize only a portion of the principal and therefore require a large balloon payment and recapitalization through a new loan or sale at maturity. Banks scrutinize projects based on their income-generating potential and potential risks. Specifically, buildings need to be able to quickly generate sufficient cash flows from rents and sales to cover debt service payments and operating expenses. Property owners look to hedge risks and reduce costs. They recapitalize their assets, selling them or exchanging one form of financing for another, such as more debt for less equity. They may physically transform buildings through renovation to raise rents and attract a different tenant mix. Money center banks hold the largest portfolio of commercial real estate loans, but regional banks also loan to the smaller and riskier projects (Weber, 2015). They often exchange this long-term debt for shorter-term and less-risky kinds. Since the early 1990s, they have sold mortgages to mortgage bankers and Wall Street investment firms. These third parties then pool and package the loans into commercial mortgage-backed securities whose differently priced segments or tranches are sold to investors more interested in owning a share of a bond

64  Renee Tapp and Rachel Weber than owning a physical building. For example, the mortgage on the building (125 South Franklin Street) from which USG relocated to 550 West Adams was pooled with those of eleven other office buildings in six other states to form a mortgage-backed security. The sponsor of the securitization was a private REIT owned by the Government of Singapore (Moody’s, 2006). In such cases, less risky tranches generally are sold to institutional investors while the lower-rated ones are bought by hedge funds. In the process, the different interests and income streams (from the rents, mortgage payments, dividends from equity ownership) associated with one office tower are owned simultaneously by several distinct entities.

How big is it? Development is driven by size, calculated as square footage or massing, to realize pre-established returns on investment (McNeill, 2019). By maximizing the amount of rentable building space, developers ensure each square foot is financially productive enough to justify the acquisition and construction costs. Financial pressures like debt and rate-of-return targets lead developers to minimize the amount of space “wasted” on non-revenue-producing uses such as elevator shafts, lobbies, public bathrooms, and stairwells, unless, of course, the developer can find a way to monetize these features. At 18 stories tall and with 483,677 rental square feet, 550 West Adams’ brokers promoted the “efficient floor plates” of floors not broken apart by elevator shafts (HFF, 2014). Striking a balance between maximum space and rentable area makes the contemporary commercial structures, like the glass-encased 550 West Adams, Class A trophies (HFF, 2014). Size is the blueprint driving most of the new commercial real estate investment, including in rental housing where similar dynamics play out. Newly constructed tall towers, inflated private homes, and massive mixed-use boxes nestle between, alongside, and on top of the older built form (Graham, 2015). Even redevelopment projects have trended toward big buildings where more square footage generates greater returns (Tapp, 2020). The origins of this design ethos, however, are ideological: big buildings are believed to provide much needed affordable housing, create sustainable urban solutions to climate change, and diminish the need for automobile infrastructure through densification (Glaeser, 2011; Florida, 2017). Such promises have fueled the overdevelopment of tall, dense, and primarily luxury rental properties from Los Angeles to London, Melbourne, Paris, Toronto, and Vancouver (for examples, see Drozdz et al., 2018 and Nethercote and Horne, 2016). Unsurprisingly, little rental relief has come to tenants, but lucrative opportunities abound for investors who capture cash flows and speculate on the securities backed by these buildings’ pooled mortgages.

What’s it made of? Physical assets, like buildings, have a materiality and are comprised of technological systems that impact their use as well as their profitability (Beauregard, 2015). If you were to turn a vacant building upside down, shake it hard, and

Buildings as Financial Assets 65 watch the insides tumble out, everything that did not fall out would be the systems (structural, mechanical, electrical, and plumbing) and materials (glass, wood, masonry, metals, paint, sheetrock, and composites). What would fall out would be the finishes and furniture. The quality, condition, and age of all materials, systems, and finishes influence the building’s operating expenses and construction costs and therefore its yields as a financial asset. Fifield constructed 550 West Adams at an initial cost of US$123 million, hiring well-known architecture firm, DeStefano + Partners, to design a building that maximized cash flows (Ori, 2014). Developers like Fifield need to manage the costs of their material inputs, which are affected by the location of where materials originate, supply chain links and backlogs, and prevailing labor costs. They try to complete the project as quickly as possible, competing globally for materials, like steel and drywall, which are increasingly in short supply. They try to minimize the construction period to avoid being saddled with higher interest rates. The complexity of the development process and the risks of not being able to access materials compel general contractors to enter into forward contracts with suppliers that set prices and guarantee delivery of materials at dates. By betting on markets like lumber futures, developers build the risk of weather or economic crises into the buildings themselves (Ascher, 2016). Once constructed, all buildings require ongoing maintenance. Materials, systems, and finishes that lack quality have short lifespans and costlier expenses. Moreover, some additional finishes might be inexpensive to install, yet developers and investors are unlikely to recapture those expenses with increased rents. Unexpected material failures and inefficiencies cut into a building’s operating expenses. While developers enter capital reserves into their financial models, costs that exceed the budget whittle away the net present value of a building. The perpetual challenge of “you have to spend some money to make money” rings true, encouraging the developer to strike a balance between current and future expenses and materials that attract their target users. Investors and lenders pressure developers to avoid constructing amenities with high fixed costs and longer-term payoffs that cannot be directly capitalized into the leases or sales prices (e.g., 550 West Adams’ 18 indoor executive parking spaces are likely more easily recapturable than surrounding the building with native landscaping). Increasing recognition of climate change is transforming construction materials and prices as well. Here the conversation turns to embodied energy and carbon in structures, measures of all the greenhouse gas emissions attributed to a material during its life cycle from extraction to manufacturing, construction, maintenance, and disposal. Some commercial developers look to replace high embodied-energy materials like steel girders and concrete with low embodied-energy ones like timber. To reward these innovations, designations like LEED signify buildings whose design, construction, and maintenance are deemed environmentally responsible. For example, 550 West Adams was constructed to both LEED Gold and Energy Star standards, with brokers hawking its green roof and daylighting features to potential tenants and investors (HFF, 2014). In some markets, environmental designations carry monetary

66  Renee Tapp and Rachel Weber significance: environmentally certified buildings often command higher rents and sell at price premiums (Fuerst and McAllister, 2011).

How old is it? Buildings begin to deteriorate from the moment they are produced (Abramson, 2016). Compared with the durable asset of land, which theoretically lasts f­ orever and requires only small maintenance costs and taxes, buildings are consumed through use, depreciate to negligible value, and become obsolete (Weber, 2002). Responding to time horizons that are typically shorter than the longevity of building materials, developers and investors rarely enter new construction ­projects—like 550 West Adams—with the intent that their building will one day receive historic designation. Even buildings nary a decade old require constant upgrading. When GLL purchased 550 West Adams in 2014, it added a fitness center, tenant lounge, and bar to the building’s second floor in hopes that these modern amenities would appeal to current and future tenants (Ecker, 2021). With assistance of the state, old buildings can generate new rents by substituting historic value for economic life. As depreciation counts downward the building’s remaining economic life, historic preservation counts upwards to reach a 50-year minimum threshold. Once a building crests this milestone and is certified by state agencies, it becomes eligible for tax credits that incentivize its renewal. “Historic” building is an official designation that swings the doors of old assets wide open for finance to rush in. Realizing the historic significance of a devalued building is an unexpected boon for owners and developers (Tapp, 2019). For example, a flurry of pre-2008 crisis redevelopment activity in the Loop’s Retail Historic District saw eleven of 550 West Adams’ neighbors rehabbed with federal government historic tax credits. Commercial skyscrapers like the Atwater Building, the Majestic Building, and the Old Dearborn Bank Building were repositioned as rental housing and retail spaces, offering their investors tax shelters via tax credits. Properly valuing a historic building raises a tension between market-based understandings of worth and social value. Historic preservation is a measure of aesthetic appreciation. This, however, is a subjective determination of value based on distinct architectural or time-based periods. Where many owners of a new building enter into construction anticipating the economic value of a building from cash flows to long-term tax deductions and capital gains upon a sale, standardized appreciation formulas that fully measure the building’s aesthetics do not exist. In the US, the criteria (its age, integrity, and significance) used to determine if a building has historic value make appraising the property more of an art than science. Preservation consultants survey properties under consideration and identify the defining design features and material elements. If a building cannot be designated as architecturally significant, it still may be contextually significant given the historical events that may have occurred in the building. Absent cultural significance, an aged building is eligible for historic status if it falls within a historic district designated by the state or

Buildings as Financial Assets 67 municipal government. Such is the case for buildings located in the Loop Retail Historic District. Oftentimes, buildings are too mundane to be historic, no matter how they are packaged or stories about their inception told. When the value of land is higher than that of the improvements, older buildings are vulnerable to the wrecking ball. Markets for salvaged materials have appeared and, for certain buildings, make dissecting a building for parts financially worthwhile (Koscielniak, 2021). Wood, tiles, bricks, windows, appliances, and even dirt removed from original structures can find their way into new construction. Rare historic elements are sold for a premium to enthusiasts in secondary markets.

What does it pay in taxes? Decisions about financing and owning buildings are also decisions about taxation. An owner of a commercial building pays income tax (paid to the federal government and possibly others); real estate or property taxes (to the city and state government); and capital gains taxes (to the federal government after the property sells). Building owners try to find ways to reduce, and better still, avoid taxes. Abatements temporarily pause the collection of levies on a property, while other maneuvers (like Opportunity Zones) enable property owners to dodge their tax bill by reinvesting their capital gains in particular locations and assets. Taxes are also the primary way the city and state government captures value from real property, so issues over their payment often put buildings in the crosshairs of conflict between state and market. To lower their property tax bill, legal representatives for the owners of 550 West Adams appealed the building’s assessed value downwards in at least eight years since 2006. This does not mean that all forms of taxation are detrimental from a building owner’s perspective. The tax code also offers opportunities for accumulation to real estate investors. The trick for owners is maximize the tax advantages of building by bringing their tax bills to zero or below. If taxes are retold as a story of financial accumulation, then it is crucial to understand how tax writeoffs associated with property increase an investor’s returns. One way is the depreciation deduction. Defined as the decline in an asset’s value over time or sunk expenses, depreciation deductions for income-producing properties determine the economic life of a building (Cairns and Jacobs, 2014). The 1981 Economic Recovery Tax Act allowed the full value of a building to be depreciated over fifteen years, a period much shorter than the anticipated physical life of a structure (Beitel, 2000). Although that basis period has been increased to closer to thirty years, a policy that might appear to encourage property owners to repair and maintain an aging building, it is in fact a major boon to real estate investors. Paper losses can turn into tangible financial gains with a touch of accounting wizardry. Fifield, which spent US$123 million on 550 West Adams’ construction, can reduce its taxable income by about $3 million annually for depreciation deductions. This cushion helps the developer meet their tax obligations,

68  Renee Tapp and Rachel Weber especially in the first year of a project when cash flows from leases might be small. If the building’s income falls below the write-offs and generates a negative cash flow, paper losses become a tax refund. Some owners even expedite a building’s economic life with a cost-segregation study to front-load depreciation in the structure’s early years and amplify the deduction amount. When subsidizing the supposed devaluation of an appreciating asset class, the tax code also encourages the use of debt financing. Mortgage interest deduction, the second important tax write-off, allows owners to apply similar financial strategies to reduce taxable income by deducting paid interest. Again, by creating a scenario where there is negative cash flow, clever accounting strategies create opportunities for cash to be redistributed from the state’s coffers to the property owner’s pockets. Substituting equity for debt has the most significant impact on investment returns and incentivizes negative leverage debt financing. Projects with negative leverage, in which debt exceeds equity, produce leveraged after-tax rates of return with high yields. The less equity the better for developers, investors, lenders, and financial markets that profit from debt-backed real estate securities. Investors repeatedly utilize tax write-offs. They claim annual deductions until the economic (depreciable) life of a building is over, until the mortgage is paid off, or, more likely, until the property sells. Even then, a sale does not deplete the tax write-offs. Sales reset the depreciation deduction clock and the interest from mortgages used to finance the acquisition becomes deductible again. The tax shelter time-loop replays until an owner holds on to the property for more than its economic life. Only then does obsolescence extinguish the tax sheltering dimensions of the asset. Some investors, however, want immediate tax benefits. Typically, this occurs when firms and individuals need a quick shelter for taxable liabilities. The challenge is to legally purchase tax write-offs without owning the whole asset. Legal entities like LLCs and limited partnerships work well for splitting ownership among many parties. Syndications allow passive investors to get a slice of, or even the whole, tax write-off pie by putting very little equity in the property (Downs, 1985; Fainstein, 2001; Kay and Tapp, 2021). Banks, financial institutions, and even football coaches are players in the current market for syndicated benefits from land and buildings (Kay and Tapp, 2021). Impatient investors look to invest in the tax credit markets that are found in abundance in real estate. Tax credits tend to be more liquid than deductions and mortgage interest write-offs; depending on the prevailing regulations, they can circulate on secondary markets (Tapp, 2019). These include the low-income housing tax credit, historic tax credit, new markets tax credit, renewable energy production tax credit, renewable energy investment tax credit, and a bevy of state tax credits that mimic these federal incentives. Tax credits create social goods like affordable housing, but they also contribute to the concentration of wealth while creating a vast chasm of inequality. Corporate investors turn to tax credits to generate shareholder value by erasing their effective tax rate and purchasing a dollar’s worth of credit at less than a dollar (Tapp, 2020).

Buildings as Financial Assets 69

How does it perform financially? Building owners look at how well buildings perform as assets using different financial metrics that measure investment returns. Some metrics are retrospective while others are prospective. Some, like the return on total assets, are static and do not account for the time-value of money or changes in rents or expenses. Others, like the internal rate of return, are dynamic and encapsulate both changes in rents from leases as well as in the asset’s market value. Some measures capture the effect of taxes and leverage while others do not. Such metrics allow for comparison and strip buildings of their distinctiveness, create uniformities, and push structures closer to pure financial assets. Investors and lenders, using different financial instruments, maintain diverse criteria for selecting investment assets. Some, like private equity, mainly seek shorter-term appreciation and value growth. They may gravitate to a value-added situation where they see an opportunity to purchase an older building, gut rehab it, and convert it into an entirely different asset. Other sources of property capital are interested in securitizing the building’s mortgages, turning something as material, idiosyncratic, and with long turnover as a building into fungible commercial paper that trades quickly in public markets (Weber, 2015). The size of the investment firm defines their goals, as does the size of its portfolio and the amount of capital available to invest. Because Chicago has historically been perceived as a safe market for investment returns, particularly when global currency rates fluctuate and political risks shift (Weber, 2015), it has been a target for investment funds. As one of several Chicago buildings sold to European investment funds in 2014, German real estate fund SEB’s sale of 550 West Adams to GLL, another German investment fund, would not be the last time the property moved between portfolios. At the start of 2022, Jones Lang LaSalle was arranging the sale of the building to an investor looking for “substantially increasing yields over a long-term investment horizon” (JLL, 2021, p.6). The yields that 550 West Adams offers investors are precisely because of its component parts: “the combination of institutional anchor tenancy, exceptional rollover profile, diversified tenant roster, and bestin-class location ensure stability of cash flows to a future investor” (ibid, p. 11).

Conclusion Tracing the interconnections between property and financial markets provides not only theoretical insight into the worlds of financialization and assetization, but also empirical specificity about the kinds of investors that have a stake in a building’s financial viability. This is only possible by viewing buildings as bundled financial assets. The political ramifications of this are no less significant than the economic ones: one can imagine situations where the interests of these investors align and where they may conflict. Holding the debt of a building through a mortgage-backed security might lead an investor to put off new investment that the REIT preparing the building for sale believes is necessary.

70  Renee Tapp and Rachel Weber Local planners and policy makers have less influence over how buildings operate as financial assets and the conflicts that might arise because of these complex entanglements, although they certainly have to contend with outcomes wrought by tax and mortgage delinquencies. When financial problems articulate themselves in vacancies, decline, and requests for public assistance, the state may have to respond. Buildings, however, remain fixed in space. They are places in which to work, visit, and live and thus often operate physically separate from the financial worlds where their revenues circulate. In this chapter, we have provided a lens into the multiple ways the physical aspects of buildings underlie their value as financial assets. These material aspects are themselves embedded in spatial and regulatory networks over which state actors have some control. Accounting techniques and financial strategies compress location, material components, zoning regulations, prevailing tax codes, and dominant ideologies within the real estate, construction, and design industries into numbers legible to global financial markets. These numbers appear on balance sheets where they remain until they turn from black to red. Financial components of buildings like 550 West Adams move about in different markets and show up in different spreadsheets, although the building’s glass façade and structural integrity remain visibly intact. Seeing behind its exterior to the magnitude, scope, and entanglements of property and financial markets requires a focus on the strategies and techniques that disassemble and corral a building’s diverse parts into tidy packages.

Acknowledgments The authors would like to thank the UIC Government Finance Research Center and the Urban Studies Foundation for their support as well as the volume editors for their excellent suggestions for revising and improving this chapter.

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72  Renee Tapp and Rachel Weber Hodes Weill and Associates (2021) Institutional real estate allocations monitor. Cornell Baker Program in Real Estate. https://www.hodesweill.com/_files/ugd/ abfec0_0576c6d1cc264004aef377252ff4f068.pdf. Jones Lang LaSalle (JLL) (2021) 550 West Adams. https://res.cloudinary.com/jll-globalcmg/image/upload/v1619548937/IC/Img/Original/ktvvgzr5a0sa3ikwmoiu.pdf. Joravsky B (2006) With friends like these. The Chicago Reader. November 30. Kay K and Tapp R (2021) Un/making assets: The institutional limits to financialization. Annals  of the American Association of Geographers. DOI: 10.1080/24694452.2021. 1960474. Knuth S (2021) Fictions of safety: Defensive storylines in global property investment. In Ghertner D A and Lake R (eds) Land Fictions. Ithaca, NY: Cornell University Press, pp. 62–85. Koscielniak M (2021) The post-crisis properties of demolishing Detroit, Michigan. In O’Callaghan C and Di Feliciantonio C (eds) The New Urban Ruins: Vacancy, Urban Politics and International Experiments in the Post-Crisis City. Bristol, UK: Policy Press, 145–162. Krippner G R (2005) The financialization of the American economy. Socio-Economic Review 3(2):173–208. McNeill D (2019) Volumetric urbanism: The production and extraction of Singaporean territory. Environment and Planning A 51(4): 849–868. Moody’s Investors Service (2006) Rating Action: Moody’s Upgrades Five Classes of LB-UBS Commercial Mortgage Trust 2004-C1. November 21. Muniesa F (2011) A flank movement in the understanding of valuation. The Sociological Review 59:24–38. NAREIT (2019) Estimating the size of the commercial real estate market. July. https:// www.reit.com/sites/default/files/Size%20of%20CRE%20market%202019%20full.pdf. Nethercote M and R Horne (2016) Ordinary vertical urbanisms: City apartments and the everyday geographies of high-rise families. Environment and Planning A 48(8):1581–1598. Ori R (2014) German buyer, seller in $185 million West Loop office deal. Crain’s Chicago Business. December 16. Ouma S (2020) Farming as Financial Asset: Global Finance and the Making of Institutional Landscapes. Newcastle upon Tyne: Agenda Publishing. Polanyi K (2001, orig. 1944) The Great Transformation. Boston: Beacon Press. Tapp R (2019) Layers of finance: Historic tax credits and the fiscal geographies of urban redevelopment. Geoforum 105:13–22. Tapp R (2020) From the state to the shareholder: Rent and the production of shareholder value in real estate. Antipode 52(3): 867–887. US Energy Information Administration (2021) 2018 Commercial Buildings Energy Consumption Survey. https://www.eia.gov/consumption/commercial/data/2018/ pdf/CBECS_2018_Building_Characteristics_Flipbook.pdf. Ward C and E Swyngedouw (2018) Neoliberalisation from the ground up: Insurgent capital, regional struggle, and the assetisation of land. Antipode 50(4):1077–1097. Weber R (2002) Extracting value from the city: Neoliberalism and urban redevelopment. Antipode 34(3):519–540. Weber R (2015) From Boom to Bubble: How Finance Built the New Chicago. Chicago, IL: University of Chicago Press.

PART II

RENT, REAL ESTATE, AND PROPERTY MARKETS

4

THE RISK MYTH BLACKSTONE, HOUSING AND RENTIER CAPITALISM1 Brett Christophers

In the years following the global financial crisis of 2007–2009, a major new player emerged in the world of large-scale residential property investment: the Blackstone Group, a Wall Street-based alternative asset manager, sometimes referred to as a private-equity investor. Although it had made smallish investments in housing in the past, Blackstone entered the financial crisis with no exposure to this asset class. Starting in 2011, however, Blackstone acquired large swathes of housing, in more than ten countries on three continents with a particular focus on two territories: Spain and the US. By 2019, Blackstone owned, and let, over 300,000 homes, and ranked alongside the likes of Germany’s Vonovia as one of the world’s largest residential landlords. In political-economic terms, a powerful narrative has emerged around such investment groups over the past few decades, during which private equity and other alternative asset classes have moved from the fringes of the asset management business to a central position. The essence of this narrative is that allocating capital to alternative asset managers represents a way for pension funds, insurance companies and high-net-worth individuals to take greater risk in the search for higher returns: a modest allocation to private equity, for instance, is regarded as a way to boost the nominally more stable and predictable returns available from traditional asset classes such as cash, bonds and publicly listed equity. Blackstone and its peers, in short, are widely regarded as high-risk investors, and that is certainly the way that Blackstone’s post-financial-crisis investment in housing has generally been viewed: to the extent that this family of investors generates strong(er) returns, it is said to be because of the great(er) risks that they have taken. The latter explain the former and the former justify the latter. But to associate what Blackstone does with heightened risk-taking is to misconstrue the nature of its business. Blackstone is a rentier capitalist (Christophers, 2020). The profits earned by such capitalists accrue from exclusive control over scarce, income-generating (rent) assets and significant power and privilege, hence limited competition, within the political and economic spaces in which such assets are acquired and commercially operated. Such control, power and privilege enable rentiers precisely to avoid risk by rolling it over to third parties. Insofar as housing and (thus) land rents are integral to contemporary rentier capitalism and insofar as the particular workings of the asset management business DOI: 10.4324/9781003280255-7

76  Brett Christophers structurally enhance a rentier’s ability to avoid and transfer risk, Blackstone, in fact, represents a rentier capitalist par excellence. This chapter develops this argument across four main sections. The first rehearses the standard “high risk, high return” thesis associated with alternative asset management in general and Blackstone and its housing investment venture more particularly. The second section begins the task of deconstructing that thesis by elaborating the key building blocks of the alternative asset management business model and demonstrating the pivotal role of risk displacement. The third section turns specifically to the details of Blackstone’s investment in residential property after the financial crisis, focusing mainly on its activities in the crucial Spanish and US markets. Far from taking on significant risk, Blackstone invested in the context of highly propitious conditions that rendered risk utterly marginal. The fourth and final section maintains that Blackstone’s vast returns on these investments do not reflect outsized risk-taking but rather the privileged position it enjoys within national and international investment landscapes.

Risk-talk Risk is at the core of the mythology of private equity and alternative asset management more widely. In the 1980s, when pension funds and insurance companies began to allocate growing amounts of capital to alternative asset managers and alternative asset classes such as private equity and real estate, they did so in search of higher returns. But there was said to be a quid pro quo: to achieve these higher returns meant taking greater risks. The two – risk and return – allegedly were joined at the hip. Their putative entanglement persists even today. Thus, for instance, when the California Public Employees’ Retirement System (CalPERS) announced in 2020 that it would be seeking better returns by investing more in private equity, commentators described its move as being emphatically into “high-risk” alternative investments (Frost and Gilroy, 2020), while even CalPERS itself said the approach was “not without risk” (Meng, 2020). In yoking expectations of return to notions of risk, such statements draw on a long tradition of thinking engrained at the heart of mainstream financial theory. Originating with Harry Markowitz’s work on portfolio selection in the 1950s, such theory posits a fundamental risk–return trade-off: higher risks must be taken to achieve higher returns. Indeed, for investments incorporating an equity risk, such as Blackstone makes, the ostensible coupling of risk and return is absolute (and, arguably, circular): variance in returns is how the risk is measured. Directly indebted to such theory, the notion that private equity is a highrisk, high-reward business is an essential part of the discourse, even lore, that surrounds it, and that is used – not least by private-equity managers – to justify high management fees. The discourse has become especially entrenched since the financial crisis and to capture the shifts in the balance of power on Wall Street that have taken place during that time. Taking stock for the New York Times, for example, Landon Thomas (2015) suggested that, amid “super-low interest rates”, power had decisively shifted away from risk-averse investment

The Risk Myth 77 banks and towards those with bigger risk appetites, in particular, “asset managers, which have been inundated with cash from investors desperate for higher returns”. Thomas (2015) singled out one firm as epitomizing the new breed of power-brokers: Blackstone. The private-equity-as-risk-taking proposition has long underwritten one of the most contentious features of the business, the carried-interest tax loophole. Carried interest or simply “carry” is the principal performance-based fee earned by private-equity firms and calculated as a percentage of realized gains on investments made by private-equity funds. In the US and many other countries, ­private-equity firms that are incorporated as partnerships pay tax on carry at the capital gains rate which traditionally has been considerably lower than the rate of tax on corporate or individual income. The logic turns on the notion of risk: the fund manager has put capital at risk, and thus carry represents a return on the invested capital and should be taxed as a capital gain. Critics, however, have long insisted that carried interest should be treated as a payment for services rendered (i.e., the management of clients’ assets), and hence taxed like regular income. But if critics of private equity rage at this loophole, they nonetheless share with industry advocates and insiders the premise that alternative asset management is itself about risk-taking. In his influential recent critique of the private-equity business, for instance, Phalippou (2020) firmly subscribes to the conventional view that targeting higher returns entails taking greater risks. Where he departs from the standard line is in his assessment of whether private-equity operators actually deliver the extra returns that greater risk-taking theoretically promises. His analysis suggests that they do not: US-based private-equity funds, he argues, have generated comparable returns to public equity indices since at least 2006. However, Phalippou does not dispute the outsized nature of the risks taken by those private-equity funds. That Blackstone was undertaking significant risks when it began investing at scale in housing after the financial crisis was agreed upon by all observers in both the media and academic social science. Blackstone’s first big investment push was in the US, where, between late 2011 and late 2013 and amidst the detritus of the financial crisis and subsequent foreclosure crisis, it bought in the region of 40,000 single-family homes at a cost of around US$7 billion, subsequently letting those homes through a new portfolio company called Invitation Homes. Writing for The Atlantic, William D. Cohan, a Wall Street veteran, called Blackstone’s strategy “both novel and risky”. It was, he said, “a classic example of the role that risk capital is supposed to play in broken markets: to make bets that others are fearful of making, and to profit from them if things work out” (Cohan, 2013). While Cohan admired the risk-taking, others in the media worried “about how the investment fund will wring from rental housing the high profits that investors expect from risky ventures” (Sangree, 2013). All agreed that the venture was risky. Scholars also acknowledged the risk: writing about post-crisis investment in US single-family housing not just by Blackstone but also by large investors more generally, Marcus Allen and colleagues argued that a key contributory factor

78  Brett Christophers had been the Federal Reserve’s loose monetary policy: “interest rates at close to zero levels pushed pension funds and mutual funds to seek higher yields and pursue risky strategies”, of which the allocation of capital to housing was the prime example (Allen et al., 2018, p. 626). Meanwhile, in 2016, Joe Beswick and colleagues (Beswick et al., 2016, pp. 323–234) wrote similarly about global investments in housing by private-equity firms like Blackstone. They described these as “opportunistic investments in high-risk/high-return markets. In an era marked by high liquidity and low yields, private equity strategies attract institutions seeking to garner larger returns for their clients”. Such opportunistic investment strategies were, they said, “by nature … high risk”.

Asset management and risk displacement Blackstone’s approach to the investment business combines five key features: it is an asset manager; invests in alternative assets; invests via funds; earns fees; and uses leverage. These five features, or rather their combination, are what set Blackstone and its direct competitors apart from other financial institutions, and tell us a great deal about Blackstone’s fundamental relation to risk. First, Blackstone, founded in 1985, is an asset manager. To be sure, it invests its own capital – as we will see, but it makes money mainly by managing – investing – the capital with which it is entrusted by clients such as insurance companies and, in particular, pension funds. Referred to as “assets under management”, in Blackstone’s case, this externally raised client capital totalled US$684 billion at the time of this writing in 2021. Second, Blackstone invests in alternative assets. Traditionally, institutional investment essentially meant investment in cash, bonds and publicly listed stocks. While investment in those three asset classes still represents the biggest share of investment by financial institutions, investment in alternative assets has grown rapidly since the 1970s. The alternative category is capacious and ever-­ expanding, ranging from precious metals to vintage wines and from works of art to cryptocurrencies. It also includes real estate. Blackstone is the world’s largest manager of alternative assets. Third, Blackstone invests via investment funds, which are vehicles for pooling money advanced by multiple investors and investing that pooled capital. Sometimes, such funds only make one investment, but typically a fund will make multiple portfolio investments; often, investments in a single asset (for instance, the shares of a private company) are effected via multiple funds. In 2016, for instance, Blackstone invested in the Swedish residential property company D. Carnegie & Co AB via two of its funds, namely Blackstone Real Estate Partners Europe IV and Blackstone Real Estate Partners VII. At least one holding company – and often several, forming a chain – is usually incorporated for each acquisition and sits between the fund and the acquired entity; at the head of this chain is the company (often suffixed TopCo) in which the fund holds shares. When Blackstone invested in Sweden’s Carnegie, for example, it incorporated no fewer than four holding companies to sit between

The Risk Myth 79

Figure 4.1  Corporate structure of 2016 investment in Carnegie & Co. by Blackstone funds. Source:  By Author.

Carnegie and the two aforementioned funds, with all four incorporated in Luxembourg (see Figure 4.1). Such holding companies distance investment funds, and thus the fund manager (here, Blackstone), from risk: the further the funds and fund manager are from the operating entity, the harder it is legally and financially for third parties to take recourse against them. The other name for investment funds is limited partnership, which is the legal form they usually take; thus, the other name for the investors whose capital is invested via the fund is partners.2 These partners are of two types. First, there are Limited Partners (LPs), so called because they have limited liability – the most they can lose is the amount they have invested in the fund – and limited control; i.e., they are not actively involved in the management of the fund. The pension funds that invest with Blackstone are its LPs. The second type of partner is a General Partner (GP) that has complete control of the fund. The GP is not the asset manager itself but rather an entity (usually another partnership) constituted and owned by that manager. The GP generally contracts the management of the fund to the asset management firm and its investment professionals. There are several reasons why the GP is constituted as a separate entity,

80  Brett Christophers of which perhaps the most important is to insulate the investment professionals from unlimited liability. Again, then: risk. If the GP has all the power, it is the LPs that contribute the lion’s share of capital to a fund. Historically, the GP “commit” – the amount of money that the asset manager via the GP itself puts into the fund – has averaged about 1 percent of fund value (Latta, 2017). Fourth, Blackstone makes money from the management of third-party investors’ capital by charging those investors (its LPs) fees. These fees are of two main types. One comprises simple annual management fees, usually calculated as a percentage of the capital that the investor has committed to a fund. Then there are performance fees, based on how much profit Blackstone earns for its LPs, the main such performance fee being the abovementioned carried interest. Typical management and performance fee rates for alternative asset managers are two percent (of committed capital, annually) and 20 percent (of realized investor gains), respectively, a model referred to in shorthand as “two and twenty”. But fees vary; often, performance fees incorporate a minimum level of return for investors (a hurdle rate) that the fund manager must achieve before any carry is earned. Fifth and finally, while Blackstone’s funds purchase assets using capital advanced by its clients as well as by Blackstone itself, they also use debt. In fact, borrowed money usually represents the biggest share of the invested capital, over 90 percent in many cases. The preponderance of debt explains the name that was typically used for alternative asset managers in the 1980s and early 1990s: leveraged-buyout firms. Leverage is the technical term for the use of debt. It also explains the high returns achieved on successful investments, with borrowing magnifying gains. Of course, investments sometimes fail, in which case debt magnifies the resulting losses, which would appear to go against the argument of this chapter that Blackstone avoids, rather than assumes, risk. Yet, crucially, the debt used to finance buyouts is not shouldered by Blackstone itself. After an investment is made, the borrowed money is not owed by Blackstone; indeed, it is not even owed by the investment fund (the limited partnership). Rather, it is owed either by the company that the fund has acquired or, as in the case of the acquisition not of a company but an asset such as an apartment block, by one of the holding companies (usually TopCo) sitting between the fund and the acquired asset. Hence, if troubles in repaying the debt should arise, Blackstone is not liable, which, of course, is precisely the point. In short, the risk that undoubtedly goes with Blackstone using principally debt to finance investments is not Blackstone’s risk. As with the use of holding companies to distance the fund manager from its acquired assets and the creation of the GP as a separate legal entity, the manner in which the debt financing of buyouts is ordinarily structured entails isolating Blackstone from risk. Risk is, specifically, displaced towards portfolio companies, their employees and their creditors. And if, in the process, risk is displaced away from fund partners, it is displaced especially away from Blackstone. After all, all Blackstone stands to lose is the c. one percent of equity financing that it has fronted; 99 percent of the equity risk is its LPs’. Thus, when in 1990 Blackstone’s third private-equity

The Risk Myth 81 investment, the US$330 million buyout of Edgcomb Metals Company, went awry losing Blackstone’s fund US$32.5 million of the $38.9 million of equity it had put into the deal, it was not one of Blackstone chief executive Stephen Schwarzman’s own colleagues that called him “a complete idiot” – it was the chief investment officer of Presidential Life Insurance, one of Blackstone’s LPs (Carey and Morris, 2010, p. 75). Perhaps the most striking fact relating to risk and debt is that not only does Blackstone not assume liability for the borrowings used by its funds to make acquisitions, but, unlike so many other contemporary corporate giants, not least in the finance sector itself, Blackstone does not generally borrow to finance its own operations. “As a fundamental operating tenet, Tony and I”, Schwarzman (2019, p. 240), referring to Hamilton “Tony” James, Blackstone’s president from 2002 to 2018, wrote in his memoirs, “had insisted on having no net debt”. Why? “It was”, Schwarzman explained, “part of our aversion to risk”. Needless to say, there is a deep irony in Blackstone operating on a no-net-debt principle while happily, indeed as part of its very modus operandi, loading debt on the companies it buys. Blackstone’s avowed risk aversion raises an obvious question: if not the taking of outsized risks, what actually is it that explains Blackstone’s outsized rewards?

Safe as houses If, as I will argue, Blackstone strategically and successfully avoided risk when investing in distressed housing assets in Spain and the US after 2010, such risk avoidance was nothing new: the company has long had, in Schwarzman’s words, an “aversion” to risk. In fact, this aversion was and is more than merely institutional, something in the marrow of the body corporate. It was and is personal, something notable about Schwarzman (one of Blackstone’s two co-founders, and chief executive for its entire existence) and his individual investor subjectivity. David Carey and John Morris (2010, p. 70–71) made specific mention of this in their book on the company and its long-time leader, citing a former partner who had worked closely alongside Schwarzman: “The rudimentary rule of investing, that one must risk money to make money, ‘is something Steve always had a hard time coping with’… [for a world-class investor], ‘his risk-aversion was really extraordinary’”. In the US, the centrepiece of Blackstone’s program of post-financial-crisis housing investment was the Invitation Homes venture. Through this vehicle, Blackstone purchased large numbers of single-family homes, focusing strategically and geographically on foreclosure hotspots. The period of most intense acquisition was between the summer of 2012 and autumn of 2013 when Invitation Homes was buying, on average, nearly 100 houses a day. By September 2016, it owned and was letting 48,431 homes, generating an average monthly rent of US$1,623, making it the country’s biggest owner of such homes (Invitation Homes, 2017). Over half of the company’s revenue came from just two states, both of which had been ravaged by the foreclosure crisis: California and Florida. At this point, at the end of 2016, Blackstone began the process of exiting its investment. It sold 30 percent of its shares through an IPO of Invitation Homes

82  Brett Christophers in 2017; by late 2019, it had sold all its shares. Its fund’s overall profit on the venture was estimated to have exceeded US$3.5 billion (Dezember, 2019). Another important way in which Blackstone came to acquire large numbers of single-family homes in the US or, at least, a significant interest in such homes was through the acquisition of residential mortgages. The primary vehicle was Bayview Asset Management, a company in which Blackstone’s funds purchased a 46 percent stake in 2008. Data are not publicly available on the number of home loans that Bayview bought from lenders after 2008, but we know that between 2012 and 2016, it purchased 31,213 mortgages from the Department of Housing and Urban Development (HUD). We also know that in the majority of these cases, Bayview subsequently repossessed the underlying property assets. As of 2020, 25,797 of the HUD loans that Bayview acquired had a known status outcome. In as many as six out of every ten such cases (15,592), Bayview had taken possession of the borrower’s home either by foreclosing or, less commonly, by virtue of the borrower providing a deed in lieu of foreclosure; i.e., conveying the property to Bayview to satisfy the delinquent loan (Christophers, 2022, p. 143). In Spain, Blackstone made its first purchase of residential property in 2013 when it bought 1,860 apartments from Madrid’s municipal housing and land company, la Empresa Municipal de la Vivienda y el Suelo de Madrid (EMVS). But this would turn out to be an anomalous deal: the majority of Spanish residential assets that Blackstone would acquire would be from banks, not from public-­ sector bodies. Sometimes Blackstone bought loans and then, as Bayview did in the US, proceeded to repossess many of the homes in question; Schwarzman even admitted on a call with Wall Street analysts that when Blackstone acquired real-estate bank loans in Europe, it did so “to basically get control of individual properties or a group of properties” (Blackstone, 2012a). The biggest of such loan deals was the 2014 purchase of 40,000 residential mortgages from Catalunya Banc. Other times, Blackstone bought homes themselves. In 2015, for example, it acquired 4,500 homes from Banco de Sabadell. Still other times, Blackstone purchased portfolios of assets that contained both homes and loans on homes. The most significant of such cases was the 2017 acquisition of a 51 percent stake in Banco Popular’s vast real-estate portfolio. The portfolio had a reported book value of around €30 billion, of which c. 25 percent represented repossessed houses and apartments and c. 40 percent represented residential mortgages. The Banco Popular deal made Blackstone the biggest private real-estate owner in Spain (Doncel, 2017). Unlike in the US with Invitation Homes, Blackstone in 2021 continued to be the owner of most of these Spanish residential assets. As such, any gains have not been widely realized. That Blackstone has made gains on paper is not in doubt. In 2018, it was reported in Spain that, according to Blackstone’s own calculations, the value of the Madrid homes it acquired from EMVS in 2013 had increased to more than three times the amount Blackstone had paid for them (Caballero, 2018). One likely reason that Blackstone has stayed in the market is that Spanish rents have and continue to increase strongly, augmenting, in turn, the value of Blackstone’s rental properties. Between 2013, when Blackstone began buying in

The Risk Myth 83 the country, and 2020, rents nationwide increased by 50 percent, representing twice the growth rate of house prices (Thompson, 2020). Talking to analysts in 2012, Schwarzman had been exceptionally bullish about the profits to be made from housing investment. “We have high expectations”, he said, “for the ultimate returns we expect to generate” (Blackstone, 2012a). The housing play, both in Spain and the US, satisfied his fundamental investment criterion: an absence of meaningful risk. Blackstone was investing in what Schwarzman described as an “extremely favorable environment”. Three particular dimensions of favourability served to render investment risk negligible. First, these were all distressed assets trading for well below market value. Blackstone’s strategy was to wait until housing markets bottomed out before beginning to buy and it judged, correctly, that this occurred earlier in the US (2011–2012) than in Spain (2013–2014). Schwarzman had told a conference audience in 2010 that Blackstone was “basically waiting to see how beaten up people’s psyches get, and where they’re willing to sell assets. Then we’ll go in and wipe the blood from the streets” (cited in Byrne, 2014). The discounts to market value that Blackstone achieved in both Spain and the US were remarkable. “And so we looked at this asset class”, remarked Jonathan Gray, the then-head of the firm’s real-estate business in mid-2013 regarding US single-family housing, “and said, gosh, we can buy homes that sold for $300-plus thousand for $150,000” (Blackstone, 2013a). Blackstone achieved discounts of a similar scale on Spanish homes. The EMVS properties were purchased for €69,000 each compared with an estimated average market value of €145,600 per unit at the time of the transaction (Martiarena, 2018). No wonder Joan Solotar, a Blackstone managing director, when interviewed by CNBC shortly thereafter about the firm’s European real estate strategy, gushed about the “huge discounts” available specifically in Spain (Navarro, 2013). Those discounts applied to home loans as well as the homes themselves. The 40,000 mortgages acquired from Catalunya Banc, for example, had a book value of €6.4 billion, but Blackstone paid just €3.6 billion for them. Thus, Tony James, Blackstone’s president, was incredulous when stock analysts questioned the logic of this deal: “we’re buying this at a huge discount to face”, James reminded them. The discount meant “we have the downside covered” (Blackstone, 2014). The price Blackstone paid Catalunya Banc represented a large discount not only to the face value of the loans but also, James observed, “to the underlying replacement value of the physical assets”, which, he said, would be a significant consideration “if we were to own [those physical assets]” (Blackstone, 2014). This was a theme that James had expounded upon before: “we never buy anything above physical replacement cost”, he told a conference hosted by Goldman Sachs in 2012 (Blackstone, 2012b). Indeed, not buying above the replacement cost has been the number 1 investment rule of Jonathan Gray, the driving force behind Blackstone’s real-estate business for the bulk of the past three decades. “I’ll start with my basic worldview”, Gray began a 2013 presentation to a forum hosted by Credit Suisse, “which is we like to buy hard assets at discounts to physical replacement cost. And it was pretty clear over the last few years”, Gray

84  Brett Christophers went on to say, by way of example, “that the largest asset class in the world, U.S. single-family housing, was going to have a lot of homes sold at big discounts to physical replacement cost” (Blackstone, 2013a). Why does Blackstone only buy real estate at discounts to the physical replacement cost, and what does this have to do with risk avoidance? This brings us to the second key respect in which the environment within which Blackstone invested in Spanish and US residential assets was, in Schwarzman’s words, extremely favourable. To grasp the significance of the replacement cost issue, it is necessary to introduce another of Gray’s favourite maxims, which is that smart real-estate investors buy in locations where it is difficult for the supply of stock to expand. Just as importantly, they sell if it looks like new supply is coming on stream. In a 2016 profile of Gray, the Financial Times described this adage thus: “pay attention to capital and cranes. When the supply of either rises dramatically, it is time to run” (Sender, 2016). Why? Because new supply is liable to ease the upward pressure on rents that fuels incumbent property owners’ profits. The relevance of replacement cost here is that developers are unlikely to build new property in areas where the cost of doing so is greater than the price of existing properties. If as an investor you can buy at a below-replacement cost, in other words, you are effectively buying yourself an insurance – or de-risking – policy. The risk that new homes will be built, negatively impacting the local dynamics of supply and demand, is minimized. In the wake of the financial crisis, as it scoured the globe for housing investment opportunities, Blackstone sought out places not only where assets were available at discounts to market value, but also where, by virtue of discounts to physical replacement cost, new housing supply was constrained and was lagging behind demand. Gray’s conviction, as outlined to William Cohan in 2013, was that, in the latter’s words, in such places, “the housing market won’t move into balance until the value of existing homes rises sufficiently to approximate the cost of building a new home” (Cohan, 2013). In 2018, at Blackstone’s annual investor day, Kathleen McCarthy, Blackstone’s co-head of real estate, reported on the firm’s progress in finding places with this imbalance. Blackstone had, she said, indeed “been able to identify shortfalls between household formation and new supply”. And such shortfalls had been most noticeable in two countries: the US and Spain (Blackstone, 2018). It was there, then, that it had invested most heavily. Housing construction had, in fact, slumped. Between 2006 and 2018, it fell by a half in the US and by as much as 90 percent in Spain (Blackstone, 2019, p. 2). Meanwhile, household formation grew apace, leading to increasing housing shortages in both countries; in the US, for example, housing demand outstripped supply to the extent that, by 2016, the country had accumulated a housing supply deficit estimated at around 2 million units (Amherst Capital, 2016, p. 22). As a result, housing affordability became more and more of a problem in both the owner-occupied and rental sectors, but especially the latter. We have already seen that Spanish rents increased by 50 percent between 2013 and 2020; in the US, researchers reported in 2020 that, similarly, nationwide rents had been “on

The Risk Myth 85 a remarkable uptrend” (Joint Center for Housing Studies of Harvard University, 2020, p. 2). This was precisely what Blackstone had betted on. Furthermore, it had not only invested in countries where housing supply lagged demand. It also invested in the regions of those countries where the lag was most pronounced: the Madrid and Barcelona regions in Spain, and California and Florida in the US. These regions exhibited, as the Invitation Homes IPO prospectus put it, “lower new supply [and] stronger job and household formation growth” than the rest of the country (Invitation Homes, 2017, p. 1). Such supply–demand imbalance was another key component of Schwarzman’s extremely favourable (i.e., fundamentally de-risked) investment environment. Third and finally, governments actively de-risked Blackstone’s housing investment. When Blackstone acquired Catalunya Banc’s mortgage book in 2014, for example, Spain’s bank bailout fund, FROB (Fondo de reestructuración ordenada bancaria), the public entity that handled the sale, generously contributed €572 million to the €4.2 billion purchase consideration. True, its agreement with Blackstone contained a clawback provision, but the state would only ever be able to recover some of that €572 million and only if Blackstone first achieved a hurdle return rate of 13 percent. Meanwhile, the delinquent mortgages that the US Department of Housing and Urban Development sold to Blackstone– Bayview not only were available at sizeable discounts to face value, but were also largely unencumbered by borrower protections (Greenburg, 2017). Another US public entity, Fannie Mae also did Blackstone a turn when, in 2017, it agreed to guarantee against default up to US$1 billion of the rental-backed bonds issued by Invitation Homes, thereby reducing the interest-cost of that debt (Dezember and Timiraos, 2017). Even more significant to the de-risking of Blackstone’s housing investment than these specific state actions was the broader structural support that policymakers (eventually) provided to the housing market. The importance of this point cannot be overstated. Why did Blackstone wait until 2011–2012 in the US and 2013 in Spain to invest in housing? It had been talking up the prospects of acquiring major residential property portfolios since the spring of 2009. Schwarzman, as we have seen, said that Blackstone kept its powder dry until distress was at its maximum and there was “blood on the streets”. Yet it is also the case that Blackstone did not begin buying until after policymakers had taken meaningful action to prop-up Spanish and US housing markets. In taking that action, the authorities essentially guaranteed future asset-price inflation, thus removing investors’ nominal risk. Only a capsule account of how policymakers eventually propped up US and Spanish housing markets can be offered here. In the US case, the critical mechanism was the unconventional monetary policy known as quantitative easing (QE), which saw the Federal Reserve (Fed) purchase long-dated financial securities in the open market. Easing occurred in three phases. QE3, which commenced in September 2012, entailed the Fed buying vast quantities of mortgage-­backed securities specifically (although not only) to lower mortgage rates and thereby kick-start a housing market that, in Adam Tooze’s (2018, p.  366) words, was

86  Brett Christophers “still in shock”. Furthermore, QE3, unlike QE1 and QE2, had no maximum dollar amount or time limit. Far from merely giving the housing market a oneoff shot, the Fed was overtly signalling its readiness, if necessary, to provide permanent support. Blackstone responded with alacrity: it ramped up its buying of US single-family homes precisely when QE3 began. In Europe, too, central bankers sent a signal, the significance of which for Spain and its housing market would have been impossible for Blackstone to miss. But the signal did not come from Madrid. It was sent, in July 2012, by the Frankfurtbased European Central Bank (ECB). During that month, the bank’s president, Mario Draghi, declared that the ECB stood ready to do “whatever it takes”. To be sure, it was not housing markets – least of all Spain’s – that were Draghi’s primary concern. The issue at hand was chaos in the European sovereign debt markets and the very future of the euro. Nevertheless, coming as it did hard on the heels of an agreement by the Eurozone finance ministers the previous month to provide Spain with up to €100 billion of loans to recapitalize its banking system, there was no doubting the significance of Draghi’s stake-in-the-ground intervention for the recovery prospects of Spain’s economy in general and its housing market in particular. Spain would henceforth be a safe and stable place to invest. In sum, by committing in mid- to late 2012 to not let things deteriorate any further under any circumstances, policymakers on both sides of the Atlantic effectively put a floor under the housing market. It was a floor that Blackstone and its perennially risk-averse leader Stephen Schwarzman would eagerly stand upon. Meanwhile, post-financial-crisis monetary policy benefitted Blackstone and other leveraged investors in another crucial way: in addition to supporting housing and other asset prices, it ensured an effectively limitless supply of unprecedentedly cheap debt financing.

Exorbitant privilege Given the multi-faceted de-risking of its post-financial-crisis residential-property investment in Spain and the US, such investment was as close to a banker for Blackstone as it is possible to find. And Blackstone knew it. In the period around 2012–2013 when the firm was beginning to make major housing investments in both countries, its top executives frequently spoke explicitly about how straightforward it was to make money in real estate – and how hard it was to lose money. Here, for example, is Tony James in December 2012: the beauty of hard assets is you never have to lose money if you are a good investor… [With] inflation constantly running up replacement-building costs, you will get no building until occupancies go up and rents go up to the point where it is justified. So eventually you will get bailed out… So that is pretty compelling – that absolute certainty of you are going to get your money with private equity type returns or better is a pretty compelling mix. So that is a really great business (Blackstone, 2012b)

The Risk Myth 87 Speaking six months later at a conference hosted by Morgan Stanley, Schwarzman was even more forthright: real estate is a wonderful business because actually it’s our simplest business… Supply and demand, I mean, you can see the building. It’s there, right? It takes roughly 3 years for supply to build because everything that gets built needs somebody in a government to approve it, right? You just can’t throw buildings up all over. You got to get building permits. People keep records of these things, so you can find any city in the world what supply is coming at you. If there’s enormous supply, you sell. How difficult is this? (Blackstone, 2013b). All of this raises a question: if, in the favourable environment described in the previous section, real-estate investment in general and housing investment in particular really is (and was) so simple and the profits to be generated from it so assured and risk-free, why does everyone not do it? Why, in the years during which Blackstone was sweeping up residential property in Spain and the US on a colossal scale, were all investors not doing the same thing and to the same degree? In reality, certain other large investors did adopt similar strategies, buying distressed residential-property assets in Spain, the US and other countries hit hard by the financial crisis. This was particularly true of other alternative asset managers such as Apollo Global Management and Colony Capital. Nonetheless, not all investors did by any means. And no other investor pursued the strategy on a comparable scale and with comparable financial success as Blackstone. The real question, then, is: why in this period did asset managers dominate ­d istressed-housing investment and why specifically was Blackstone dominant? The answer is that not all investors actually could avoid risk to the extent and in the manner breezily envisioned by James and Schwarzman in the above quotations. The ability to do so was a privilege, held only by large rentier capitalists. And Blackstone enjoyed greater privilege than its rentier-capitalist competitors. Arguably, the most important basis of privilege was simply scale. As James observed, the financial crisis had widened the gap to Blackstone’s real-­ estate competitors: So in private equity, for example, we have the largest fund in the world. That is great, but there are 10 or 15 other funds that are roughly comparable in terms of size and capabilities… Real estate is different. We have virtually a unique position. Before the meltdown in real estate our key competitors were Goldman Sachs and Morgan Stanley, Bear Stearns, Lehman Brothers. They are all out of the business. They all blew themselves up. They are all out of business. So the next biggest real estate fund is 20% of our size. So it is truly a unique position in the market. (Blackstone, 2012b)

88  Brett Christophers This was far from being about size for size’s sake. “Scale”, James insisted, “matters”. It matters in the hustle and bustle of the marketplace, in being able to negotiate better deals than anyone else: “being both the largest buyer, the largest owner and the largest seller of real estate in the world”, James explained, “gives you huge leverage”. Indeed, in terms of doing real-estate deals, scale sometimes simply disqualifies all other bidders. Schwarzman remarked in late 2012 that its status as “the largest capital pool in the world” made Blackstone, “in many cases, the sole bidder for properties” (Blackstone, 2012a). Kathleen McCarthy, several years later, reiterated the advantages of scale in the market for real estate: Blackstone’s size “allows us to concentrate on large, complicated situations where there is much less competition” (Blackstone, 2018). Competition risk, then, is something that Blackstone, in view of its scalar privilege, has been able to largely circumvent. Scale also matters from an operational perspective. “This is a business with economies of scale”, James observed of single-family rental in the US (Blackstone, 2013c). The more properties one has in a particular market – and 95 percent of Invitation Homes’ revenue was earned in local markets where it owned at least 2,000 homes (Invitation Homes, 2017, p. 102) – the cheaper it is on average to manage each one. Furthermore, the operational advantages deriving from scale are closely bound up, as James recognized, with financing advantages deriving from the same source. Like all Blackstone ventures, Invitation Homes was heavily leveraged. In funding it, Blackstone was able to access, in James’s words, “very attractive debt financing that no one else can … because they don’t have the scale”. This enabled Blackstone to buy quicker, and more, than competitors. It possessed that fabled thing, “first mover advantage. We got in first. We got in with real operating scale… One of the problems the other guys have is they’ve got a little bit of money to get started. They got started but they didn’t have enough capital to get to profitable scale” (Blackstone, 2013c). For Blackstone, by contrast, it was a virtuous circle. Another crucial ingredient of success conferred by Blackstone’s unrivalled scale was the ability to ride out volatility. James, as we have seen, argued that you never have to lose money in real estate if you buy below the replacement cost because supply will remain constrained until rents go up: “eventually”, as he said, “you will get bailed out”. But the key word here is “eventually”. To assume that all investor-buyers can sit tight and weather periodic market downturns and wait for eventual price inflation is to presuppose that such buyers do not have to liquidate their investment in the meantime. Few investors are fortunate enough to be in such a privileged position. Blackstone, thanks to its immense scale, is: short-term difficulties in one part of the business can be comfortably cross-subsidized with profits from elsewhere. In respect of real-estate investment, the firm has what James aptly called “staying power” (Blackstone, 2012b). Without such staying power, and the concomitant capacity to endure market fluctuations, real-estate investment potentially becomes considerably riskier.

The Risk Myth 89 Whether by virtue of its scale or not, Blackstone also enjoys a final key source of privilege; to wit: privileged access to government. This is about much more than, say, Schwarzman being a long-term confidant of ex-President Trump, Steven Mnuchin attending Schwarzman’s 70th birthday party at the latter’s home in Palm Beach two days before he was confirmed as US Treasury Secretary, or any other such cozy interpersonal Washington–Wall Street relationship. Much more significant is the deep institutionalization in the US of tight links between policymaking bodies on the one hand and major money-making bodies such as Blackstone on the other. Again, only a glimpse of such connections as they pertain specifically to Blackstone can be given here. Suffice it to say that the dividing line between politics and business is blurred and not only because the latter actively lobbies and – through campaign contributions and the like – directly funds the former. Notably, several of Blackstone’s key lobbyists hail from the very state institutions they have ended up lobbying: Eli Miller, for example, who had been the chief operating officer of Trump’s 2016 presidential campaign, worked as the chief of staff to Treasury Secretary Mnuchin between 2017 and 2019 before moving to a role as the Managing Director of Government Relations at Blackstone. Meanwhile, the door also revolves in the opposite direction: during the US foreclosure crisis, at least two Blackstone executives, Matt Kabaker and Ian Samuels, moved to the Treasury to assist the then-Secretary Timothy Geithner on housing finance policy. An appropriate observation with which to close, therefore, is that if Geithner’s policies signally failed in assisting distressed mortgagors (which is widely recognized to have been the case), they helped nonetheless, and partly as a result of that very failure, to fashion the particular favourable environment – i.e., the availability at knock-down prices of large stocks of impaired home loans and repossessed single-family housing – from which Invitation Homes and Blackstone, at little to no risk to themselves, would subsequently benefit.

Conclusion Private equity and alternative asset management more generally are businesses shrouded in secrecy: the word “private” speaks volumes. They are also shrouded in legend and myth. One such myth is the belief that, to the degree that firms such as Blackstone are able to generate outsized returns, it is because they take outsized risks. Yet, in the case of what has arguably been Blackstone’s highest profile investment venture of the past decade, namely its multi-territory wager on residential property, risk has simply not been a significant factor. Blackstone’s major housing investments in Spain and the US have been largely riskless ones. If Blackstone has been able to exploit advantageous conditions, it is not because it took more risks than other investors. Rather, it is because it enjoys a position of exceptional structural privilege in achieving and exploiting the ownership of scarce income-generating assets such as housing. Such privilege is the hallmark of the contemporary rentier capitalist.

90  Brett Christophers

Notes

1 The author wishes to thank Benjamin Braun and the editors for comments on previous drafts, and Antoine Paccoud for assistance in tracking down company filings in Luxembourg. 2 Note that one reason that the funds are established as limited partnerships is that, unlike corporations, such partnerships are generally not subject to tax; rather, tax is incurred by investors on distributions from the fund.

References Allen M T, J Rutherford, R Rutherford, and A Yavas (2018) Impact of investors in distressed housing markets. The Journal of Real Estate Finance and Economics 56(4):622–652. Amherst Capital (2016) U.S. Single-Family Rental – An Emerging Institutional Asset Class. https://www.amherstcapital.com/documents/20649/22737/US+SFR+Emerg ing+Asset+Class/9d84e0da-4a9f-4665-9880-88a4515d9d2b. Beswick J, G Alexandri, M Byrne, S Vives-Miró, D Fields, S Hodkinson, and M Janoschka (2016) Speculating on London’s housing future: The rise of global corporate landlords in ‘post-crisis’ urban landscapes. City 20(2):321–341. Blackstone (2012a) Earnings Call Transcript Q3 2012. 19 October. https://seekingalpha. com/article/934381-the-blackstone-groups-ceo-discusses-q3-2012-results-earningscall-transcript. Blackstone (2012b) The Blackstone Group at Goldman Sachs Financial Services Confe­ rence. 5 December. http://www.alacrastore.com/research/thomson-streetevents-The_ Blackstone_Group_at_Goldman_Sachs_Financial_Services_Conference-T4963343. Blackstone (2013a) The Blackstone Group LP Presents at 2013 Credit Suisse Financial Services Forum. 13 February. https://seekingalpha.com/article/1191671-the-blackstonegroup-lp-presents-at-2013-credit-suisse-financial-services-forum-febminus-13minus2013-12-15-pm. Blackstone (2013b) The Blackstone Group L.P. Presents at Morgan Stanley Financials Conference 2013. 11 June. https://seekingalpha.com/article/1495522-the-blackstonegroup-l-p-presents-at-morgan-stanley-financials-conference-2013-junminus-11minus2013-01-55-pm?part=single. Blackstone (2013c) Earnings Call Transcript Q3 2013. 17 October. https://seekingalpha. com/article/1756332-the-blackstone-group-l-p-management-discusses-q3-2013results-earnings-call-transcript. Blackstone (2014) Earnings Call Transcript Q2 2014. 17 July. https://seekingalpha. com/article/2321515-the-blackstone-groups-bx-ceo-steve-schwarzman-on-q2-2014results-earnings-call-transcript. Blackstone (2018) 2018 Blackstone Investor Day Webcast. 21 September. https://event. webcasts.com/viewer/event.jsp?ei=1213114&tp_key=34a8efedcc. Blackstone (2019) Blackstone’s Approach to Rental Housing. https://www.blackstone. com/wp-content/uploads/sites/2/2019/09/approach-to-rental-housing.pdf. Byrne N (2014) Wall Street wolfs down Ireland Inc. Irish Mail on Sunday, 3 August. Caballero F (2018) El valor de las viviendas sociales vendidas por el Ayuntamiento de Ana Botella a fondos buitre aumenta un 227%. 24 April. https://www.eldiario.es/madrid/ viviendas-sociales-ayuntamiento-botella-aumentado_1_2158123.html. Carey D and J E Morris (2010) King of Capital: The Remarkable Rise, Fall, and Rise Again of Steve Schwarzman and Blackstone. New York: Crown Business.

The Risk Myth 91 Christophers B (2020) Rentier Capitalism: Who Owns the Economy, and Who Pays for It? London: Verso. Christophers B (2022) The role of the state in the transfer of value from Main Street to Wall Street: US single-family housing after the financial crisis. Antipode 54:130–152. Cohan W D (2013) Why wall street loves houses again. https://www.theatlantic.com/ magazine/archive/2013/10/why-wall-street-loves-houses-again/309454/. Dezember R (2019) Blackstone moves out of rental-home wager with a big gain. Wall Street Journal, 21 November. Dezember R and N Timiraos (2017) Fannie Mae expands role to backing home rentals. Wall Street Journal, 26 January. Doncel L (2017) Blackstone, el nuevo gigante del ladrillo. El País, 10 August. Frost R and L Gilroy (2020) The potential risks and rewards of CalPERS’ new investment policy. 8 July. https://reason.org/commentary/the-potential-risks-andrewards-of-calpers-new-investment-policy/. Greenburg B (2017) Consolidation after crisis: How a few private investors bought distressed, federally-insured mortgages after the foreclosure crisis. New York University Journal of Legislation and Public Policy 20:887–939. Invitation Homes (2017) Form S-11. https://www.sec.gov/Archives/edgar/data/ 1687229/000119312517004519/d260125ds11.htm. Joint Center for Housing Studies of Harvard University (2020) America’s Rental Housing https://www.jchs.harvard.edu/sites/default/files/Harvard_JCHS_Americas_Rental_ Housing_2020.pdf. Latta A (2017) LP corner: Thoughts on GP commitment. 13 May. http://www.allenlatta. com/allens-blog/lp-corner-thoughts-on-gp-commitment. Martiarena A (2018) Ana Botella y miembros de su equipo, condenados a pagar 25 ­millones por la venta de pisos públicos a fondos buitre. 28 December. https://www. lavanguardia.com/politica/20181228/453787388067/tribunal-cuentas-condenaana-botella-gobierno-emvs-venta-pisos-publicos-protegidos-fondos-buitres-blackstone26-millones.html. Meng B (2020) Calpers prepares for the long haul. Wall Street Journal, 15 June. Navarro B (2013) Blackstone’s contrarian bets on real estate. 8 August. https://www. cnbc.com/2013/08/08/blackstones-contrarian-bets-on-real-estate.html. Phalippou L (2020) An Inconvenient Fact: Private Equity Returns & The Billionaire Factory. University of Oxford, Said Business School, Working Paper. https://papers. ssrn.com/sol3/Papers.cfm?abstract_id=3623820. Sangree H (2013) Blackstone banks on future of U.S. rental housing. 13 April. https:// www.seacoastonline.com/article/20130413/BIZ/304130312. Schwarzman S (2019) What It Takes: Lessons in the Pursuit of Excellence. New York: Simon & Schuster. Sender H (2016) Investment strategy: the new property barons. Financial Times, 3 April. Thomas L (2015) Blackstone’s deal with GE highlights its real estate holdings. New York Times, 12 April. Thompson C (2020) España carga los dados de la apuesta inmobiliaria de Blackstone. 22 February. https://es.investing.com/news/economy/espana-carga-los-dados-de-laapuesta-inmobiliaria-de-blackstone-1972049. Tooze A (2018) Crashed. London: Allen Lane.

5

THE POLITICAL ECONOMY OF ABANDONED PROPERTY STRUCTURE AND AGENCY IN LAND BANKING PR ACTICE IN MUNCIE, INDIANA John West

This chapter explores structure and agency in political economy through a case study describing efforts to shift the practice of abandoned property governance. I study the institutional framework and the state and county policies that allow predatory and speculative landlords to buy tax-delinquent properties and use them as financial assets to maximize land rents. This chapter shows that such commodification is rooted in anti-urban politics and policy within local and state governments. The narrative structure of this chapter also conveys a strategic attempt to work against the tendency towards property commodification through the institutional mechanism of a land bank. The practice of land banking is an effort to re-frame the issue of abandonment, centering the idea of responsible management of properties in order to improve the quality of life for surrounding communities. With this story of practice-based scholarship, I show the importance of persistence, efficiency, non-partisan administration, coalition building and framing in pursuing effective governance of abandoned properties. What follows starts as a first-person narrative account of an abandoned property auction. Transitioning to a focus on the diversity of market participants, the account shifts to the strategic decisions of buyers. From there, the focus shifts to the political geography of abandoned property legislation, showing the processes that create the strategic ground for the re-use of vacant land. Finally, returning to the first-person narrative, I describe policy change efforts and show the land bank’s strategy and its impacts.

The county auction In June of 2021, the Auditor’s office held an auction of tax-foreclosed properties, known as the deed sale1 in Delaware County, in the state of Indiana. The semi-annual sale starts at 8:00 am, in a hall at the local fair ground. By the time I arrived at 7:45, the Hall was full of people waiting in line to register with a representative of SRI, a private company that sells software to local units of government for managing abandoned property governance and conducting auctions of tax liens or sales. SRI bills itself as “Your partners for delinquent tax DOI: 10.4324/9781003280255-8

The Political Economy of Abandoned Property 93 recovery, property auctions and foreclosure services”, and the “your” refers both to administrators in units of local government and investors. By the end of the day, SRI would have a winning bid from 122 buyers, the majority of whom did not live in the neighbourhood where the purchase property is located. Corporate entities, rather than owner occupants, currently own 21 percent of the 5,848 properties sold in county tax lien auctions over the past ten years (Shears, 2022). My role at the auction was to bid on three properties for clients of the Muncie Land Bank, a non-profit institution started by the City of Muncie. Land banks are governmental or private non-profit organizations that acquire, maintain and re-use abandoned property. Land banks seek to manage the re-use of abandoned property by vetting 2 bidders and buyers of property and/or engaging in partnerships to redevelop property to address public problems, including the lack of affordable housing, the lack of park space and the need for community gathering spaces in disinvested neighbourhoods. Tax forfeiture processes are the primary means through which land banks acquire an abandoned property. Model land banks across the country systematically acquire all tax and mortgage-­forfeited property, becoming a repository for vacant land. This can put them at odds with practices that emphasize market mechanisms (like deed auctions), and the shortterm goal of elected officials to quickly dispose of property, with the hope of directly raising revenue and enlarging property tax receipts (Hackworth, 2019, p. 140). As the chair of the board of the Muncie Land Bank, I had been seeking to convince local units of government to assign abandoned properties to our organization for more than four years. These efforts have not yet been successful, and so, as an agent of the land bank, I entered the auction as a bidder like any other. In 2017, the City of Muncie approached me, a planning professor at a local university, to start a land bank under a newly passed state law. The land banking law required the board of directors to be appointed by the Mayor and City Council. Over four years, working with local allies, we had secured a competent and effective board, raised money from private foundations to hire staff and perform its core mission of acquiring and reusing property, and formed partnerships with end users, including housing developers, both non-profit and for profit, with track records of producing high-quality housing (West, 2021). I had entered the county auction to acquire three additional properties that the land bank would hold and maintain until partner organizations were prepared to undertake their development projects. Prior to the auction, the land bank had entered into contractual agreements with buyers who had committed to build a park, a new Habitat for Humanity3 home and a new home in a particularly distressed neighborhood adjacent to downtown Muncie. Our partner organizations were a local church-based Community Development Corporation, a Habitat for Humanity affiliate and an out-of-state purchaser who had already developed a dozen units of remarkably high quality, affordable housing in a neighbourhood characterized by disinvestment and neglect. The position of the land bank was politically and financially insecure. Though local government had founded the land bank, neither the City nor the County

94  John West had provided funding or properties. As a bidder in the auction, I was to acquire properties and then manage them according to our bylaws with the end goal of finding a productive use for them. By acquiring properties and transferring them to responsible developers, the land bank sought to persuade skeptical local officials of our mission and purpose. In law and in practice, Delaware County and the State of Indiana had embraced entrepreneurial and market-only strategies for addressing blight and abandonment. The unregulated county auction of a tax-foreclosed property is the epitome of these strategies. The Muncie Land Bank’s relationship with the county officials who ran the auction was weak in part because of their suspicion of the idea of public governance of abandoned property. Jason Hackworth argues that racially tinged perceptions of government corruption serve as “bonding capital” for conservative voters. Declining cities are the backdrop for the conservative argument that government is ineffective4 (2019, pp. 63–95). In the case of Muncie, this generalized predisposition towards an anti-urban sentiment came into focus by corruption in the local Democratic Party that resulted in the conviction of the former mayor. Party officials, including the Mayor, the Party Chair, the Building Commissioner and the director of the Sanitary District, are alleged by government prosecutors to have conspired in a kickback scheme involving the demolition and maintenance of properties (Walker, 2022). For the conservative elected officials who run the Delaware County tax forfeiture auction, the ideological predisposition towards deregulated approaches to public governance fits hand-in-glove with the very real and very damaging recent history of local corruption. Because of the legal positioning of land banks, and the tenuous relationship with the county government, I entered the auction on equal footing with every other private bidder. The highest bid wins even though I was the Chair of the board for the Muncie Land Bank, an institution with a publicly appointed board and a public mission. The winning bidder pays within 48 hours. In the county fairground building, after checking in, I pulled a folding chair from a pallet, and sat in a row of people who did the same. Each person had been given a paper list of properties that were for sale, which included a county property ID and the address, but no physical description or image. We sat facing a lectern, at which a professional auctioneer stood, wearing a cowboy hat and a shirt with the SRI logo on it, in bright yellow, the corporate color. I recognized several of the other investors. During my work with the land bank, I got to know most of the people and institutions dealing with abandoned property. There was a man who owned a local pub, and sought to corner the market on nearby properties, as local government has taken several steps to improve neighbourhood infrastructure and many believe that this will lead to gentrification. There was a representative from a local rental property owners’ association, seeking to purchase properties to rent to college students. What was most striking were the number of people whom I had never seen before. Delaware County is small (population 110,000), and the vast majority of properties for sale in the auction were in the City of Muncie (65,000) (US Census

The Political Economy of Abandoned Property 95 Bureau, 2020). Among the people who I did not recognize was a man, sitting in the back, who had requisitioned a table for himself, and set up two laptops and a fan. As the bidding started, more than 140 people were present, but there was a core contingent of approximately 20 people who bid on nearly every property, all of them unknown to me, and other locals in the room. In the ten-year period from 2011 to 2021, Delaware County auctioned liens on 5,848 unique properties, which makes a little over 10% of the approximately 50,000 total housing units in the county.5 Each property is offered for sale at auction an average of 2.8 times. As a result, there are just shy of 8,000 sales and a nearly equal number of non-sales (Shears, 2022). These figures on tax-­ delinquent sales reveal that a significant proportion of all Delaware County properties becomes embroiled in tax delinquency sales, and that when those properties are offered for sale, they are as likely to sell as to not sell. Geographically within the county, auctioned properties are concentrated in overwhelmingly in Muncie, with some additional clustering in older farming and industrial towns. Within the City of Muncie, the auctioned properties are concentrated to the south and east of the White River, extending from the downtown business and retail area into neighbourhoods that were both developed and dominated by industrial concerns that have since departed. The two neighbourhoods with the largest number of auctioned properties are the two neighbourhoods with the largest concentrations of African American residents (Whitely and Industry) (Shears, 2022). Overall, we should imagine that many properties sit untended through multiple cycles of sales, leading to a decay in the physical structure, overgrown weeds and deterioration of values for adjacent properties in working-class areas of already concentrated poverty. The auctioneer worked his way through the properties, starting bids at US$500, and working his way up. The average winning bid was approximately US$3,700, though some went as high as US$22,000. Each item auctioned was a deed for a piece of real property, some vacant, weed and rodent-infested lots with no structures, some cleared lots and other lots with structures (mostly houses) that were in various states of disrepair. More than 90% of properties were located in residential areas. All of the property had been deemed abandoned by the County as a result of failure to pay property taxes. The low winning bids on these abandoned properties is a reflection of the overall selling price of homes in Muncie, which was, on average, US$85,217, or 75% below the national average in the year 2021, the lowest in the US for a city of its size (Rhodes, 2021). The extremely low cost of housing is a result of population decline, down by 14.7% in Muncie and 13.5% in the county from peak population in 1980 and 1970 in the two jurisdictions, respectively (Decennial Census 1900–2020). Population decline, in turn, was fueled by a loss of major manufacturers in the automotive, steel-wire and glass industries. This problem is common for a significant proportion of cities in the US. Population loss affects a broad and understudied swath of people in urban areas. Cities and towns sized between 20,000 and 200,000 residents, with slow population growth, no population growth or declining population contain more

96  John West residents (46,000,000) than the top 40 cities in the US (45,000,000) (Connelly, Faulk and Wornell, 2022). Such cities are concentrated in the mid-west, and south-east, and dot the areas outside of major cities in the states of New York and Pennsylvania. Scholars have coined the terms shrinking cities, legacy cities and vulnerable communities to describe urban areas with population decline. When the June 2021 auction closed, I won the bid on a property. I received a deed from the auctioneer’s assistant, and a set of instructions to record the deed at the County Recorder’s office within 48 hours. I encountered a group of four of the most active bidders, who were talking among themselves, while recording the deed. As mentioned above, approximately 20 out of 140 auction participants bid on a large percentage of properties. While most bidders entered the auction with a list of one to five properties to purchase, the core group of bidders made offers on at least a dozen properties. These highly active bidders were also unknown to the local participants who I spoke with at the auction. Several knew each other, not well, but professionally. They had been to the same auctions together, across the country. They recounted auctions in what could have been a roll call of “vulnerable cities”, including Tulsa, Oklahoma; Rochester, New York; and Erie, Pennsylvania. They recounted successes at earlier auctions, discussed their winning bids in Muncie and then decided to celebrate at a local bar down the street. It was 11:30 on a Monday morning. Under four hours, I had witnessed the process through which land or property becomes dis-embedded from local social relations, and becomes an asset owned by non-local financial actors.

The buyers The buyers of abandoned properties undertake strategies for profit making and property re-use that may compound issues of disinvestment, or improve properties to stabilize neighborhoods for remaining community members. Buying an abandoned property poses challenges, including distressed physical structure, unkempt landscaping and the proximity of other low-value or abandoned properties. Purchasers have limited access to credit for improvements because conventional banks will not offer home repair mortgages, for fixing a roof, plumbing or updating electrics because of the low underlying value of land. Banks also typically refuse loans to purchase houses that costs less than US$50,000 (Rhodes 2021). The physical structure and availability of finance for improvements influence the strategic actions of buyers, which, in turn, can influence the neighborhood and city-level property values. However, as shown below, buyer strategies are well known, and effective policy for limiting harmful speculation exists. Approximately 4,000 unique individuals and corporate entities currently own the 5,848 properties sold at auction; approximately 32% of current owners own more than one auctioned property6. In total, 61% of all owners are located in Muncie, another 26% are located in other parts of the State of Indiana and 13% are out-of-state. The owners of formerly tax-delinquent property in the Delaware County include individual buyers (79%) and corporate entities (21%). Corporate

The Political Economy of Abandoned Property 97 ownership suggests that properties are not owner-occupied. It is a legal structure typically used for rental companies, or brokers looking to purchase property to profit from its resale. In the context of Muncie, the high percentage of corporate ownership is not surprising. As a college town, many property management companies own many houses and rent them to students. The overall rate of owner occupancy in Delaware County was 63.5% in 2019, below the statewide average of 69.1% (Shears, 2022; U.S. Census, 2019). Therefore owners of auctioned properties are concentrated in Muncie. Most are individuals, though a sizable percentage (more than one in five) are corporate llcs. A body of scholarship has documented both productive and speculative motivations for acquiring abandoned properties. Speculators have found a fertile ground for profit in the acquisition of mortgage- and tax-foreclosed properties (Dewar et al., 2015; Mallach, 2010; Seymour et al., 2020). A speculator seeks to generate profit from an abandoned property with little or no investment in the upgrading of that property with the hope of realizing profit. While financial definitions of speculators emphasize risk to the investor, in the political economy of shrinking cities, this definition emphasizes the risk to neighbors, communities and cities where speculators purchase abandoned property. When abandoned property speculators are successful, they treat land as a pure commodity, with no regard for the physical condition of buildings, lots or blocks, or the existing social relations in neighborhoods and communities. Mallach (2010) categorized abandoned property investors into four groups. In order to localize and add detail to each of these categories, the following section will draw on examples from Muncie that fit within each category. The first two categories represent strategic, and profit-driven action that is also likely to have a benign or even positive impact on the surrounding community: 1 Rehabbers buy properties in poor condition, rehabilitate them and sell them in good condition to home buyers or investors. In Muncie, a non-profit housing developer, EcoRehab, has drawn on expertise from the local architecture department to acquire and rehabilitate vacant properties in such a way as to meet standards of environmental stability, and then sell them to first-time homebuyers. 2 Holders buy properties and rent them out in fair to good condition, usually following responsible maintenance and tenant selection practices. Numerous campus housing rental firms fit this description, locally in Muncie. These firms maintain housing to building code standards and screen potential renters. While neighborhood residents sometimes lament the loss of owner-­ occupied housing in formerly stable communities, with the overall economic decline of the city, student rental housing is a preferable outcome for those areas within walking distance to campus. These first two groups may make money by purchasing abandoned properties, but their activities are not speculative. Rehabilitating houses and reselling them to owner occupants, or renting them poses little risk to communities and neighborhoods, especially in weak housing markets

98  John West where there is little potential for pricing out neighbors. On the other hand, Mallach and others have identified two types of speculative investors: 3 Flippers buy properties in poor condition and sell them other buyers in as-is or similar condition, often using unethical or illegal practices. Flippers also profit by acquiring property that is needed for a larger development project by gouging, or demanding high purchase prices from public or private developers in order to acquire the crucial parcel (Dewar et al., 2015, pp. 605–606). Locally, a recent transaction of tax-forfeited properties exemplifies flipping as a speculative practice. Delaware County sold 142  properties to EXH Capital Partners, a Limited Liability Corporation based in another state, more than 500 miles from Muncie, at an average cost of US$179 per property, with a two-year exemption on paying property taxes (Commissioners Meeting minutes, September 16, 2019). EXH Capital Partners then contracted a local real-estate agent to market the properties to adjacent property owners at twice the assessed value, for each property, which ranges from US$500 to US$5,000. Such bulk purchases of property can quickly become profitable, by selling a portion of properties to adjacent homeowners at the asking price. After acquiring these properties, EXH Capital performed minimal or no maintenance. In one neighborhood (Industry), this resulted in 22 lots with overgrown weeds. Through a local community development corporation, neighbors sought to learn who owned the properties, to contact the owner and request maintenance. Because EXH capital is a limited liability corporation, registered in another state, the identity of the person responsible for property upkeep was difficult to find. Eventually, the community development corporation applied for and received a grant to pay residents to mow lawns on abandoned properties, including those owned by EXH Capital. 4 Milkers buy properties in poor condition for very low prices and rent them out in as-is or similar condition, with minimal maintenance. Other scholars have documented that Milkers acquire and rent out formerly abandoned properties in conditions that do not meet basic conditions of habitability (e.g., no heat, no door locks, broken windows). Milkers generate profit by offering substandard housing to the most vulnerable residents of disinvested neighborhoods (Desmond, 2016; Seymour et al., 2020). Milkers are prevalent in the Old West End neighborhood of Muncie. The neighborhood has homeowners interested in housing preservation living next to rentals owned by Milkers who provide no maintenance, and run short-term leases, resulting in a high turn-over residents. The founder of a small community development corporation in the neighborhood described living next to a rental property owned by a milking landlord. She described renters leaving trash and furniture on the lawn and in the neighborhood when evicted from their home, and an incident of arson, in which a renter was trying to warm the home after utilities had been shutoff. She described her efforts, with her neighbors living in under-maintained structures, to find and hold accountable property owners (Muncie Land Bank 2019).

The Political Economy of Abandoned Property 99 The four types of distressed property buyers that Mallach identified should not be understood as mutually exclusive or stable. A holder in the student housing market may also be a milker in a neighborhood with greater abandonment, and they may change strategies on the same unit as a neighborhood, or the physical structure of the unit degrades. Owners of distressed property have individual strategies and these strategies will change within the context of policy and investment. Financial actors profit from the anti-urban policies of state and local government. With abandoned property, government, politics and policy take the center stage because the state law defines the mechanisms for repurposing and marketing abandoned property. Governmental actors choose a deregulated approach for political and ideological reasons. The core element that both permits and produces abandoned property commodification is the political alignment between sub-urban and rural voters and the disproportionate number of elected officials who represent them. Where speculators are tolerated, they thrive. Speculation is curtailed by effective city, county and state policies, including public ownership of tax forfeited property and disposition through a land bank (Heins and Abdelazin, 2014). While non-local speculators profit from the acquisition of abandoned properties, it is governmental entities that craft the regulatory processes and auction where such transactions are possible. The commodification of abandoned property results from how governmental actors shape the processes through which tax-delinquent properties are re-used. Numerous other jurisdictions in the US have adopted different policies, showing that this dis-embedding of abandoned property is not a necessary consequence of abandonment. Abandoned property can be held by local government and redeveloped as neighborhood amenities; improved housing, parks, gardens and side yards. In order to understand the political economy of abandoned property, we first turn to the state and local laws that govern property tax delinquency and foreclosure. Then, we will examine how local and state government jurisdictions disempower places like Muncie within the legal and political arenas.

Political geography The policies that set the process for reusing tax-delinquent abandoned properties are created by governmental units that under-represent the urban areas where most abandonment occurs. The following section examines political geography of the State of Indiana and Delaware County. In the US, counties administer tax-delinquent properties. Counties are units of government that typically encompass cities, suburbs and rural areas. County functions are governed by state laws. Notably, city governments (municipalities) play no legal role in governing the tax forfeiture. The analysis of state political representation and legal code as well as practices shows that the political jurisdictions that govern property tax foreclosure in Indiana limit the ability of municipal governmental actors to manage the disposition of the foreclosed property.

100  John West

State Indiana state government under-represents cities in formal governmental structures, where abandonment is most prevalent. Demographically, the majority of residents (51%) in the State of Indiana live outside municipalities with more than 20,000 people. The percentage of non-urban residents rises to 56% when including newer urbanized areas that function as suburbs surrounding major cities (Carmel, Fishers, Wesfield and Greenwood) (Census, 2020). These newer urban places are also less likely to have a large amount of property tax forfeiture. By population alone, the majority of Indiana residents and voters do not live in cities, especially older ones with high levels of property tax foreclosure. For the majority of state residents, urban property abandonment is not a problem in the jurisdiction where they live. More specifically, the politically ascendant and financially secure voters, living in new suburban districts, do not encounter blight in their communities. In turn, elected representatives are less likely to give attention to urban issues and the problem of abandoned property. Aside from sheer demographics, party politics and political ideology also skew anti-urban. Indiana state legislative bodies over-represent conservative voices by creating state district maps that “pack” city voters into fewer senate and assembly districts, or “crack” voters from the same city into districts that include large suburban and rural areas (Lange, 2021). Though there is typically a less than 10% point difference between the two major parties in presidential elections in Indiana, in 2022, conservative (Republican) supermajorities controlled 78% of the seats in the Indiana State Senate (39 Republicans, 11 Democrats) and 71% of seats in the General Assembly (71 Republicans, 29 Democrats) (Ballotpedia, 2022). All three branches of state government have been controlled by elected officials from the Republican Party since 2011 (Ballotopedia, 2022). Jason Hackworth (2019) has documented that conservative control of state government in the industrial mid-west has resulted in anti-urban policies that limit cities, ability to address the causes and consequences of property abandonment. Property rights attitudes, laws and practices support the idea that property owners – homeowners, landlords and industrial concerns – have absolute authority on their land. Property rights rhetoric was a key component of conservative messaging in 2009, when conservatives won land slide elections in state government, and it continues to be an animating force in contemporary state-level conservative political coalition building. In Indiana, this has taken the form of a property tax cap (which resulted in a 45% loss of revenue for the City of Muncie) and a law that prevents cities from regulating landlord retaliation against renters (Faulk et al., 2019; Lange and Pak-Harvey, 2021). A facet of the anti-urban ideology of conservative politics directly ties to governmental action to seize property in case of the failure to pay taxes and government management of the disposition of those seized homes. Returning to the issue of tax forfeiture, the tendency towards anti-urban policy in Indiana has not resulted in major changes to policies that governs the abandoned properties. However, the State of Indiana has rejected efforts

The Political Economy of Abandoned Property 101 to amend legislation to address tax forfeiture, while neighbouring states of Michigan and Ohio have significantly revised law in this area. Indiana’s lack of action is notable, as tax forfeitures have dramatically increased in all three states since the 2008 recession (Alexander, 2015). Indiana state law provides the county government with significant discretion concerning tax-delinquent properties. After detailing the state law, we will examine how the county government exercises the discretion afforded, and what geographic and political considerations influence how discretion is used. The State of Indiana’s tax forfeiture law mandates a process by which county governments track properties with delinquent taxes and notify property owners. If back taxes lapse for approximately 18 months (three consecutive payments), counties may auction a lien on the delinquent property taxes. Property tax lien sales are auctioned for sale to the general public, with few criteria for vetting potential buyers. The initial sale of a tax lien occurs in the fall of each year and is required to be for the total amount of back taxes. If, as is often the case, tax liens are not sold in the initial auction, counties may take the following actions: auction the lien at a reduced price (no less than US$50) at a second auction, and assign the tax lien to an eligible entity, which includes non-profits, the County government or other local units of government prior to the subsequent sale (Indiana Code Section 6-1.1-24 & 25, 2021). The liens may be redeemed (purchased by the original property owner) for a six month period after the auction, or date of assignment. In order to acquire the property, the holder of the tax lien must issue a public notice, notifying all entities with a fiduciary interest in the property, and petition in the court for a deed, which confers the ownership of the real property to the new purchaser. The new owner of the property is responsible for paying off any outstanding liens on the property. Properties with outstanding liens cannot receive title insurance, which makes getting a mortgage on the property impossible (Indiana Code Section 6-1.1-24 & 25, 2021). Because tax liens often do not sell at auction, the County Commissioners may assign the tax lien to the county government and undertake the process of turning the lien into a marketable deed. In Delaware County, for example, in lieu of a sale of discounted tax liens, the County holds a deed sale in the spring. The tax lien sale process in Indiana is problematic for municipalities facing large numbers of property tax foreclosures because of the extended amount of time, approximately 30 months, that passes between a home owner (or other property owner) abandoning the house and a new owner taking possession of the property. Tax-delinquent, abandoned homes often do not have electricity, plumbing or any form of maintenance during this period, which leads to decay of the physical structure, squatting and lawns overgrown with weeds and brambles. From the time that the property is abandoned, until a new buyer acquires the deed, neither agents of local government nor potential buyers may enter the property or maintain it. Moreover, as an open auction, with few qualifications for bidders, tax lien sales invite speculators who seek to earn interest and fees on tax liens when they are redeemed (minimum of 10%) or acquire the property at

102  John West a low cost if they are not. By comparison, since 2009, both Michigan and Ohio have adopted procedures that enable counties to quickly and directly acquire tax-delinquent property that has been abandoned, maintain it and transfer a deed with all liens cleared (Alexander, 2015).

County While the State Government enacts tax forfeiture law, counties are the jurisdictional instrumentalities that enact it. The State of Indiana tax lien law gives significant discretion to counties, especially the right to transfer liens after the first auction. Therefore, in order to understand the political economy of tax forfeiture, it is necessary to understand the structure and political geography of the county government. Counties are the governmental instrumentality that collects property tax. Their geographical extent often includes cities, suburbs and rural areas (where smaller towns are also present). In Indiana, counties are governed through an executive branch, three commissioners and a legislative branch, the seven-­ member County Council. Additionally, Indiana counties have a variety of elected administrative offices, including a Clerk, which administers elections, a Treasurer, which collects taxes, and an Auditor, which serves an accounting function. As with the state as a whole, county governments tend to over-represent non-urban and conservative voters. In Delaware County, the focus of this study, voters have chosen the more conservative Republican Party consistently over the past three presidential elections, but the margin of victory is typically around 5%. In 2020, during a high turn-out presidential election, 55% of voters selected the Republican candidate for president and 42% chose the Democratic candidate, demonstrating that there is a significant, but not overwhelming, majority of voters who choose the more conservative party (Delaware County Clerk, 2022). Yet Republicans hold all three of the County Commissioner’s seats and six of the seven County Council seats (Delaware County Clerk, 2022). Once again, the drawing of district boundaries is an important reason why conservatives control a greater proportion of local offices than the overall breakdown of voters. All three Commissioners are elected by the entire county, as are three at-large members of the County Council. The district boundaries of the remaining four County Council seats are a classic example of “cracking”, with each district drawn to include a portion of Muncie. County-wide and “cracked” boundaries dilute the votes of urban residents. As a result, the City of Muncie contains 58% of Delaware County population; yet, in 2022, two of the three commissioners lived outside the Muncie city limits as do five of the seven County Councilors. Additionally, individuals who live outside of Muncie hold the Clerk, Treasurer and Auditor positions. These elected officials have pursued polices that are at odds with the city residents, including the relocation of the administrative county jail and some administrative offices from the downtown area to a peripheral location in the city. Muncie local officials and

The Political Economy of Abandoned Property 103 residents feared that this move would undermine concerted efforts to support local downtown businesses.7 Concerning the tax forfeiture process, the Indiana state code gives County Commissioners an important discretion. As described above, County Commissioners may choose to assign tax lien certificates to public or non-profit entities, if they fail to sell at auction. With the ability to assign tax lien certificates, rather than auctioning them, counties have a mechanism to remove the opportunity for speculators to purchase these abandoned properties. This discretion can have an important impact on whether abandoned properties end up in the investment portfolio of speculators, or in the hands of homeowners and high-quality landlords. For example, Vanderburgh County, in the southeast of Indiana, has assigned over 600 tax lien certificates to a local land bank in their major City of Evansville, which has resulted in the development of over 100 units of low-income housing (Evansville Land Bank Corporation, 2019). However, throughout Indiana, commissioners tend not to use this discretion, instead offering liens at multiple auctions, or turning the liens into cleared deeds and auctioning those. Vanderburgh County is only one of two jurisdictions that have significantly limited tax lien auctions (the other is the capital City of Indianapolis). In Muncie, local non-profit, low-income housing developers typically receive fewer than 5% of liens through this process and their production of habitable, sustainable units has been much smaller. While the County Commissioners, Treasurer and Assessor may exercise administrative discretion with tax-delinquent properties to interrupt the cycle of speculation, the political geography of counties negates this possibility almost uniformly. The political economy of an abandoned property is structured by reinforcing demographic, jurisdictional and ideological forces that promote property rights, and the status quo, which leaves land in communities with heavy disinvestment vulnerable to speculative predation. The overweening tendency towards conservativism generally and in property rights specifically becomes embodied in the figure of the County Commission. The consequence is the auctioning of tax liens to the highest bidder. The bidders must only meet the low threshold of attending the auction and paying within 48 hours. In comparison with managerial strategies for addressing abandonment, this opens municipalities and disinvested neighbourhoods to speculators who seek not to improve and invest in property, but rather to profit quickly by renting substandard housing, gouging or selling to institutional investors.

Change Politics and policy at the state and county jurisdictions presents little resistance to and even encourages the many speculative buyers of abandoned property. Recognizing this problem, I have worked with state-wide and local coalitions to amend law and policy. Advocates of land banking, seeking to systematically apply a managerial approach to the problem of abandonment, have proposed amendments and bills in 2018, 2021 and 2022 to improve the 2016 law.

104  John West In early 2021, a local assemblywoman worked with the Muncie Land Bank to write a bill that would require the local government to fund land banks through fees and to donate tax-foreclosed property to land banks. A group of advocates including a lobbyist for the real-estate industry, a community development lobbying group, an academic who had help to write a reference book on tax forfeiture, two representatives of land banks in other parts of the state, and I testified five times in support of legislation. The bill, having been introduced by the minority political party (Democrats), passed unanimously out of four committees, a surprising success that we attributed, at least in part, to our partner from the real-estate lobby. We encountered our first serious resistance in the Ways and Means committee, which is required to hold a hearing for each bill involving new taxes and fees. Two Republican assembly people from Delaware County expressed misgivings about the amendments, but would not specify their concerns. In the hearing, they asked pointed questions about the potential for corruption. Instead of calling for a vote, the chair of the Ways and Means committee tabled the bill, meaning it could be considered again in the session. In our discussion after the hearing, the real-estate lobbyist explained to me that tabling the bill was a way of removing it for consideration without forcing a vote; the bill would not proceed. Either the chair of the Ways and Means committee did not believe the vote would go as he wished, or he did not want members of his party to go on record with a yes or no vote, for political reasons. She speculated that because one of the Delaware County assembly persons was newly elected to a seat that had been held by a Democrat, the chair of the committee killed the bill out of deference to her precarious electoral position. She represents a majority suburban and rural district that includes parts of Delaware County8. Though our amended legislation did not pass, the group of statewide land banking advocates had deepened our connection with one another, and we began strategizing for 2022. Shortly after the defeat, one of our legislative partners, a state-wide NGO that focuses on community development, identified a grant program that provided technical assistance from a national planning organization focusing on the issue of abandoned property. Collaboratively with land banking advocates who had worked on the failed legislation across the state, we wrote a successful application. Starting in the summer of 2021, we began strategy sessions to plan for a legislative effort in 2022. We arrived at an exceedingly incremental strategy, asking only for an amendment that would require counties to consult local land banks when disposing of property. We successfully found Republican sponsors for our bill, due largely to the demonstrated impact of a land bank in a rural, conservative area of the success. As of this writing, the legislation has been amended twice, and passed through three committees. At the county level, change is similarly tenuous and slow. The state law, as mentioned above, gives land banks the power to enter into contracts with other units of local government. From the inception of the Muncie Land Bank in 2017, we have sought to secure property donations from county government. In 2020, the county was so averse to working with our organization that when we approached

The Political Economy of Abandoned Property 105 them for a property donation for a client of the land bank, they refused and insisted that the city redevelopment corporation serve as the intermediary instead. Over the course of 2020 and 2021, we acquired over 60 properties as donations from other sources and demonstrated our ability to efficiently manage them. We created and ran an auction process, that runs monthly year-round. Unlike the county auction, ours included an administrative process to review the background and proposals of bidders. Our task was to find the bidder who was most likely to re-use the property to benefit the surrounding neighbourhood, which was not always the high bidder. In the first year of our auction, the land bank sold 32 of 39 properties, most to adjacent homeowners looking to expand their lawn, and to non-profit neighborhood organizations for the development of housing and community gardens. The land bank purchased the property, and kept our promise of turning it over to a vetted and reputable buyer. Simultaneously, when the county hired a planning firm to create a plan for the region, the Muncie Land Bank hired the same group to write our own strategic plan. Our goal was for outside experts, who the county had selected, to write the land bank into the agenda of the county government. In January of 2022, the land bank approached the county again for property donations. We clearly presented our successes in the language of adding to tax revenues, eliminating the need for county administration, and emphasized the analysis of the strategic plan. We received a tentative agreement for a donation of 15–20 properties. To return to the beginning of this chapter, I entered the county auction in June of 2021, scarcely three months after our legislative failure with the goal of demonstrating the benefit of land banking to the elected officials who had thwarted our legislation. Less than one year later, advocates for effective management of abandoned property and I had deepened our connections with one another, demonstrated small successes and found ways of communicating those successes within frameworks that carried weight with state- and county-elected officials. We may never attain an ideal abandoned property policy in Muncie, or Indiana, but we will continue to push against the prevailing ideology of deregulation and commodification by continuing to persist, build coalitions, manage property efficiently and frame our work in a language palatable to elected officials with differing ideological positions.

Notes

1 As described below, the tax deed sale is one of the two auctions of tax-delinquent property in Delaware County. For the deed sale, the county is auctioning the right to purchase a legal claim on the for title real property. The second auction is the tax lien sale, which sells claims on the tax liability of delinquent property owners. After purchasing a lien, the new buyer may lose their claim on the property if the original owner pays the back taxes and penalties. 2 Vetting denotes the process of conducting a review of the bidder’s prior development activities, capacity for completing a project and the feasibility of the proposed project. For example, the Muncie Land Bank will visit other developments completed by a bidder to check the quality of their work and property management, require proof of financial capacity or demonstrated ability for completing

106  John West improvements and also review the feasibility of the plan or proposal for the lot or structure the bidder is seeking to buy. 3 Habitat for Humanity is an international non-governmental organization that offers self-help housing to clients, which is defined as the housing that the clients assist in building. Habitat for Humanity is active in cities across the US through locally organized and operated affiliates. 4 Hackworth (2019) argues that mid-western voters in and around cities with high African-American populations include people with active racial bias and more generalized racial antipathy. Using the coded language of disorder, dysfunction and crime, conservative politicians effectively appeal to both sets of voters. Hackworth uses general demographic and voting data to support this claim (2019, pp. 63–95) and also a case study of Detroit, Michigan, in conservative think tank publications (2019, pp. 96–133) to support this claim. He goes on to argue that the goal and result of this political strategy is to minimize the taxation and regulation both within declining cities and generally at the state and national scales. 5 The comparison between properties auctioned and total units requires some explanation. Auctioned properties may not be housing units, and each property may contain multiple units. The comparison with total housing units is to give a sense of the scale of auctions relative to the total amount of property in Delaware County. 6 The data reviewed for this case do not include the name of the winning bidder at auctions, but rather the current owner of the auctioned property. 7 Republican domination in 2022 is also the result of the failures and graft within the Democratic party mentioned above. Municipal and county elections were occurring at the same time that the Federal Bureau of Investigations was raiding the administrative offices of the Democratic Party and as indictments began to be announced by the District Attorney. Prior to this scandal and especially when State property tax caps were imposed, Democrats were more competitive both in the City of Muncie and in the County. 2012 was the last year that Democrats held a majority of the commissioner positions. 8 Ironically, in the build-up to the introduction of the land banking bill, I had sent the newly elected state assembly woman three e-mails inviting her to help us draft the legislation, to express concerns, or just to weigh in on how she was planning on voting. She responded in the same way that all commissioners did to a similar e-mail, with silence.

References Alexander F (2015). Land Banks and Land Banking (Second Edition). Flint, MI: Center for Community Progress. Ballotopedia.com (2022) United States Congressional Delegations. https://ballotpedia. org/United_States_congressional_delegations_from_Indiana Connelly, J, D Faulk, E Wornell (2022) Vulnerable Communities Ithaca, NY: Cornell University Press Delaware County Commissioners (2019) Commissioner Meeting Minutes, Delaware County, IN. Delaware County Clerk (2022) Delaware County, Indiana Election Results History. http:// www.dcelectionday.com/ Desmond M (2016) Evicted: Poverty and Profit in the American City. New York, NY: Crown Publishers. Dewar M (2013) What helps or hinders nonprofit developers in reusing vacant, abandoned, and contaminated property? In Dewar M and Thomas J M (eds.) The City After Abandonment. Philadelphia, PA: University of Pennsylvania Press, pp. 174–196.

The Political Economy of Abandoned Property 107 Dewar M, E Seymour, and O Druță (2015) Disinvesting in the city: The role of tax foreclosure in Detroit. Urban Affairs Review 51(5):587–615. Evansville Land Bank Corporation 2019 Progress Report. (2019). https://www.evansvillegov. org/egov/documents/1554136461_44751.pdf Faulk D C Taylor, and P Schaal (2019) Local Government Responses to Property Tax Rate Caps: An Analysis of Indiana Municipal Governments. Muncie, IN: Center for Business and Economic Research, Ball State University. https://projects.cberdata.org Hackworth J (2019) Manufacturing Decline. New York, NY: Columbia University Press. Heins P and T Abdelazim (2014) Take It to the Bank: How Land Banks are Strengthening America’s Neighborhoods. Flint, MI: Center for Community Progress. Lange K (2021). What Hoosiers should know about packing, cracking and gerrymandering. IndyStar, August 26. https://www.indystar.com/story/news/politics/2021/08/26/ indiana-gerrymandering-what-you-should-know-packing-cracking/5598561001/ Lange K and A Pak-Harvey (2021). Indiana Senate overrides veto on Indianapolis landlordtenant bill. The Indianapolis Star, February 8. https://www.indystar.com/story/ news/politics/2021/02/08/indiana-senate-veto-could-come-indianapolis-landlordtenant-initiative/4433004001/ Mallach A (2010) Meeting the challenge of distressed property investors in America’s neighborhoods. Local Initiative Support Corporation. https://www.lisc.org/our-resources/ resource/meeting-challenge-distressed-property-investors-americas-neighborhoods/ Muncie Land Bank (2019) 100 Dreams 100 Stories. Muncie, IN: Muncie Land Bank. Rhodes M (2021). Study Ranks Muncie’s Housing Market #1 Most Affordable in the USA. Muncie Journal, March 13. http://www.munciejournal.com/2021/03/ study-ranks-muncies-housing-market-1-most-affordable-in-the-usa/ Indiana Code section 6-1. § 24 & 25Sale of Real Property When Taxes or Special Assessments Become Delinquent, (2016). https://statecodesfiles.justia.com/indiana/ 2015/title-6/article-1.1/chapter-24/chapter-124.pdf Seymour E, A Endsley, and R Franklin (2020) Differential drivers of rent burden in growing and shrinking cities. Applied Geography 125:1–11. Shears A (2022) Analysis of Delaware County Tax Lien Sales—2011—2021. Muncie, IN: Muncie Map Company. United States Census Bureau (2019) American Community Survey. United States Census Bureau. (2020). Decennial Census. https://data.census.gov/ cedsci/table?q=United%20States&table=DP05&tid=ACSDP1Y2017.DP05&g =0100000US&lastDisplayedRow=29&vintage=2017&layer=state&cid=DP05_0001E United States Census Bureau. (2021). American Community Survey. Walker D (2022). Sentencing memo recounts bribery saga, Neal’s business dealings. The Star Press, January 24. https://www.thestarpress.com/story/news/crime/2022/01/ 24/memo-recounts-retired-officers-involvement-muncie-bribery-scheme/6604861001/ ?fbclid=IwAR3WfTCBjVH4G5ZjfSRVORaOqx36sYrh6043fhp_W6c1PXSeL9 Ddp86bN2I West J (2021) Land banking regulation as rhetorical infrastructure: Planning as translation in the Muncie Land Bank. In Rydin Y, Beauregard R, Cremaschi M, and Lieto L (eds.) Regulation and Planning. New York: Routledge, pp. 197–209.

6

THE POLITICAL ECONOMY OF ITALIAN PUBLIC REAL ESTATE PRIVATIZATION AUSTERITY, FINANCIALIZATION AND THE “ENRICHMENT ECONOMY” Félix Adisson

Scholars studying the political economy of land have been increasingly concerned by the policies and politics of public real estate privatization for about a decade. This privatization results in property rights being created and distributed, socio-spatial settings and the built environment restructured notably through large-scale development projects, and public wealth redistribution (Artioli, 2021; Haila, 2008). While this concerns various regions, for instance, countries undergoing post-socialist transitions (Adisson and Artioli, 2021), it assumes a particular depth and peculiar characteristics in Europe where public land has been key in the building and provision of local welfare (Häussermann and Haila, 2004). Recent research links changes in this welfare model to public real estate privatization (Christophers, 2018; Hyötyläinen and Haila, 2018). Several concepts have been coined to characterize the way that public real estate privatization is becoming a focus of policies in Europe. The “politics of public land” (Artioli, 2016, np, my translation), “politics of public land privatization” (Christophers, 2018, p. 240) and “entrepreneurial public real estate policy” (Hyötyläinen and Haila, 2018, p. 138) refer to public land sales and leases geared towards rent-maximizing strategies, and the power relations, conflicts and negotiations that shape these policies. These policies have predominantly been explained by neoliberalism, whose application to public real estate allows policy-makers to claim that the misuse or underuse of public organizations’ properties generate a surplus to be divested to the real estate market (Christophers, 2018; see Olsson, 2018 on neoliberalism, as well as Artioli, 2016 and Adisson, 2018 about the related new public management reforms of public real estate). In order to go beyond a focus on neoliberalism, this chapter highlights the political economy of public land privatization by considering austerity policies and financialized capitalism. The relationship between the privatization and its political economy is conceptualized as financialized public real estate policies; i.e., the strategies and programs by which state organizations manage their real estate properties as capitalized future revenues, treating them as financial assets, and the negotiations and DOI: 10.4324/9781003280255-9

The Political Economy of Italian Public Real Estate Privatization 109 conflicts surrounding these activities (adapted from Adisson and Halbert, 2022, p.4). The argument unfolds in two steps. First, building on Pierson (2002) and Streeck (2014), I argue that, in the European political-economic framework of permanent austerity and financialized capitalism, attempts by public organizations to obtain capital by selling their properties are meant to provide a substitute for public debt repayment as well as financing public policies addressing issues such as welfare provision or regional development. Second, I show that these attempts imply that policy-makers perform sorting, symbolic and material operations on public real estate and conceive new capital accumulation strategies. This will be exemplified by uncovering one of these strategies through the theory of the “enrichment economy”. Boltanski and Esquerre (2020) forged this theory to make sense of contemporary changes of capitalism, especially in de-industrializing Europe where the rise of the industries for luxury goods, heritage, arts, culture and tourism has selectively transformed the landscapes of city centres and the countryside. The enrichment economy operates through narratives that, by linking objects and territories to past events or people, enable their production and transformation. This analysis supplements the focus on neoliberalism mentioned above, since it appears that the privatization of public real estate not only consists of the dismantling of state functions that leads to a surplus to sell, but also commands operations related to the contemporary evolution of capitalism that involve institutional investors to transform land and building properties into capital.1 This argument is demonstrated through the study of two policies that targeted public real estate in the last decade in Italy: Dimore (Country Value – Dwelling) and Silver Fund. According to Streeck’s definition (2014, pp. 156– 158), Italy is arguably an emblematic consolidation state that has been pursuing several strategies of revenue-bearing and deficit reduction for more than two decades in order to meet Euro convergence criteria and appear solvent to credit ratings agencies. It has developed several innovations in the field of public finance both in debt (see Lagna, 2015 on the use of interest rate swaps by local governments) and in the privatization schemes on which this chapter focuses. This has not prevented dramatic cuts to the budgets of public administrations correlated to a comparable collapse in public investment.2 Hence, the search to deliver policies in spite of the lack of public financing. The study of these two policies relies both on first-hand material (mainly 21 interviews with 27 key public and private actors of these policies) and a review of secondary sources (parliamentary or real estate market trends reports, meeting documentation and press releases). The collection and analysis of this material aimed to understand the principles and mechanisms of these policies as well as their development, outcomes and failures. The next section emphasizes key political-economic dimensions of public land privatization, namely permanent austerity and financialized capitalism. It also points out the overlooked challenge for public organizations to develop capital accumulation strategies when they want to divest their real estate. Sections two

110  Félix Adisson and three analyze the Valore Paese Dimore and Silver Fund programs. They are designed to identify and support new capital accumulation strategies based on the cultural heritage value of buildings that can be interpreted in terms of the enrichment economy theory. The conclusion comes back to the distributional outcomes of the financialization of public real estate policies.

The political economy of public real estate privatization Research into the privatization of public land and real estate in Europe converges around two explanations. First are budget constraints, especially during recessions leading to austerity measures at both national and local levels. Second is the neoliberal shift in policy-making which extends market logic thanks to the active role played by governments at both central and local levels. Austerity is recognized as a key driver of public real estate privatization and, reciprocally, the disposal of public properties is considered an element of consolidation policies (Peck, 2012; Piganiol, 2017). For instance, Haila (2008, p. 807) pointed out that the severe recession in Finland in the 1990s “prompted the reorganization of the ownership and management of the state’s real-estate assets”. However, there is no direct causal relation between an economic recession or even tight public budgets and implementation of an entrepreneurial real estate policy. Privatization is a policy choice in response to this situation. Indeed, Haila specified that this recession represented an opportunity for the Finnish government to introduce this new policy. In Greece, Souliotis (2021, p. 11) highlights the key role of the technopols which combined technocratic expertise with partisan resources and “played an intermediary role between the international economic orthodoxy and the domestic field of economic governance” in implementing public properties privatization as a counterpart of the European bailout program following the 2010 sovereign debt crisis. Christophers (2018) also mentions that austerity creates surplus land to be sold, especially since the 2008 financial crisis. This occurs in two ways. First, faced with increasing public debt, governments argue that revenues from public land disposals can be used for debt repayments. Second, the super-austerity imposed by the central state on local governments in the UK led them to cut services and jobs and thus produce a surplus of disused public real estate to be sold. While the linkage between fiscal stress, consolidation policies and public real estate disposal is well established, it is worth questioning whether or not this political economy of austerity can be subsumed under neo-liberalization. Christophers (2018) argues that the mechanisms through which austerity discourses create surplus land are part of the machinery of the British neoliberal narrative. Neoliberalism is thus the explanation in the last instance to the point that privatization of public ownership is considered “what genuinely sets this era apart” (Christophers, 2018, p. 18). In the same vein, Peck (2012) considers that an austerity urbanism that fosters the sale of municipal assets is a moment of consolidation and intensification of neoliberal urban governance following the post-2008 financial crisis. As a consequence, both Peck and Christophers tend to

The Political Economy of Italian Public Real Estate Privatization 111 consider austerity as an adjustment that deepens neoliberal policies, rather than as a political-economic framework in which neoliberal policies operate. However, Pierson (2002) found that West and South European countries had entered a phase of permanent austerity well before the 2008 financial crisis and pointed out the demographic and economic factors that have been conducive to this lasting condition: economic globalization, falling economic growth, “maturation of governmental commitments” (Pierson, 2002, p. 370), especially related to welfare spending), and population aging. In addition, Streeck (2014) emphasized the increasing resort to the bond market since the 1970s by European governments in order to finance rising welfare spending. This process has led to various adjustments, among which is the privatization of public assets and companies. Streeck’s perspective not only contributes to reinserting neoliberal policies that target public real estate into the political economy of the consolidation state, but also provides an understanding of the link between austerity and financialized capitalism. Indeed, the tightening grip of financial institutions over European states associated with the latter’s increasing reliance on capital markets, which the sovereign debt crisis amplified, leads to consolidation policies that target public company and property privatizations. Despite Streeck’s contribution, and while financialization has been one of the main topics in urban political economy in the past decade, scholars studying public real estate privatization in European countries have not reached a consensus about its role as a driver and/or consequence of public real estate privatization. The existing scholarship ranges from simply overlooking this factor to denying its role. This may be due to the polysemy of the concept and the uneven financialization of real estate from one country or city to another. For instance, although Haila (1988) was a pioneering scholar on this topic, her article with Hyötyläinen (Hyötyläinen and Haila, 2018) does not mention financialization among explanatory factors of the entrepreneurial public real estate policy in Finland. Christophers (2017, pp. 78–81) does discuss the role of financialization, but concludes that it is a consequence rather than a cause or a means of public land privatization. In the long-standing and highly financialized British real estate market (Coackley, 1994), institutional investors raising capital in financial markets may happen to be among the end-buyers and thus contribute eventually to financial landownership. But, according to Christophers, public administrations are not treating their land as a financial asset; rather, they decide to stop using some properties and categorize them as surplus (i.e., they consider its use value). Starting from the surplus land conceptualization, Whiteside (2019) reaches a more nuanced conclusion regarding the state-owned enterprise entrusted with privatizing Canadian public land. On the one hand, it “may treat public land as a financial asset”, while, on the other, it “remained fairly insulated from the impact of ‘financialization’, if defined by a company’s exposure to financial markets or use of financial instruments” (p. 515). It is, however, empirically and theoretically difficult to insulate the ways in which public land is privatized from the European political economy of real

112  Félix Adisson estate development that has undergone a process of financialization in multiple segments and areas for thirty years now, whether we are defining it as the growth of the properties owned by the financial sector or the increasing use of financial instruments and calculative devices in policy-making. In fact, research shows that public landowners have adopted the tools and practices of a real estate industry that is now deeply infused with the capital and calculative practices of financial markets. With these instruments, public landowners manage their properties and deliver tradable assets to their end-buyers under fiscal stress. For example, budget cuts and managerialism at the University of Amsterdam led it to turn to real estate professionals and financialized metrics and values (Engelen et al., 2014). Real estate was the “Trojan horse” through which financialization unfolded. A longitudinal analysis of public real estate investment funds in Italy over twenty years comes to a similar conclusion (Adisson and Halbert, 2022; see also Belotti, 2021 for the case of social housing). In 2001, the Italian state imported the investment vehicles from the financialized real estate sector into its legislation and then entrusted asset management companies with en-bloc sales of public properties to institutional investors. During the next decade, the largest public investment bank and the Ministry of Economy and Finance created their respective asset management companies. By doing so, public organizations internalized the rationale, tools and practices of the financialized real estate sector. This transformed publicly owned properties into assets whose use, value and location are assessed through the lens of an investor. In other words, the ways in which the Italian state privatized its real estate has not only contributed to increasing the wealth appropriated by institutional investors, but also led to the financialization of the public real estate policy (Chiapello, 2017). Therefore, consolidation policies and financialization are not independent processes, but related to one another. On the one hand, financialization through the provision of capital by the bond market is a cause of the permanent austerity that leads to the privatization of public real estate. On the other hand, this disposal may fuel the financialization of real estate properties to the extent that some are purchased by investors linked with financial markets. In spite of this fertile ground, the divestment of public properties should not be taken for granted. Indeed, putting public land and buildings for sale implies physical transformations (including construction and refurbishing works) as well as organizational and regulatory changes which may then lead to oppositions and contestations within state organizations or on the part of civil society (see Piganiol, 2022 about the “contested commodification” of public real estate within the French public administration and Adisson, 2018 for railway land urban redevelopment projects). In addition, market structures and conditions vary from one country to another. The 2008 crisis and its unfolding that pushed European states to accelerate public property privatization also induced sluggish real estate markets for over a decade in Southern Europe. In the meantime, as already mentioned, these markets have become increasingly financialized, thereby making dominant investors’ categorizations and calculative practices of

The Political Economy of Italian Public Real Estate Privatization 113 properties. These investors and their intermediaries allocate capital in highly spatially selective ways (Halbert et al., 2014). Attracting them thus requires legal, discursive and physical operations to create land rent opportunities. As a consequence, the ways in which public landowners and policy-makers deliver their properties to real estate markets and the capital accumulation strategies they develop need to be analyzed. Finally, it is worth noting that divestment is rarely an end in itself. Public real estate policies pursue a variety of purposes ranging from cash generation to complex reorganizations of a public administration on the national territory (see Artioli, 2016 on the Army in France). This is particularly the case under permanent austerity when disposals of public real estate can be a means to finance other policies. Yet, attempts to reach these purposes through land rent extraction and the adoption of an investor viewpoint are not neutral, as they will, in turn, frame these goals and policies, including the definition of their content and beneficiaries. In that light, the remainder of this chapter explores two cases of financialized public real estate policies designed by the Italian consolidation state. These policies can be understood as attempts to find room for maneuver by and for cash-poor, but asset-rich, administrations using their land and building properties to raise money and finance other policies. However, these attempts faced a sluggish post-2008 real estate market with housing prices, numbers of transactions and new constructions that have not returned to pre-crisis levels (PwC, 2020). I will thus show how the Italian state interlocked rent extraction out of its properties with other policy issues. These attempts have implied the ideation and implementation of capital accumulation strategies using the territorial and demographic characteristics of the country, namely its world-famous cultural heritage and its elderly population. The “enrichment economy” (Boltanski and Esquerre, 2020) offers a ­heuristic framework for analyzing these strategies. Building on examples of spatial transformations, most of them located in France and Italy, it highlights the rise of new forms of wealth production and consumption that rely on cultural heritage landmarks, but also more mundane and new elements, such as knifes named as and related to the small town of Laguiole in France. According to this theory, these products are enriched not only through material interventions, but also through the construction of narratives referring to the past that adds value in the eyes of investors and consumers, as it has occurred for the transformation in Leisure complex of the Lingotto, the main Fiat plant in Turin. Now pervasive in high-end industries, this form of capital accumulation is thus based on the commodification of existing (rather than new) things and places. Central to the enrichment are the new interactions between tourism and luxury as well as the creation of regional and local identities by public and private institutions through territorial marketing techniques. While not limited to these areas, this theory appears particularly appropriate for understanding changing strategies of capital accumulation that are transforming the landscapes of European cities and countryside.

114  Félix Adisson

Valore Paese Dimore: turning Italian cultural heritage into upmarket tourist facilities Valore Paese Dimore was a financialized public real estate policy established in 2013, aimed at redeveloping cultural heritage sites into luxury tourism premises. Its objectives were to boost regional development and enhance cultural supply, competitiveness and the promotion of the Italian excellence (Agenzia del Demanio, 2014, p. 5) by turning public properties into assets. In the words of one of its masterminds, the “dream, the idea of the project” was to “give life to a new chain that redevelops the Italian tourist offer, on the tourism-culture combination, by exploiting public real estate and thus starting virtuous circles of economic development in local territories”.3 Inspired by the Spanish paradores and Portuguese pousadas, it consisted initially of the creation of a network of 111 tourist infrastructures. The envisioned chain comprised not only hotels, but also leisure and cultural services (slow food, care and well being, rituals and religion) located in heritage buildings (ville, castles, lighthouses, barracks, prisons) (Agenzia del Demanio, 2014, p. 39, 52). The aim was to unify single elements through the “Dimora brand”. This brand was thought as a symbol of the network, an intangible corporate asset and a distinctive label for the target customers: well-off people oriented towards forms of so-called Veblenian conspicuous consumption or “high value-added tourism” in the words of this policy (Agenzia del Demanio, 2014, pp. 9–11). As a result, foreign private hospitals were consulted in the initial stage of policy implementation as potential tenants. The policy-maker quoted above confirmed the kind of customers being targeted: [we are] in touch with big US hospitals, for recovery after a surgical operation in some places of Italian beauty, or for the operation itself, because the costs are similar, after all, between US health facilities and doing the operation abroad, ensuring a stay and holidays for convalescence in the Cinque Terre or in Venice.4 Put otherwise, Valore Paese Dimore can be thought as an endeavor to shift the purpose of existing public building complexes. The agency in charge of stateowned properties (Agenzia del Demanio) took the initiative for this policy along with the ministries of Tourism, Economic Development, Territorial Cohesion. It also involved the Conference of Regions and the National Association of Italian Municipalities (Associazione nazionale dei communi italiani); i.e., the two main representative bodies of these levels of government. The idea was to enroll the political representatives of the sub-national territories to contribute to the program by bringing in public buildings and facilitate redevelopment processes as they hold legal powers in urban planning. Local governments would actually be financially incentivized to drive the local implementation of the program. Indeed, the program offered: recognition to the municipalities cooperating in the development of real estate giving them 10% of the rent that the state collects, for the entire

The Political Economy of Italian Public Real Estate Privatization 115 duration of the lease. We have planned a simplification in regard to the [Internal] Stability Pact: the proceeds obtained by the municipalities are available and not considered recorded in the Pact.5 In other words, local governments joining the program were exempted from one of the key austerity measures imposed by the central State over local governments via the control and limit of the revenues and spending of the municipalities. The governance was completed by two para-public investors: the largest public investment bank, Cassa Depositi e Prestiti (CDP), and the National Agency for Inward Investment and Economic Development (Invitalia, formerly known as the Cassa del Mezzogiorno), which was created to support the economic development of Southern Italy and is now a holding owned by the Ministry of Economy and Finance. This involvement of para-public investors was later extended to actors in the real estate and tourism industries (Assoimmobiliare, and the hotel trade branches of the General Confederation of Italian Industry) who were invited to contribute to working sessions along with influential heritage and environmental NGOs (Italianostra, WWF, Legambiente). Various instruments were envisioned in order to implement this policy, including concessions, project financing, leasing, real estate investment trusts and funds managed by asset management companies. Each was a way to transform public real estate into assets generating capitalized revenue streams. Yet, the program encountered several difficulties in its development due to the difficulty of convincing foreign investors initially targeted to buy disused buildings in outlying areas, as well as a disagreement between the stakeholders over how to organize the sales and leases. This eventually led to redirect the sales towards para-public investors, as well as the defection of the National Association of Italian Municipalities.6 It also resulted in the abandonment of the Valore Paese Dimore network and brand. While it can thus be considered a policy failure as a program, dozens of individual buildings (especially lighthouses) have been sold to investors by means of their transformation into assets.7 In order to dissect how this process unfolded, we will discuss one of these buildings that were regularly showcased in the official documentation as a prototype that combines the use of a public real estate investment fund and a lease. Now a 5-star resort, Villa Tolomei is a 17-hectare property on a hill in the southwest of Florence, laid out around a villa dating back to the 14th century. It was the historical residence of the Tolomei family and was transferred to the Italian state in 1961. Until 2007, it was used mainly as a higher education facility.8 The year after, it was rented out for fifty years by the Agenzia del Demanio to a company held by a consortium of three firms financed by the Bank of Sardinia and the Mediterranean Banking Group.9 This duration was possible thanks to a change to the legislation that had previously limited the term for this kind of historic building. Such change was considered: a very timely instrument for tourist facility development schemes. Beyond the fact that Villa Tolomei was an inalienable property, very restricted [by

116  Félix Adisson the cultural heritage legislation], it is because contracts for leases or the management of a hotel on the market work on a duration of about 30 or 50  years, so a very long period for the amortization of investments even bigger than at Villa Tolomei.10 This bespoke legislation change allowed protected cultural heritage sites to be turned into tradable assets desirable for investors. The deal included considerable work that was finished by 2013. The renovation was framed by a narrative of decline and renaissance articulated by the Agenzia del Demanio: “Here, we are reclaiming a building that had become an open-air garbage dump. It was a squat in wonderful location […] subject to risk of fire, further degradation, and actually the ruin of the building”.11 In parallel, the public agency acted as a private real estate investor to the extent that, once the redevelopment risk was cleared off, it sold in 2014 what was now a A-class asset producing a steady €150,000 yearly revenue stream. It has been purchased by the Fondo Investimenti per la Valorizzazione launched at that time by the real estate branch of the public investment bank CDP. Financed by the equity of the CDP, the fund has a target of €1.2 billion. Its portfolio includes buildings transferred from regional health agencies, social security institutions, universities or the Department of Defense. If the transfer of properties into this fund entailed political bargaining, its structure and operation mimic private real estate funds. In other words, the fact that an investment fund (i.e., an institutional form that aims to boost financial liquidity) was involved in this deal and more generally in the policy scheme signals the extent to which the policy-making has become financialized. The symbolic and material transformations of the villa thus combine territorial marketing techniques and a narrative about a fresh start for this endangered noble residence with its treatment as a financial asset. The material and symbolic transformation of the public property of Villa Tolomei offers a telling illustration of how the enrichment economy unfolds: in addition to the expensive rooms of the hotel, it includes a farm producing Chianti wine and olive oil. This example and, more generally, the Valore Paese Dimore policy epitomize the idea of an economy oriented towards the consumption of well-off people and whose development relies on the production and the display of territorial identities related to historical and geographical singularities. For Boltanski and Esquerre (2014, pp. 27–58), things are valued in the enrichment economy through collection; i.e., a conventional form of valuation. In this way, the value of a thing depends on its lifespan, authenticity and associations with past events and similar objects. They explicitly oppose this form of valuation to the asset form whose valuation is based on future revenue streams. However, Valore Paese Dimore shows that actors in the economy of enrichment rely on both forms for valuing and value creation. In other words, as anticipated by Fraser (2016), the transformations supporting this economy are fully articulated with the techniques and institutions of financialized capitalism. In addition, the policy fosters regional development through high-end tourism

The Political Economy of Italian Public Real Estate Privatization 117 guided by the search for alternative financing and revenues generated through the sale of public real estate.

Fondo Silver: financializing the retirement homes of the Italian aging society The Fondo Silver is a more recent case of a financialized real estate public policy that attempts to turn cultural heritage buildings into assets. While Valore Paese Dimore attempted to foster tourist and territorial development, this fund aims to address the issue of the aging population by providing accommodation services to the elderly, hence its reference to “silver”. Although it has another policy goal, the production of welfare facilities, the program corroborates the endeavor by policy-makers to transform disused public properties into tradable assets. This initiative was launched by the National Social Security Institution (Istituto Nazionale per la Previdenza Sociale, INPS) that has endured a series of reforms since the 1990s. Driven by the objectives of reducing its costs and increasing its revenues, these reforms were part and parcel of the Italian state’s broader project to reduce the financial burden of its welfare agencies. Central to these reforms was the sale of its properties carried out through the tools of the financialized real estate sector. The securitization of public housing (cartolarizzazione) and real estate investment funds (fondi communi di investimento immobiliare) for non-residential public properties were introduced in 2001. Those instruments were used by welfare agencies to sell properties (especially those owned by the INPS) to institutional investors. While securitization was halted after a first wave, public real estate investment funds have grown since the 2000s. Most importantly, however, these funds have been internalized within state organizations, both in terms of the management and capital (Adisson and Halbert, 2022). If the Fondo Invistimenti per la Valorizzazione used for implementing Valore Paese Dimore was a first step in this direction, the internalization has been completed by the fund of funds (i3Core) launched by the Ministry of Economy and Finance of which the Silver Fund is part. This fund of funds is managed by an ad hoc asset management company (Invimit) owned by the Ministry and its staff and management are made up of professionals hired from the financialized real estate sector. The internalization is completed by the capital invested to redevelop the buildings that are provided by another welfare agency, the National Institute of Social Welfare and Assistance for Public Administration Employees (INAIL). Unlike the INPS which still has budget problems, the latter has “budget surpluses and thus can freely allow itself to make investments in the real estate sector, especially with Invimit”.12 INAIL provides patient capital since the fund seeks 3% to 4% profitability over 30 years. This financing scheme has allowed the creation of eight funds since 2015, with the Silver Fund being the latest.13 With a target of €500 million, the Silver Fund is partly owned by the INPS whose shareholding corresponds to the capitalized value of the buildings it brought into the fund (less a 10% discount on their total value which is a convention in the financialized real estate sector). INAIL is the

118  Félix Adisson other shareholder as it contributed equity to cover the expenditure required to transform the buildings into retirement homes. This financializing instrument “that our president [of the INPS] strongly endorsed” is an attempt to restructure the means and the meaning of part of the welfare policy of the INPS.14 It uses the real estate and financial resources of social security institutions to produce privatized welfare accommodation according to a scheme based on the extraction of land rent rather than the usual social contributions. Consolidation policies are thus not just about curtailing public spending, but also about changing how the production and the maintenance of the welfare state infrastructure is funded (see Belotti, 2021 for the use of a public investment fund for financing the construction of public housing in Italy). Since the launch of the fund in 2018, six building complexes have been transferred by the INPS to the Silver Fund, representing more than €40 million in capital expenditure for their transformation.15 The plan of the Fund’s promoters is to upscale the policy and expand its scope by involving the properties of other public administrations (especially local governments) that are or were used for holiday and leisure activities.16 But the original idea for establishing the network of retirement homes was to redevelop the so-called Colonies which were built in outstanding landscapes of the Peninsula (such as the Venice Lido) during the Fascist period in order to accommodate and indoctrinate Italian youth during their holidays and whose ownership ended up in INPS hands. The person responsible for this program at INPS explained this change of function in this way: These are beautiful historic buildings, constructed in the Fascist period essentially. These are the 1930s Colonies of Mussolini, where he sent the youth to study, to take holidays, which unfortunately have been closed, due to demographic change as well as the needs. Because they do not have a suitable operating cost structure for maintaining them anymore. And now, through this fund, we want to give them new beginnings and open Signor Houses.17 As for Valore Paese Dimore, the tools and financing scheme for the Silver Fund are underpinned by a narrative of resurgence. Together, they allow the transformation of structures built for enrolling young Italians into the Fascist values and ideals into a new asset class – senior housing – on the financialized real estate market. This creation of rent opportunities by building on the demographic growth in dependent, elderly people (a key factor conducive to the permanent austerity condition according to Pierson) is handled by the INPS and the asset management company (Invimit), with the support of private expertise in the real estate industry. Indeed, INPS top management believes in this project because: We have relied on one of the main consulting firms of the Italian market, called Nomisma. And several detailed studies have been carried out, also looking at what is done in other countries, especially in Germany. Based on these studies, Invimit has prepared a business plan.18

The Political Economy of Italian Public Real Estate Privatization 119 In its report, the consulting firm developed the idea that the Fund is part and parcel of the larger development of what it calls the “Silver Economy”. It states that this residential model corresponds to “the population’s needs, in relation to social and demographic changes, which is the starting point of a new demand for real estate. It can thus be assumed that new real estate necessities/opportunities flank social and demographic needs” (Fiorino, 2018, p. 21). It also stresses the opportunity to develop this segment of the real estate market since: in Europe, the volume of real estate transactions for senior Housing between 2015 and 2017 […] was about 13.2 billion euros. Italy stands out compared to the average investment amounts in Europe inasmuch as spending totaled 129 million euros. (p. 21) The recourse to consulting and expertise is further confirmed by the launch in 2021 of an adjudication addressed to insurance and assistance services companies in order to test the market feasibility of the business plan.19 This substantiates the idea that the capital accumulation strategy ideated by the policy-makers is not taken for granted, and needs successive validation and valuation by this emerging segment of the real estate investment market. For instance, aside from their age (over 65), the targeted customers are not clearly defined by the promoters of this program, unlike the well-off international tourists envisioned by Valore Dimore Paese. Yet, they are not necessarily different from the latter. The homes are viewed as an opportunity for the development of Silver Tourism, especially senior visitors from foreign countries (Fiorino, 2018, p. 16). The fact remains that the financialized public real estate policies targeting the Colonies resulted from close collaboration between public landowners and the real estate sector to develop a new capital accumulation strategy based on a demographic trend and the cultural heritage, notably that of the Fascist period. The new narrative of the silver economy is combined with the refurbishment of building complexes situated in distinctive locations. As for Valore Paese Dimore, this is in line with the understanding of the enrichment economy theory. Symbolic and material operations regenerating national and local identities are produced on cultural heritage sites in order to create a capital accumulation opportunity. However, my analysis supplements this theory by foregrounding its political-economic framework. Indeed, this opportunity results from the austerity reforms of welfare agencies and is framed by the rationales, tools and calculative devices of financialized capitalism. Therefore, enrichment is not just specific to the collection as a mode of accumulation, as argued by Boltanski and Esquerre, but is also involved in the making of assets.

Conclusion This chapter has addressed policies of public real estate privatization in European countries. It departed from a growing literature on this topic that considers neoliberalism the main explanation of disposals of public land and buildings.

120  Félix Adisson Complementing this approach, I related these policies to the political-economic framework of permanent austerity and financialized capitalism. Public real estate privatization has a dialectical relationship with this framework. On the one hand, austerity is linked to the use and pressures of bond markets that foster the sale of public properties. On the other hand, these policies provide readymade assets to investors and thus contribute to the growth of the financial sector as well as to the financialization of public policies. Indeed, the use of financial rationales, categories, tools and calculative methods has led to the adoption by the state of an investor’s viewpoint (Chiapello, 2017), as confirmed by the analysis of the two financialized public real estate policies designed by Italian public administrations. Together, these policies show that public real estate privatization is not merely a revenue-raising strategy aimed at balancing the books of indebted consolidation states. Through the new capital accumulation strategy underpinning the enrichment economy, they are also attempting to channel institutional investments towards these properties so as to respond to policy issues lacking financing due to austerity cutbacks. The analysis of these cases offers three main contributions. First, it demonstrates that the delivery of public real estate properties onto a sluggish South-European real estate market was far from a sure-fire success and was resolved by turning them into assets mainly for institutional investors. Both policies were originally designed to transform various types of public buildings into capitalized revenue streams and put them in different segments of the market. These policies thus rely on the logics, vehicles and calculative devices of the financialized real estate sector. Successful or not, they are even more ambitious in that they actually envisioned the development of asset classes in Italy, namely high-end tourist complexes and retirement homes for the supposedly well-off and elderly people. This leads us to a second contribution. In a context of everlasting budget consolidation, the transformation of public real estate into assets not only serves the purpose of obtaining capital gains, but is also designed to pursue other policy goals. In the cases studied in this chapter, these goals are the local economic development of remote locations and the construction of accommodation facilities for an aging society. These goals show that these policies are directly linked to the demographic and economic transformations of European societies identified by Pierson and Streeck as conducive to the lasting condition of permanent austerity. Yet, the financialization of public real estate policy frames the very content and beneficiaries of these policies; the distributional effects of these welfare and regional development programs profited affluent groups. The land, buildings and capital of public administrations were mobilized to tailor assets whose revenue streams can be obtained by implementing policies targeting people who are well off and are expected to pay the estimated land rents. The third contribution is that the search for an answer to policy issues in the political-economic context of austerity and financialized capitalism induces

The Political Economy of Italian Public Real Estate Privatization 121 the identification and implementation of new capital accumulation strategies. In these cases, Italian administrations have relied on internal and external expertise in order to find niches to be exploited thanks to cultural heritage and demographic trends. The enrichment economy theory of contemporary capitalism change is an insightful framework for interpreting these strategies. The repurposing and the chains of tourist accommodations and retirement homes envisioned by the Italian state and social security institutions for the abandoned barracks, lighthouses or Fascist Colonies are typical of the kind of shifts Boltanski and Esquerre (2020) refer in their analysis to a “collection” in the minds of the policy and market actors as well as customers. That is how, alongside material transformations, narratives of decline and renaissance are articulated about the silver economy or for high-end international tourism as well as more particular ones associated with a category of buildings, such as the lighthouses, or even a single site like the Villa Tolomei in Florence and its olive oil production, narratives which are intended to attract institutional investors, as well as well-off customers identified as the main clientele of the enrichment economy. The enrichment economy theory can thus be useful in understanding the political economy of the transformation of rural and urban land in European countries and other regions. It allows us to grasp an important shift in capitalist strategies of accumulation, this time by highlighting the discursive, material and territorial transformations that support and, at the same time, are induced by these strategies. Yet, this chapter is an empirical confirmation of a major point addressed to this theory by Fraser (2016). Limited by their ideal-typical approach, the two authors conceive the valuation process of the “things” related to the collection form of this economy as distinct from the asset form associated with financialized capitalism (Boltanski and Esquerre, 2014), and not in relation to one another. However, both Valore Paese Dimore and the Silver Fund are using the tools and calculative devices of the financialized real estate industry. Their attempts to design new beginnings for public cultural heritage combine narratives of the collection form and the value-setting of the asset form. What I show here is that these real estate policies result from the pressure of bond markets on public debt, and are designed in relation to the financialization of real estate. In fact, they are inconceivable without them. As stated by Fraser (2016, p. 312), “although it is not their intention, then, Boltanski and Esquerre help us understand how it is possible for finance to play the role it plays today – no longer a definable sector of the world economy, but a strand that penetrates and sucks value from every sector”, including the state and its real estate. By combining the understanding of the pervasiveness and domination of contemporary finance capitalism and the austerity policy paradigm with the insights of the enrichment economy theory – and reframing this latter accordingly – new avenues for research can be opened for studying the political economy of land.

122  Félix Adisson

Acknowledgements My sincere thanks to Robert Beauregard and Mika Hyötyläinen as well as Antoine Guironnet and Ludovic Halbert for their insightful comments on previous versions of this chapter.

Notes 1 Institutional investors are organizations such as insurer, private equity funds or government-linked companies which pool capital to buy assets (bonds, company shares, real estate properties) on behalf of other people. 2 For instance, the block grants transferred by the central state to municipalities decreased by around 50% between 2007 and 2015 with the explicit goal of making them contribute to the austerity plan in response to the 2008 sovereign debt crisis (Cepiku et al., 2016; Guéné and Raynal, 2015). A comparable decrease (42.1%) in local public investment was observed between 2008 and 2017 (Ministero dell’Interno, 2019). 3 Interview with a senior manager of the Agenzia del Demanio by Luca Gaeta and Luca Savoldi, on July 11, 2013, Rome. I am grateful to these colleagues for letting me use this interview which was part of a research on the re-use of Italian public real estate (Gaeta and Savoldi, 2013) while I was a post-doc in the DASTU, Politecnico di Milano. All quotes from interviews and documentation in Italian have been translated into English by the author. 4 Interview with a senior manager of the Agenzia del Demanio, op. cit. 5 Interview with a senior manager of the Agenzia del Demanio, op. cit. 6 Interview with the head of the Agenzia del Demanio, February 14, 2017, Rome; interview with a senior official of the National association of the Italian municipalities in charge of Valore Paese Dimore. 7 For instance, the sub-category of coastal facilities (especially lighthouses), called “Valore Paese Fari", has been pursued further totalizing more than 35 leases, and will also see an annual adjudication in 2021. 8 Retrieved from http://www.limen.org/bbcc/tutela/conservazione%20delle%20 citt%E0/ toscana/firenze/Ville/Tolomei/Villa%20Tolomei.htm on October 22, 2021. 9 Retrieved from https://vademecum.publicrealestate.it/en/casi-studio/florence-villatolomei on November 17, 2021. 10 Interview with a senior manager of the Agenzia del Demanio, op. cit. 11 Interview with a senior manager of the Agenzia del Demanio, op. cit. 12 Interview with the head and a senior manager of the directorate of the value appreciation of public assets and real estate, Ministry of Economy and Finance, May 16, 2018, Rome. 13 The eight funds of I3Core are as follows: INAIL and INPS dedicated to the properties of these two social security institutions, that of the Lazio Region which is facing a long budgetary crisis as well as Patrimonio Italia and Sviluppo Italia for local authorities and the Ministry of Defense, and Università and Silver aiming at developing the market segments of the student accommodations and retirement home,s respectively. 14 Interview with the head of the directorate of the real estate, INPS, May 17, 2018, Rome. 1. 15 Press releases retrieved from www.invimit.it/concluso-primo-apporto-al-fondoi3-silver/ and https://www.invimit.it/i3-silver-concluso-secondo-apporto/ on October 5, 2021. 16 Interview with the head of the directorate of the real estate, INPS, op. cit. 17 Interview with the head of the directorate of the real estate, INPS, op. cit.

The Political Economy of Italian Public Real Estate Privatization 123 18 Interview with the head of the directorate of the real estate, INPS, op. cit. 19 Press release retrieved from www.invimit.it/fondo-silver-pubblicato-lavviso-diconsultazione-preliminare-di-mercato/ on October 5, 2021.

References Adisson F (2018) From state restructuring to urban restructuring: The intermediation of public landownership in urban development projects in France. European Urban and Regional Studies 25(4):373–390. Adisson F and F Artioli (Eds.) (2021) Public land privatizations: Coalitions, instruments and socio-spatial implications of property management reforms [Special issue] Land Use Policy. Adisson F and Halbert L (2022) State financialization: permanent austerity, financialized real estate, and the politics of public assets in Italy. Economy and Society [DOI: https:// doi.org/10.1080/03085147.2022.2073064] Agenzia del Demanio (2014) Valore Paese Dimore. Valorizzare i beni pubblici per rilanciare lo sviluppo. [URL: http://dec.ec.unipg.it/~fabrizio.pompei/DIMORE_ PROGETTO.pdf]. Artioli F (2016) Les politiques des fonciers publics. La reconversion des sites militaires dans les villes françaises et italiennes entre réformes des armées, contraintes budgétaires et aménagements urbains. Métropoles 18 [DOI: https://doi.org/10.4000/ metropoles.5244]. Artioli F (2021) Sale of public land as a financing instrument. The unspoken political choices and distributional effects of land-based solutions. Land Use Policy 104 [DOI: https://doi.org/10.1016/j.landusepol.2020.105199]. Belotti E (2021) The invisible hand of the shareholding state: the financialization of Italian real-estate investment funds for social housing. Housing Studies [DOI: 10.1080/0267 3037.2021.1935762]. Boltanski L and A Esquerre (2014) La collection, une forme neuve du capitalisme. La mise en valeur économique du passé et ses effets. Les temps modernes 679:5–72. Boltanski L and A Esquerre (2020) Enrichment. A Critique of Commodities. Cambridge: Polity Press. Cepiku D, R Mussari, and F Giordano (2016) Local governments managing austerity: Approaches, determinants and impact. Public Administration 94(1):223–243. Chiapello E (2017) La financiarisation des politiques publiques. Mondes en développement 178(2):23–40. Christophers B (2017) The state and financialization of public land in the United Kingdom. Antipode 49(1):62–85. Christophers B (2018) The New Enclosure. The Appropriation of Public Land in Neoliberal Britain. London: Verso. Coackley J (1994) The integration of property and financial markets. Environment and Planning A 26(5):697–713. Engelen E, R Fernandez, and R Hendrikse (2014) How finance penetrates its other: A cautionary tale on the financialization of a Dutch university. Antipode 46(4):1072–1091. Fiorino G (2018, June 14-15) Valorizzazione delle strutture sociali in disuso: il progetto INPS. Silver Economy Forum. Genoa, Italy. [URL: https://www.silvereconomyforum. it/download/Fiorino_SilverEconomyForumGE2018.pdf]. Fraser N (2016) Enrichment: The new form of capitalism? A reply to Boltanski and Esquerre. Teoria politica. Nuova serie 6:307–314.

124  Félix Adisson Gaeta L and P Savoldi (eds.) (2013) Orientamenti per la gestione del patrimonio pubblico. Società degli urbanisti italiani. Milan. [URL: http://media.planum.bedita.net/20/08/ Gestione_beni_immobili_pubblici_Societ%C3%A0_Italiana_degli_Urbanisti.pdf]. Guéné C and C Raynal (2015) L’association des collectivités territoriales à la maîtrise des finances publiques: les exemples autrichien et italien. Rapport d’information fait au nom de la commission des finances du Sénat. Paris. [URL: https://www.senat.fr/ notice-rapport/2014/r14-678-notice.html]. Haila A (1988) Land as a financial asset. The theory of urban rent as a mirror of economic transformation. Antipode 20(2):79–101. Haila A (2008) From Annankatu to Antinkatu: Contracts, development rights and partnerships in Kamppi, Helsinki. International Journal of Urban and Regional Research 32(4):804–814. Halbert L, J Henneberry, and F Mouzakis (2014) The financialization of business property and what it means for cities and regions. Regional Studies 48(3):547–550. Häussermann H and A Haila (2004) The European city: A conceptual framework and normative project. In Kazepov Y (ed.) Cities of Europe: Changing Contexts, Local Arrangements and the Challenge to Social Cohesion. Malden, MA: Blackwell, pp. 43–63. Hyötyläinen M and A Haila (2018) Entrepreneurial public real estate policy: The case of Eiranranta, Helsinki. Geoforum 89:137–144. Lagna A (2015) Italian municipalities and the politics of financial derivatives: Rethinking the Foucauldian perspective. Competition & Change 19(4):283–300. Ministero dell’Interno (2019) Gli investimenti degli enti locali: analisi degli andamenti e azioni per il rilancio. Rome. [URL: https://dait.interno.gov.it/documenti/ investimenti_enti_locali.pdf]. Olsson L (2018) The neoliberalization of municipal land policy in Sweden. International Journal of Urban and Regional Research 42(4):633–650. Peck J (2012) Austerity urbanism: American cities under extreme economy. City 16(6):626–655. Pierson P (2002) Coping with permanent austerity: Welfare state restructuring in affluent democracies. Revue Française de Sociologie 43(2):369–406. Piganiol M (2017) The price of political compromise. When housing and debt policies collide in the land market. Revue française de sociologie 58(2):267–293. Piganiol M (2022) The contested commodification of state-owned land. French Politics 20(2):226–243. PwC (2020) Real estate market overview. Italy 2019. Milan. [URL: https://www.pwc. com/it/it/publications/assets/docs/pwc-real-estate-2019.pdf]. Souliotis N (2021) Politicians, technocrats and public officials as privatisation actors in Greece: A sociological account. Land Use Policy 104 [DOI: https://doi.org/10.1016/j. landusepol.2021.105370]. Streeck W (2014). The politics of public debt: Neoliberalism, capitalist development and the restructuring of the state. German Economic Review 15(1):143–165. Whiteside H (2019) The state’s estate: Devaluing and revaluing ‘surplus’ public land in Canada. Environment and Planning A 51(2):505–526.

7

THE SINGAPORE AND HONG KONG PROPERTY MARKETS LESSONS FOR THE WEST FROM SUCCESSFUL GLOBAL CITIES1 Anne Haila

Economists, historians and journalists have attempted to explain what is called the Asian Renaissance, or the economic miracle of the four tigers, or the rise of Asian civilizations, or the shift of the world’s economic gravity centre to Asia. Typical explanations refer to, for example, the network of overseas Chinese and the absence of the welfare state (Naisbitt, 1995), or mobilization of resources and increase in inputs (Krugman, 1994), or networks, kin and values of overseas Chinese (Kotkin, 1993; Seagrave, 1995) or ideology, ideological strength and communitarianism (Lodge and Vogel, 1990), or the change of the power balance (George, 1992). These explanations have three features in common. First, they are general and broad. No detailed account of the mechanism producing the effect to be explained is provided. Second, they tend to refer only to the productive sector, forgetting that present-day capitalism also concerns consumption and symbolic exchange (Baudrillard, 1972), property speculation (Lefebvre, 1972), cultural capital (Zukin, 1995), investment switch between different sectors (Harvey, 1978), information (Castells, 1989) and globalization (Henderson and Castells, 1987; Krugman, 1994; Peet, 1991; Sklair, 1991; Taylor and Thrift, 1982; Wallerstein,1979). Krugman (1994), for example, talks about efficiency and productivity measured with input-output ratios. Naisbitt (1995), although he refers to consumption as one of his megatrends and in spite of the fact that he connects this to the increase of brand consciousness, still assumes the old Keynesian approach (thinking in terms of efficient demand). Third, these explanations ignore the role of the real estate sector. Given the rapid rise in property prices and the significant role of the real estate sector in Asia this neglect is not only surprising but also a mistake.2 The aim of this chapter is, first, to correct this mistake by analysing global real estate investment flows and, second, to specify the popular explanations for the rise of Asian economies by taking into account urban politics practised in global cities. Two different types of global city politics are identified: first, those seeking to attract multinational companies, global capital and investments, and second, those attempting to regulate the property market. This chapter also attempts to explain property prices in a global city. The case will be the city state of Singapore and the interpretation of Singapore as the global city is that of the Finnish business community in Singapore.3 DOI: 10.4324/9781003280255-10

126  Anne Haila

A trend in planning: selling instead of regulating Cities have an important role in economic growth. Two approaches to analyse this role can be identified. First, historians, geographers and archaeologists discuss, in general terms, cities as a cradle of civilization and a source of innovations (see, for example, Childe, 1942; Pirenne, 1925; Weber, 1958). In a similar vein, although in more economic terms, Jane Jacobs (1965; 1984) discusses the role of certain types of cities in nourishing entrepreneurialism. Second, urban economists, rather than analysing the role of cities in general, analyse various characteristics of cities, and rather than analysing the promoting and facilitating role, tend to focus on the obstacles cities pose to economic growth. The concept that captivates these two intentions of urban economists is the concept of negative externalities (examples of externalities are traffic congestion, pollution and the rise of property values produced by and risking economic growth). These two approaches to the role of cities, active and promoting on the one hand and passive and precautionary on the other, imply different tasks for urban planning: the task of planning could be either to attempt to promote economic activity or to reduce negative externalities, or to do both. Since the 1980s, Western cities have redefined the tasks of urban planning. In the 1980s modernist urban planning came under attack by post-­modernists and was criticized for being inefficient and retarding development and, as a result, became privatized and replaced with public-private partnerships (for the change and new forms of urban planning, see, for example, Ambrose, 1986; Beauregard, 1989; Brindley et al., 1991; Cooke, 1990; Dear, 1986; Squires, 1989; Thornley, 1991). Two city states, Singapore and Hong Kong, seemed to be predecessors of the new type of urban planning that so quickly spread in the Western world.4 These city states without hinterlands had been free enterprise zones and were known for their laissez-faire policies. In some countries, these successful city states were used as models or in legitimizing the change.5 The goal of urban planning in the Western world was redefined to attract global investments and multinational enterprises. To achieve this goal, planners took as their task to create and manipulate the image of the city and produce cultural services. These new tasks superseded the old modernist type of regulation that was more concerned with housing and spatial inequalities. Some scholars talked about the era of city states (Peirce et al., 1993), and suggested that in this new era the new imperative for cities is to compete with each other in order to catch mobile investments (Parkinson, 1991; Soldatos, 1993). In Europe, the process of integration within the European Union reinforced the belief that competition is a necessity, disseminated the doctrine of image promotion, and shifted the focus of public projects and programs to economy and culture instead of social issues (Cheshire and Gordon, 1996; Haila, 1997b; Imrie and Thomas, 1995). The discourse on global cities (King, 1990; Sassen, 1991) and post-modern criticism of modernist planning (e.g. Venturi et al., 1978) strengthened the conviction that in this new era of increasingly autonomous and competing city states the task of urban planning is to sell the city (Ashworth and Voogd, 1990) and

The Singapore and Hong Kong Property Markets 127 market places (Kotler et al., 1993) for investors, tourists, and enterprises and that there are other professionals who can do the job better than professional planners. Planning power was alienated to private sector consultants and public-­ private partnerships and modernist regulation, from above by professional planners, received a bad reputation as authoritarian and elitist. In Finland, a new term not used previously appeared in the public agenda in the middle of the 1990s. This term is “urban politics” that more or less substituted for the term previously used, “urban planning”. This change of the vocabulary is indicative. The new word suggests that the previous mode of planning – coordinating from above, adjusting different land uses into each other, emphasizing targets and values like equality and social welfare – has been replaced with projects that are carried out by public-private partnerships and that are not only more economic and market oriented than the previous public projects, but also more controversial (Haila, 1997b).6

The global city politics I and II Singapore and Hong Kong have been extremely successful in attracting multinational companies, foreign investments and technologies. In a short time, they have managed to develop from undeveloped cities to the financial centres and global cities.7 Typical accounts of the success of Singapore refer to good geographical location and comparative advantage in relation to neighbouring countries: no corruption, English language as the official language, minor political risk, good government, good communication facilities, good business climate (see, e.g. Sesser, 1994). Sceptics claim that the competitive advantage of Singapore is only temporary and explain the success by referring to natural and historical factors: the fortunate heritage as an entrepot and the use of cheap labour power (Krugman, 1994). According to these pessimistic visions, Singapore will lose its relative attractiveness when the neighbouring countries modernize: Kuala Lumpur and Jakarta are noteworthy rivals. The factors that made Singapore prosper are not, however, only natural or historical. Singapore’s status as the global city and the popular location for multinational companies is reached by means of programmes and institutions of the government. According to Chen (1978), the political elite has played a significant role in the process of transforming Singapore from a basically entrepot economy to a manufacturing-­industry-service economy and from laissez-faire society to a planned, development-oriented state (van Grunsven and van Egeraat, 1999). A good example of the consistency and extension of the governmental programmes is the way Singapore solved the financial crisis in 1986 (see Ong and Govindasamy-Ong, 1996). The presence of Finnish companies in Singapore is a good case to illustrate this point. In 1995, the Embassy of Finland and Finland Trade Centre listed 69 Finnish companies in Singapore. This is quite a good achievement for a small country. Many of these companies use Singapore as a base for doing business in South-East and East Asia. It is no surprise to find companies like Nokia in Singapore, but it is surprising to find out that many of the Finnish companies

128  Anne Haila in Singapore operate in the field of forest industry: the urban city state does not provide customers for these companies, their market area is rather in Malaysia and Indonesia. What explains their presence in Singapore? When the Finnish companies first landed in the Far East in the beginning of the 1980s, Singapore looked self-evidently as the only alternative. It was strikingly more developed, Western and easy than its neighbours. The open door policy of China and the opening of the Chinese market, however, changed the situation, and made some companies move to Hong Kong or open a branch office in Hong Kong. Some companies, however, after a while, left Hong Kong and some even returned to Singapore, notwithstanding that the market area has moved eastwards for good. The location decisions of these firms show not only that Singapore is recognized as the global city, but also the survival of this status. The point of view of private enterprise is important for global cities. In Singapore, this insight is captured in the slogan, “what is good for business is good for the future of Singapore” (Cragg, 1996, 207). The Finnish business community repeated the list of location factors one can read from the literature: Singapore was chosen as the location because there is no corruption and no political risk and because of its good communication facilities, good business climate and the use of English. In addition to these, important are also services provided by the Economic Development Board (EDB), and supply of “intelligent” and modern office and industrial space. Further, Finnish businessmen tended to emphasize Singapore as the safe and easy environment for the family, for spouses and children. Although Finnish companies do not seem to have any explicitly expressed sexual and marital status policy, they have tended to send families, not bachelors, to Singapore. The rhetoric of family values by the Singapore government and Singapore’s safe streets and parks, also for women (see Haila, 1996), have met perfectly the needs of Finns. The discourse of Singapore as the good place for the family by Finnish businessmen functions as a euphemism to differentiate Singapore from places like Bangkok and Pattaya.8 Many of the location factors that made Singapore the global city and the location for multinational companies are not natural nor historical, but are the result of public programmes and institutions. I will call the set of these institutions and programs Global City Politics I (Haila, 1997a). This includes industrial policy (import-substitution policies, export promotion, restructuring the economy with labour saving and higher value added industries, free trade zones), services by EDB, financial city policy (to make Singapore the financial centre of South-East Asia with the help of the Monetary Authority of Singapore (MAS), the Asia currency market, and Singapore International Monetary Exchange (Simex)), information city policy (to create the networked city and computerize the whole city state with the help of National Computer Board, National Technology Plan, Singapore: The Next Lap: Government of Singapore, 1991), production of intelligent office and industrial space demanded by multinational companies (by UR A and Jurong Town Corporation), and production of image buildings (designed by I. M. Pei, Kisho Kurokawa and Kenzo, for example). There are many good treatises of the contents and functions of these programs

The Singapore and Hong Kong Property Markets 129 and institutions (Hill and Lian, 1995; Mirza, 1986; Murray & Perera, 1996). For the purpose of the argument in this chapter, it is enough to notice their double function in creating laissez-faire conditions for private enterprises and financial institutions, and regulating in order to protect the business. For example, a global financial centre does not need only liberal policy to attract financial institutions, but also rules and regulation. This became evident in the case of Barings Bank. Also, unlike the sceptics who argue that the internet and restrained flow of information is the weak link that will ultimately hurt the global status of Singapore, some others, like Manuel Castells (1989), argue that the informational city implies, by necessity, control. In 1997, one Finnish company, one of the first to come to Singapore and one of the largest Finnish companies, made a radical decision to close its Singapore office and move closer to its customers (Thailand, Malaysia and Indonesia). An important reason for this decision was high costs in Singapore. High costs (especially office rents and housing) were also the reason why some Finnish companies left Hong Kong. The moves of multinational companies, the raison d’etre for global cities, reveal that in a global city there is always the danger that the success of the city will lead to a rise in property prices. This rise will threaten the city’s status as the global city.9 I will call Global City Politics II the set of programs and institutions that have the effect of curbing the rise of property prices. Global City Politics I make a city the global city, and Global City Politics II help the global city to preserve this status. Global City Politics I contain measures and strategies to create the image of the city, compete with other cities and attract investments, capital, multinational companies and tourists. The aim of Global City Politics II is to regulate the property market. In the following, I will analyse Global City Politics II in Singapore.

Global real estate investment flows Today, Singapore is a surplus economy. One sign of this is the abundance of advertisements of properties for sale, also overseas, in the local newspaper Straits Times. This indicates, first, that Singaporeans have surplus money to invest and, second, that they do invest, also abroad. Popular targets are London, Australia, Malaysia, New Zealand and China. Singapore is also the target for foreign investment. The majority of these investments are in residential and commercial properties. In the residential sector, most investors come from Hong Kong, Indonesia and Malaysia. They buy housing in the better neighbourhoods (districts 9, 10 and 11). In 1994, in Richmond Park, one better neighbourhood, 35% of the buyers were foreigners (Straits Times, 18 March 1994). In the Orchard Road area, the main tourist and shopping area, foreigners own properties like Delfi Orchard, Palais Renaissance, Promenade and Paragon (owned by Japanese), Wisma Atria and Forum Galleria (by investors from Kuwait), and Holiday Inn and Hyatt Regency (by investors from Brunei). In the business centre of Singapore (Raffles Place), there are less foreign investments. (In 1990, Hong Kong Bank was owned by Hong Kong

130  Anne Haila Bank and Standard Chartered Building by British Standard Chartered. In total, 30% of the OUB Centre was owned by the Kuwait Investment Office (Chee, 1990)). Skyscrapers in Raffles Place are owned mostly by local banks and companies and the government (MAS Building is owned by The Monetary Authority of Singapore, Treasury Building by DBS-Land and Ocean Building by Straits Teamship) (Chee, 1990; Wan, 1995). A consequence of the increase in the amount of property investments and investors is a rise in property prices. When a city becomes linked into what can be called the global property market (Beauregard and Haila, 1997) – the market where foreigners invest, like Los Angeles that was a target for Japanese investment in the 1980s – the rise tends to be sharp. In Asia, the rise of office rents and housing prices has been meteoric. Compared to Europe and North America, there are some additional factors in Asia that make properties expensive: in Asia “a considerable proportion of the new rich are part-time or full-time property speculators” (Lo, 1996). In general, the interest of Asians to buy real estate has been explained by referring to “Asian hunger for land”. In Asia, there live property tycoons like Li Ka-shing and in Asia many of the rich have accumulated their fortunes in property speculation.10 In Asia, companies are involved in the real estate business (for example, in Hong Kong approximately seven companies out of ten invest in real estate (International Herald Tribune, 26 March 1997)). Given this unusual and significant role of the real estate business and the property sector in Asia, the neglect of it in typical explanations for the rise of Asian economies is strange and erroneous. Compared to other Asian cities, Singapore has, however, managed to curb the rise of property prices and, in international comparisons, Singapore is not the most expensive city. In a survey of ten major Asian cities carried out in 1994 by the Taipei office of Richard Ellis International Property Consultants, Tokyo (US$14.56 per square feet) and Hong Kong (US$12.64) were the most expensive cities for office rents. Office rents in Shanghai were rated as the third most expensive (US$7.11), and Beijing is the fourth expensive (US$6.42). Hanoi (US$6.21) was fifth and Ho Chi Minh City (US$5.37) the sixth, followed by Guangzhou (US$5.29) and Taipei (US$4.31). Singapore (US$4.24) was after these (Straits Times, 28 October 1994). What explains the relatively low prices in Singapore, particularly since Singapore is higher in the urban hierarchy than Shanghai, Beijing, Hanoi, Ho Chi Minh City, Guangzhou and Taipei? Why are office rents lower in Singapore than in cities that most likely are below it in the hierarchy of cities? In the following, I will attempt to explain this.

Explaining lower property prices One reason for the relatively low property prices is the control and intervention in the property market by the government. For example, in the middle of the 1980s, Singapore faced a recession with increasing vacancy rates and declining property prices. The government intervened with comprehensive measures in order

The Singapore and Hong Kong Property Markets 131 to control supply by announcing that there will be no land sales for the next two years, to stimulate demand by allowing people to invest their CPF-savings in non-residential property, to lower property taxes, and to postpone its own projects. The intervention turned out to be successful and efficient (Zhu, 1997). In the 1990s, the government introduced another type of programme. In 14 November 1995, The Straits Times reported that “the government is looking of ways to cap the exponential growth of industrial land prices in a move to alleviate rising business costs, the Ministry of Industry (MTI) said yesterday”. A year later, in May 1996, “the government introduced a package of measures to scotch speculation in private residential properties” (The Business Times, 11 March, 1997). The package seemed to produce good results and, in March 1997, The Business Times reported that the frantic buying has stopped and bids for land are lower. Hong Kong was the second in the list by Richard Ellis. Hong Kong like Singapore has attempted to regulate the market and prices, but has been less successful. One reason for the failure of governmental intervention programmes in Hong Kong that is mentioned is the local bourgeoisie that has been “a major stumbling block for the government’s attempts to control property speculation … real estate developers and property agents … actively lobbied the government against any measures that would have a detrimental impact upon the property market” (Lo, 1996). The reason why in Hong Kong, and not in Singapore the local bourgeoisie and real estate developers have managed to frustrate government’s intervention programmes is the different power structure in these city states. Contrary to Hong Kong, where capitalists from Shanghai (Wong, 1988) and successful businessmen like Li Ka-shing have an important role, in Singapore, according to Chen (1978), the three most important groups of the power elite are the political elite, the civil bureaucrats and the select professional elite: “the military and the business elite are not part of the power structure in Singapore society”. The second reason for the relatively moderate price level in Singapore is the heritage of public landed property left by the British and the laws making possible efficient land policy and land use control: Land Acquisition Ordnance (1955), Land Acquisition Act (1966), Property Tax Order (1967) and Control Premises Bill (1968). These laws authorized public authorities to expropriate land and this power has been used efficiently. Between the years 1965 and 1988, more than 1,200 sites were taken by the power of eminent domain (de Koninck, 1992). In addition to intervention programs and land banking, there is a third reason for the relatively low prices in Singapore. This is the segmentation of the market. I will in the following section identify these segments, and analyse the mechanisms through which investment in the property sector can harm the productive sector and economic growth.

Investment in property and the segmentation of the market There are three mechanisms through which investment in the property sector can harm production and economic growth: (1) reducing productive investment, (2) increasing office and industrial rents and thus production costs, and

132  Anne Haila (3) increasing the costs of the reproduction of the labour power and thus increasing the wages. In Singapore, there exist some institutions that have the effect of checking the harmful effects of the last two. First, investments in the property sector reduce productive investment. As the theory of capital switching (Beauregard, 1994; Haila, 1991; Harvey, 1978, 1982) explains, investments in the built environment are related to cycles and opportunities to make profit in the productive sector: investments are switched from the primary circuit into the built environment at the time when there are fewer opportunities for profit in the productive sector, and although this switching can bring a temporary solution, in the long run and as excessive it retards economic growth. In Singapore, there exist some intermediating institutions that have the effect of weakening the effects of economic cycles. The supply of land is controlled by the government, and land is released in auctions arranged by Urban Redevelopment Authority (UR A). UR A has sold parcels of land in auctions arranged in the years 1967, 1968, 1969, 1974, 1976, between 1976 and 1982 yearly, and after this less regularly. The regulation of the amount of urban development, slowing it down at the time of booms, prevents the heating-up of the market; high rents are not a lasting phenomenon. The gradual and planned release of land is the lesson Singapore can give for cities like Shanghai that in the situation of increased demand release too much land at the same time and produce the condition of over-supply where the extremely high vacancy rate of 40% does not even (yet?) bring prices down.11 Second, investment in the property sector increases industrial and office rents. In Singapore, this increase is checked because of the following reasons: Jurong Town Corporation (JTC) (that is a state owned non-financial enterprise) provides industries with industrial space and liberates them from speculating with properties that, for example, during the latest property slump bankrupted companies in the West as well as in the East (Tan, 1991). JTC is Singapore’s largest industrial landlord and is “responsible for the development and management of industrial estates, including the allocation of prepared industrial land sites with infrastructure facilities on lease terms of 30 years or more” (Murray and Perera, 1996). JTC is also “actively seeking to intensify industrial land use to help moderate prices” (The Straits Times, 17 November 1995). Most of the prime office space in Raffles Place is owned by Singaporeans and public authorities. Because of this local and public ownership, this important space and market is less exposed to global cycles and foreign influence. Thus, a boom in some other market does not affect prices in Singapore as directly as it does in the property market where foreigners have larger possessions. Third, investments in the property sector increase the costs of housing and thus the reproduction costs of labour power. Especially in economies that are based on the use of cheap labour, the rise in housing prices is detrimental. In Singapore, the harmful effect of the rise in housing prices on labour power is prevented through a clear separation between private and public housing markets. Foreigners who invest in housing in Singapore invest in the private market.

The Singapore and Hong Kong Property Markets 133 Investors from Hong Kong, Malaysia, Indonesia, Japan and Taiwan invest in the better areas (districts 9, 10 and 11) (Wan, 1995). Prices of private housing in the better areas are high, but they are paid by “expats” (salaries paid by multinational companies: in global terms, this means there is a flow of money from countries like Finland, Sweden, Japan, US and Britain to the Singapore housing sector) and by those Singaporeans who can afford these prices and wish to make a distinction through lifestyle (Bourdieu, 1984). The majority of the workforce lives in HDB-flats provided and subsidized by the public body of the Housing Development Board (HDB). (In 1989, 87% of the population lived in HDBflats; de Koninck, 1992).) Thus, the increase of prices in the private sector does not affect them. UR A, JTC and HDB have an important role in the property market in Singapore. UR A regulates supply for land for urban development, JTG produces industrial space and HDB produces public housing. The prime office market is controlled by local companies and public authorities, and the private sector housing is separated from public housing. Foreigners invest in the private sector housing and commercial properties. The result of the institutions of UR A, JTC and HDB along with locals investing in the prime office market and foreigners in private housing and commercial properties is a segmented market structure; i.e. separate submarkets with different price levels and barriers between these markets. The barriers are created by the public institutions that control different market segments.12 The existence of the separate segments and the institutional barriers between them in the Singapore property market explain why, in spite of the globalization of the property market, increased activity in real estate business, foreign investments and the status of the global city, the pressure of price rises can be prevented in those segments that are vital for the survival of the global city status (housing for workers, industrial and office space for multinational companies). This implies that the processes of deregulation, capitalization, securitization and globalization of the property market that have the effect of homogenizing prices are harmful processes for the productive sector and the global city status. One location advantage of Singapore, from the point of view of multinational companies, is Singapore’s liberal policy of taxing profits. From the point of view of Singapore, this is a problem. Many of the shopping centres along the Orchard Road are owned by foreign companies like Isetan and Takashimaya and Sogo (Japanese). Because of the moderate taxes on profit, they can export their profits. However, this can be compensated with high taxes on property that would make it possible to capture part of the surplus produced in shopping. International comparisons show that Singapore has high taxes on property. In 1981, Singapore’s taxes on property were 9.0% and on property income 14.5% of total revenue. In the UK taxes on property were 1.5% and on property income 7.7%, in the US 1.2% and 6.8% respectively, and in Korea 0.9% and 7.3% respectively (Mirza, 1986, p. 53). In the environment where taxes on profit are low, high property taxes make it possible to capture part of the surplus produced in the city. This is important for Singapore for two reasons. Shopping is not only an increasingly important activity in present-day capitalism in general, as

134  Anne Haila Baudrillard (1972) argues, but it is especially important in Singapore that, as an old trading port, has a less-developed industrial sector of its own, and where shopping is a popular way of life and urban culture (Chua, 1992). The development of luxurious and pleasant shopping centres with cinemas and other entertainment facilities plus high property taxes can function to increase and channel to Singapore revenues created in the extravagance and conspicuous consumption by expatriate families, tourists and the Singaporean new wealthy class.

The lesson given by the successful global city Singapore and Hong Kong have been praised for their successful Global City Politics I. Their success has confirmed the belief that the policy of attracting investments, multinational companies, technology and tourists can be successful. Creating a good business climate and developing the city from the point of view of private enterprise can produce good results. The information and financial city policies are important in making the city a global city and financial centre. Image buildings, “intelligent” office space and a good environment for the family can also have a role as well as the promotion of the image of the city. Unlike those explanations for the rise of Asian economies that refer only to the productivity, a more detailed analysis of these successful city states shows that comprehensive urban politics also have a role to play. But Global City Politics I is not the whole truth. The unfortunately ignored part of the success story is the control and regulation of the property market. The danger always present in the successful global city is the rise of property prices that will ultimately make multinational companies, the raison d’etre of global cities, look for alternative locations. Therefore, control and intervention in the property market is needed. The lesson that successful global cities in the East can give to the cities in the West is that marketing and selling the city is not enough, but must be complemented with control and regulation. In the Western world, the post-modern criticism against the modernist planning project led to replacement of control and regulation with attempts to create favourable conditions for private enterprise. Control and regulation, from above by professional planners, got a bad reputation and was condemned as authoritarian and elitist. The irony of the policy shift towards more market-oriented programmes is that private enterprise benefits from regulation. The lesson given by Singapore goes even further than just to remind us of the necessity of control. Control and intervention in the conditions of a free market economy are often difficult, and can fail as the example of Hong Kong shows. The segmentation of the property market restrains and diminishes the negative consequences of the increase of the amount of property investment and of achieving the status of the global city. Singaporean institutions – UR A, JTC and HDB – as well as intervention programmes and the array of measures (like property tax, regulation of land supply, sales tax, revenue tax, regulation of loans) are resources that can be used efficiently or less efficiently. In other words, the explanation offered in this chapter is not that prices cannot rise.

The Singapore and Hong Kong Property Markets 135

Notes 1 This chapter is included with the permission of Taylor & Francis. It was published in European Planning Studies 7(2):175–187 and has been copy-edited to match the style of this book. An original version of this chapter was presented at the 4th APSA, Asian Planning School Association, Congress in Bandung, Indonesia, September 2–4, 1997. In the published version, Anne Haila thanked Robert Beauregard, Austin Jaffe, K.C. Hong, and an anonymous referee for their helpful comments. 2 The mistake of neglecting the property sector became even more evident when the economic crisis began after 1 July when the Thai baht was devalued. In some Asian countries, an important reason for the crisis was excessive property investments and development projects. 3 The empirical material for this chapter is based on interviews I conducted between the years 1994 and 1996 when I lived in Singapore and worked as a senior fellow at  the National University of Singapore and during frequent visits to Singapore after that. I would like to thank Raimo Valo, and the following informants: Eero Boren, Juuso Himanen, Pekka Holstein, Elisa Häinninen, Ilkka Hänninen, Markku Karvonen, Olli Laasanen, Veli Laurila, Kari Pesonen, Sami Sinisalo and Thomas Zilliacus. Naturally, they are not responsible for any of the conclusions drawn in this study. In addition to these Finns, I intervened Singaporean investors and real estate brokers who prefer to be anonymous. A more detailed nalysis of Singapore as the global city is in Haila (1997c). 4 With this change in urban planning, I refer to a set of parallel changes in the Western world. In the UK, urban enterprise zones were established (Hall, 1982; Massey, 1982), planning system was changed (Thornley, 1991) and public-private partnerships became popular (Lawless, 1994). In the US also enterprise zones were established (Butler, 1981), planning system was modified (Beauregard, 1989) and public-private partnerships gained popularity (Squires, 1991). The city of Helsinki used foreign consultants (British and German) (see, for example, Landry and Kelly, 1994) as advisers, in an attempt to develop its image and increase the supply for cultural services, by first to achieve the status of the cultural capital of Europe in the year 2000 and then to prepare for the celebrations of this year. The city also made efforts in selling properties in Helsinki for Asian investors, and is about to change the principles of its housing policy (to be more market oriented). 5 In the UK (see Hall, 1982; Massey, 1982; Schiffer, 1983), the influence of the Hong Kong model was explicit. Singapore has also been used as a model. Nathan Gardels, from Los Angeles Times writes about the lesson post-liberal Singapore can give for America (Straits Times, 2 February 1996). Gardels regards Singapore as the best prepared society for the twenty-first century and praises its social policy, business climate, safe streets and welfare. A Dutch architect, Rem Koolhaas (Koolhaas and Mau, 1996), also regards Singapore as the model for the future. The point he emphasizes is Singapore’s efficiency. One concrete example of Singapore as a model is the building of Suzhou, the mini-Singapore in China. Suzhou is planned and built according to the principles used in Singapore and it will show the success of these ideas in a foreign ground. 6 I would like to thank John Logan for the useful discussions concerning the American usage of the terms “urban politics” and “urban planning”. 7 Singapore and Hong Kong are not global cities like London, New York and Tokyo. I am using the term in less ambitious sense than Sassen (1991). Instead of control centres, I define global cities simply as locations for multinational companies and financial institutions and targets for global property investments. 8 Unlike Britain and the Netherlands, Finland does not have any imperialist tradition nor experience with colonies. This might be the reason why Finnish companies do not seem to have any explicitly expressed sexual or marital status policy. The colonial history tells that British and Dutch companies first sent bachelors to colonies

136  Anne Haila



9

10

11

12

(in Indonesia, India and Africa) and recommended men to take a local concubine. Then, at the turn of the century, the ideas of racism and eugenics in Europe gave the local woman a new definition. She was defined as contaminated. The policy changed and the European woman was sent to colonies, not only to guarantee the victory of Western values, but also the purity of the Caucasian race (Stoler, 1990). Until today, Finnish companies seem to have preferred sending families to Singapore, no matter that these commissions with high housing and schooling costs have been expensive for Finnish companies. In 1997, there seem to be a slight change in the policy and a trend to send more bachelors. The most likely the reason for this change is economic, although the liberalization of the atmosphere and an increased tolerance towards different races and interracial marriages in Finland, the increase of the number of liaisons between an Asian woman and a Caucasian man both in Finland and in places like Singapore, and an establishment of a firm in Finland that imports Asian women to Finland to marry Finnish men can also have a role to play. Of course, also other types of negative externalities, like pollution and congestion, have this kind of negative effect. I will, however, discuss only the role of property prices. According to the listings by Forbes (1996), in the group of the ten richest in the world, Li Ka-shing (Hong Kong), Yoshiaki Tsutsumi (Japan) and Tan Yu (Philippines) all had the source of their wealth in real estate business, while western tycoons, in this category of ten, Bill Gates (USA), Warren Buffet (USA) and Paul Sacher (Swiss) have accumulated their fortunes from other types of business. This figure of 40% was given by a Chinese partner of a joint venture I interviewed in Shanghai in June 1997. A recent report by Colliers Jardine (Jackson, 1997) gives the vacancy rate of 22% (of all grades and prime) in December 1996, and estimates the vacancy rate to be 39% (of all grades) and 34% (prime) in December. In Pudong, the vacancy rate is 60% (all grades, December 1996) and estimated to be 73% (all grades) and 70% (prime) in December 1997. David Harvey (1974) in a study on the Baltimore housing market shows how financial institutions with their loan policies create a segmented property market with different price levels.

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PART III

LAND AND SOCIAL RELATIONS

8

LAND RELATIONS IN TURMOIL TR ANS-LOCAL CONSTRUCTIONS OF HOME AMONG RUR AL MIGR ANTS IN XIAMEN, CHINA Haoxuan Sa and Jani Vuolteenaho

Within three decades, the People’s Republic of China has altered from a mass public rental society, in which private homeownership and commercial housing developments were discouraged by the socialist government, to an ultra-­ ownership society in which they are fervently championed by policy-makers, entrepreneurs and, arguably, even by the majority of ordinary Chinese people (He and Wu, 2009; Huang, 2004; Huang, He and Gan, 2021; Wu, 2007). Figures expressive of this housing upheaval are astonishing. In much of the latter half of the twentieth century, private homeownership accounted for less than 30% of housing, but very rapidly “reached 85% in 2010 nationwide (70% in cities) and more than 90% in 2017 (87% in urban and 96% in rural China)” (Huang, He, and Gan, 2021, p. 1). As Huang, He and Gan emphasize (2021, p. 2), the transition has benefitted the country’s rising middle classes, but not all of its population: “migrants in cities have been largely excluded from… [urban] homeownership and wealth accumulation”. Focusing on interconnections between China’s market-socialist reforms (including the housing reform and land reforms implemented in cities and rural peripheries) and trans-local aspects in rural migrants’ lives, we argue that the new Chinese dream of homeownership (Huang, 2004) has also influenced the life-paths, everyday valuations and place-related emotional belongings of rural migrants living and working in cities. To unpack key interconnections of post-Mao China’s migration situation with its land and housing reforms, this chapter concentrates on three aspects of China’s land regime change. These are as follows: (1) vast quantities of farmland have been re-purposed in the countryside with parts of this land being converted to residential lots; (2) native villagers in urbanizing areas have abandoned agriculture and developed their collectively owned land parcels into rentals to accommodate rural migrants; and (3) urban governments have collected vast premiums through negotiating, bidding and auctioning fixed-term land use rights for state-owned land (often in pursuit of attracting higher-end residential and commercial developments). Meanwhile, part of the country’s turmoil has been its altered rural-urban division and migration waves of flexible and cheap labor that feed urban-centric economic growth. Prior studies have analyzed DOI: 10.4324/9781003280255-12

144  Haoxuan Sa and Jani Vuolteenaho manifestations of this mass migration including the rise of urban villages as low-rent alternatives to contemporary Chinese owner-occupied xiaoqu (commercial housing) buildings. Especially in prosperous southern cities like Xiamen, where housing prices have climbed extremely high, the informally developed, substandard urban villages or villages in the city (chengzhongcun) are among the few affordable housing options for rural migrants. In this chapter, we seek to introduce more rarely discussed rural-urban relations as well as migrants’ trans-local emotional experiences into this literature. Via attention paid to differing mental and social constructions of home among Xiamen rural migrants, we will also reflect on how the changing land relations in contemporary China are simultaneously about the politics of place (cf. Logan and Molotch, 1987), affecting the migrants’ bonds and sentiments regarding their places of origin and destination. We conducted a case study in Xiamen, a prosperous city on the southeast (Taiwan Strait) coast of China in the Fujian province. Most of the previous studies on Chinese rural-to-urban migrants have focused on migrants in major population centers (e.g. Beijing, Shanghai, Guangzhou) or provincial capital cities (e.g. Nanjing, Xi’an), whereas less urban research has been conducted on sub-provincial cities like Xiamen. In particular, we have selected two Xiamen urban villages of Caitang and An’dou as the sites of our fieldwork to exemplify co-ethnic destination spaces (Wu, Zhang, and Webster, 2014) into which migrants from different regions of China have settled, doing so on plots developed by native (ex-peasant) populations and their collective shareholding companies (Sa, 2020). In Caitang and An’dou, we carried out 24 in-depth interviews with young adult rural migrants during 2014–2018. The informants had stayed in Xiamen from a few to over ten years and earned their living as manufacturing industry workers, office workers or in menial service-sector jobs. The on-site ethnographic research was followed by online correspondence to trace changes in their life paths, narratives and life-situations. To substantiate the chapter’s findings, we also conducted interviews with five representatives of the non-governmental organization Guo Ren Gong You Zhi Jia (GRGYZJ). In the following three theory sections, we highlight a set of themes around post-Mao China’s urban-centered growth; discuss interrelations between the country’s persistent hukou (Household Registration) system, internal mass migration and the diversity of migrants’ fates; and, finally, outline aspects of home and trans-localism affecting their lives. We next examine trans-local and emotional aspects in Xiamen young adult rural migrants’ narratives and self-­positionings, by applying Kochan’s (2016) three-partite conceptualization of home for Chinese internal migrants. Here, the focus moves from the migrants’ ancestral home located in the countryside to Xiamen as their city home (with its branded reputation, migrant policies and multiple arenas for their exclusion/inclusion from schooling opportunities to consumption spaces), and the material home of their rented flats and immediate living environment in Caitang and An’dou. In the concluding discussion, we underscore the importance of land relations for understanding contemporary China and its migration situation, both in terms of

Land Relations in Turmoil 145 feeding urban accumulation processes at the expense of the countryside, and as a major factor undergirding people’s everyday life chances, decisions, aspirations, ambivalences of belonging, and conceptions of place and home.

Land regime changes boosting China’s urban revolution In The Urban Revolution, originally published in 1970, Lefebvre (2003 [1970], p. 79) maintained that “the old ‘town-country’ distinction is in the process of disappearing”, adding that it has not lost its usefulness for the purposes of capital accumulation. According to the French sociologist, a “complete urbanization” was progressing on the global scale, with rampant or embryonic variations underway not only in capitalist societies but also in state-socialist regimes. The implosion-explosion of the urban society generated by rural exoduses, subordination of the agrarian to the urban, extension of the urban fabric, real estate speculation, and capital projects inside and outside the city were becoming global realities (pp. 15, 155). Subsequently, Lefebvre’s complete (or planetary) urbanization thesis has been acclaimed for farsightedness and criticized for its abstractedness and implicit Western biases (e.g. Brenner and Keil, 2016; Tang, 2014). Lefebvre’s (2003, p. 113) notion that “the demographic, ideological, and sociological reasons, the economic and political advantages of the city” were “the same in China as elsewhere” as early as the turn of the 1970s seems particularly curious in hindsight. If made a decade or two later, this point would have been indisputable: since the 1980s and 1990s, “renewed urbanism has eventually flourished”, pushed forward by policies and processes that have “stretched, expanded, and upgraded” the urban scale all over the country. In the meantime, the countryside in post-Mao China has largely become “a wasteland of ‘backwardness’ and ‘tradition’” (Yan, 2008, pp. 41–42). In many ways, the far-­reaching effects of land re-arrangements in rural and urban China (notwithstanding the unchanged de jure separation between rural land owned by local collectives and state-owned urban land) are in line with Lefebvre’s (2003; 2017) view of city–countryside relations as an engine of accumulation, social turbulence and inequality. In rural areas, swathes of farmland have been re-purposed or neglected. In contrast to Mao-era reforms that first “redistributed agricultural land to peasant households and later reorganized land and labor for large-scale production through agricultural collectives”, the last four decades have witnessed “a redeployment of land to peasant households, together with reduced state control of labor, pricing and accumulation and ‘the state…. exercising less intrusion into the daily life of ordinary people and their mobility, while reinstating the household as the basic unit of welfare provision’” (Nguyen and Locke, 2014, pp. 855–860). In village collectives, the use of rights to residential land has been distributed to households. As mirrored in the astonishing homeownership rate of 96% in rural China (Huang, He, and Gan, 2021), many families have built their own houses on these parcels. However, the Rural Contracting Law of 2003 strictly prohibits selling housing entities built on collectively owned

146  Haoxuan Sa and Jani Vuolteenaho land to outsiders which has thwarted the actual and prospective economic value of these properties. In the face of limited job opportunities in the countryside, this has fueled China’s “pell-mell urbanization” (Harvey, 2012, p. 58) through a flexible supply of cheap domestic labor that draws from the country’s rural-­ urban disparities. Land and real estate transitions that have concerned cities in the market-socialist China have been no less profound. Aimed at boosting growth through inter- and intra-urban economic competition, a series of new laws and institutional changes have effectively rendered the Chinese urban world a playground of land requisition, speculation and rent garnering (Haila, 2016, p. 71; Sa, 2020), even though a legal separation continues to exist between inalienable land ownership and alienable and transferable land use rights. A full-scale commodification of land has taken place, with municipal or metropolitan governments in the lead (Haila, 2007; Wu, 2016). Especially since the mid-1990s, local governments’ strengthened autonomy has made them proactive in forming growth alliances and joint ventures with private capital (Wu, 2016, p. 346), and leasing land use rights (for c. 40–80 years) to overseas and domestic real estate investors and developers (Wu, 2007, p. 10). Some cities boast land-related revenue that “accounts for up to 60% [of] total local fiscal income” (He and Wu, 2009, p. 288). As Haila (1999) noted, municipalities have been made the actual managers of state property. Local governments have also been given the legal power to convert collectively owned rural land into developable urban land. On the periphery of expanding cities where scarcity of land prevails, this has led to expropriations and farmers making way for new developments (Wu, 2007, p. 11). A concurrent but more informal path to residential land change has been the rise of urban villages, particularly in southern China. In these cases, native villagers and their cooperative companies have jumped on the entrepreneurial bandwagon and started to gather rental incomes by accommodating labor migrants on their self-developed and densely-built properties (Huang, 2004).

The hukou system and varieties of rural-to-urban migration Interconnected with China’s market-socialist land arrangements is another peculiarity of the Chinese urban growth machine (Logan and Molotch, 1987) that relates to the persistent hukou system. Instituted in 1958, the hukou legislation was previously efficient in keeping “rural people immobile in the service of socialist construction” (Nguyen and Locke, 2014, p.860). By contrast, rural migrants are nowadays allowed to move to cities on their own will, but denied a range of urban citizenship rights on account of their rural hukou. As an uprooted rural population living and working in cities, the access to municipal services from health care to schooling is usually blocked, while leaving rural migrants their rural citizenship as their only insurance in case they fail to prosper and have to return home (Andreas and Zhan, 2016). Easily laid-off when not needed, the hukouless migrants form the nucleus of China’s floating population (Wu, Zhang, and Webster, 2014).

Land Relations in Turmoil 147 As Haila (2016, p.71) notes, the preceding Mao-era land reform went against Marx’s notion of primitive accumulation in that it “did not dispossess the peasant-workers from the land”. In the post-Mao era, by contrast, millions of former peasants, especially in economically less viable villages, have left their homes and ancestral lands either permanently or temporarily. This process largely reflects the dynamics of what Harvey (2003) calls accumulation by dispossession with the countryside’s cheap and mobile migrant labor reserves functioning as a solution for sought-after urban economic competitiveness. In Ran Liu’s (2015, pp. 79–80) phrase, “the surplus of agricultural labor driven by poverty and lack of employment opportunities in the rural hinterland” has been a key prerequisite for the country’s fast-paced urban capital accumulation. She identifies close linkages between migrants’ dispossession, like their neglected housing and participation rights in cities, and a massive release of hitherto unavailable assets at a low or super-cheapened cost into the mainstream of capital accumulation (Liu, 2015). Over time, however, some easements to the rigidities of hukou have been issued by the central and local authorities. An instance relevant for this study is Xiamen’s liberal policy in the provision of public schooling services to hukouless rural migrants’ children, which has added a further pull factor to the city’s reputation as a welcoming migration destination. As initial windows into the heterogeneous everyday realities of the Chinese migration situation and the relational spatialities between the rural and the urban, previous studies have uncovered a variation in the duration and cyclic nature of migration as well as in levels of urban integration among rural migrants. Many rural migrants are literally leading trans-local lives, intermittently migrating between the urban and the rural as a means of maximizing incomes and sustaining their families (Fan, 2009). Many older migrants have permanently returned to the countryside, whereas newer generations have “joined the urban precariats” (Nguyen and Locke, 2014, p. 866), again often with a rather vague urban identity and enduring connections with their rural base. Profoundly affected by the gaping rural-urban discrepancies and economic upswings and slumps, other migrants have returned involuntarily. Such was the story of the bankruptcy of the Ma family’s transport business that stifled their entrepreneurial ambitions in the city of Golmud in western China (Zhang, 2014, pp. 44–45). The family returned to their native village where their “small landholdings, housing, and other personal or familial assets” (Zhang, 2014, pp. 44) provided them with subsistence needs as well as “gave them a sense of attachment, relatedness, roots, identity and belonging (Zhang, 2014, pp. 45)” For other hard-hit migrants, returning to the village seems to have no meaning, however bleak the chances are to find a new job in a destination city (Chan, 2010). As with our study on Xiamen young adult rural migrants, still other narratives in the research literature uncover relatively strong levels of urban integration and longer-term ambitions to work and live in a city, despite the material, social and emotional hardships (Wu, Zhang, and Webster, 2014; Yan, 2008). Summarily, a complex interplay between new land arrangements in the rural areas and urban hubs, in tandem with the hukou system of separate land-rooted

148  Haoxuan Sa and Jani Vuolteenaho citizen rights for rural and urban populations and flexible hiring and lay-off ­practices that have been pivotal ingredients as post-Mao China has fast-­forwarded to co-existing prosperity and inequality through rural-to-urban labor migration. In the meantime, diverse migrant fates and often spatially multipronged narratives of belonging and home have emerged.

Aspects of home and trans-localism in migrants’ lives The concept of home has been a subject of interest in different schools of thought from subject-philosophical ponderings over dwelling in the world to ethnographies on the materialities and meanings of a house/apartment for inhabitants (Cieraad, 2006). On the one hand, the home is tangible and practiced on a daily basis through mundane tasks and proximate interactions. On the other, it is not necessarily bound to a local context as with the cases of a home region, country, supra-regional entity or the “new localisms” discussed by Massey (1992, p. 6): “Each geographical ‘place’ in the world is being realigned in relation to the new global realities, their roles within the wider whole are being re-assigned, their boundaries dissolve as they are increasingly crossed by everything from investment flows to cultural influences”. Diaspora and migration researchers have also deployed the concept of home as a lens into the multi-layered and often trans-local qualities of identity, place attachment, inclusion/exclusion, (un)welcoming and emotional vulnerability (Ralph and Staeheli, 2011; Vuolteenaho and Lyytinen, 2018). As Mee and Wright (2009) write, “a sense of belonging, or home (whether experienced in-situ or in extra-local ways) contributes to migrants’ settling down or returning back decisions”. Home is an accordion-like concept for migrants: “it both stretches to expand migrants outwards to distant and remote places, while also squeezing to embed them in their proximate and immediate locales and social relations” (Ralph and Staeheli, 2011, p. 518). How do the above notions resonate with the Chinese migration situation as an engine of the country’s tremendous urbanization and the rural migrants’ diversely trans-local life paths and narratives? One discourse concerns the aforementioned “Chinese dream of the new era” homeownership (Huang, He, and Gan, 2021, p. 1). Public housing was the predominant form and public ownership was the norm for those who grew up under Mao’s regime (Zhang, 2010). Since the State Council’s scheme for housing system reform in 1988 and the opening of commercial housing markets in the 1990s, things have changed very rapidly with indirect and direct effects on migrants’ lives and their relocation, settling down and returning-back decisions. As a frontier of urban beautification, mushrooming gated communities across Chinese cities epitomize a widespread “longing for a peaceful, comfortable, tasteful, quality domestic life (you pinzhi de shenghuo) (Yan, 2008, p. 81). As noted, however, rural migrants have remained disadvantaged and forced to find urban housing through private rental housing markets. Further aspects of home addressed in the Chinese migration literature relate to migrant integration in the city’s social networks and the roles that a migrant’s

Land Relations in Turmoil 149 place of origin (laojia), or ancestral home village, play amidst their lives in the city. Characteristically for the Chinese culture, strong kinship and place-grounded bonds between migrants of the same rural lineage ease the settling down in the city. However, for many, the strong networks with relatives in migrant enclaves “sometimes become a burden that tie migrants to traditional and constraining social and spatial structures, limit their movement, and hinder their experience of the city” (Kochan, 2016, p. 24). According to Kochan (2016), the ancestral village epitomizes home as a fixed and stable place that is constraining migrants’ sense of belonging to an unchanging countryside haven. In a striking contrast, Yan (2008), in her ethnography on young migrant woman domestic workers from the Anhui province, notes that the post-Mao developments have “robbed the countryside of its ability to serve as a place for rural youth to construct a meaningful identity” (p. 51). In different ways, these notions resonate with the multi-scalar and often ambivalent understandings of home by young adult Xiamen migrants. Nguyen and Locke (2014, p. 867) insist that rural migrants actively operate “at the margin of urban society, physically and metaphorically” (ibid.), and, in doing so, “create other spaces that transcend the rural-urban distinction” (ibid.), or render “the rural-urban distinction porous and fuzzy for people involved” (ibid.). Even more explicitly, this study’s empirical design follows Kochan’s (2016) triadic trans-local approach to Chinese rural migrants’ narrations of home. In particular, we analyze the Xiamen young adult migrants’ ancestral home located in the countryside, Xiamen as their city home, the material home of the dwelling and its immediate urban village surroundings, and interconnections and tensions among these three home spaces.

Xiamen migrants’ (dis)connections with the ancestral home The rural migrants we interviewed wavered between nostalgia for and sentimental distancing from their ancestral home villages. In recollections of their ancestral homes, on the one hand, they maintained that native-place sentiments were important (see also Friedmann, 2007). Descriptions of a strong emotional attachment were common and their narratives of migration bore unmistakable echoes of two age-old Chinese cultural principles excavated by Xiaotong Fei (1992), namely the values of an “earth-bound” and “family-linked” agrarian society. In his Earthbound China, Fei (1992) wrote that the closely interconnected diyuan (place ties) and xueyuan (kinship bonds) were the two primary ways to connect people in traditional Chinese society. Diyuan denotes a geographical tie to a home region, which is one’s or one’s ancestor’s place of birth: “In stable societies, diyuan, or regionalism, is no more than an extension of consanguinity and cannot be separated from it” (Fei, 1992, p.121). One of the basic ideas in Chinese culture has been to “be born and die in the same place”. “Birth – that is, one’s bloodline – determines one’s ties to a location” (Fei, 1992, p.121). In societies where people do not relocate or migrate, lineage groups imply a solidified relationship between people and place (Fei, 1992).

150  Haoxuan Sa and Jani Vuolteenaho Our interviews also revealed that one’s previous life in the home village was typically romanticized. One of our key informants, Mr. Fei, a 27-year-old rural migrant worker with 11-year working experience in different cities, provided a nostalgic imagery of his home village: “It is no exaggeration to say, my hometown is a shan qing shui xiu (literally, the hills are always green and the river is always crystal) place. Nothing can replace the position of my home village in my heart”. On the other hand, the migrants’ actual social experiences that elevated market relations in work and leisure challenged the romanticized images of their ancestral homes. This disillusionment was manifested in the informants’ accounts of how the possibility of returning to the countryside seemed a practically unthinkable option for most of them: “My home village in my memory is a dreamland, but I cannot return to it”. Unlike some previous studies on Chinese migrants (Zhu, 2007), the majority of migrants we interviewed did not have any plans of returning home. When we asked about their future plans, all except one informant lacked a plan to return to their ancestral home. The reasons that the migrants gave were practical. Their income sources and occupations were urban-based and returning back was blocked by a lack of job opportunities in the home village. Strikingly, not even the fact that our interviewees all owned a house in the countryside did not turn their minds more favorable toward a prospect of a return migration. While they belonged to new China’s overwhelming majority of rural homeowners (Huang, He, and Gan, 2021), homeownership in the countryside had largely lost its significance for them. Intriguingly, in the light of the Lefebvrian view of China’s complete urbanization, the interviewees saw that not only Chinese cities have experienced rapid changes but also the countryside: “The village is not the previous village”. Increasing numbers of their relatives had left the home village, weakening the consanguinity connection. The ancestral villages had not only socially emptied out and experienced major demographic changes, but significant land and institutional changes had taken place. For instance, corruption in village committees dampened their desire to return. Again, Mr. Fei’s story serves as an example: Last year, I went back to celebrate lunar New Year, I cannot recognize it is my home village where I grew up. All the roads have been changed… Besides, the corruption of village committee is very heavy. Many public resources, for instance, the old banyan tree as well as our public fishing pond have been sold at a very cheap price by the village committee. I do not want to go back to stay with these corrupt guys. Such negative perceptions of the countryside by our informants are in line with the criticisms of rural development in post-Mao China and resonate with complex problems that have emanated from abandoning farming, abuses of collective land rights by local cadres, organizational complexities due to overlapping collective entities at different levels of administrative hierarchy and rural discontent from land dispossession (Hsing, 2010; Nguyen and Locke, 2014). Our

Land Relations in Turmoil 151 informants also referred to arrival of urban values to their home villages by underscoring greedy and envious valuations nowadays prevalent among rural populations (Steinmüller, 2013). For instance, many told us that the fear of losing face prevented them from telling their friends and relatives from the home village the truth about their urban lives. In this connection, the term mianzi, or “saving face or reputation”, denoted pressing expectations from native friends and relatives. Though the interviewed Xiamen rural migrants worked hard in the host city, they saw that they could not reach these social demands. As Mr. Li, a 30-year-old rural migrant worker from Yunnan, confessed: “All my relatives who stay behind in the home village believe I have earned a lot. And they envy me, because I have the ability to work in Xiamen, one of the most beautiful cities in China. If I go back, they will know I am still poor”.

Ambivalences of Xiamen as the migrants’ city home Among our interviewees, the emotional oscillation between belonging and non-belonging was also manifested on the urban scale of the city home, namely Xiamen as their hometown. To start with positively integrating aspects, it is frequently underscored in Chinese migration literature (e.g. Wu, Zhang, and Webster, 2014) that the migrants’ native place- and kinship-based networks offer them initial entry points for urban integration, especially in finding a job and affordable housing. At first, these assisting networks tend to be exclusively composed of their Laoxiang or “people from the same place”, but through time expand to form bonds with fellow migrants with a wider regional provenance. This held true with our Xiamen interviewees who told us that the diyuan and xueyuan bonds had often faltered in the course of years or gradually given way to companionships in which “mutual understanding is better”. For more Xiamen-specific integrating factors, local economic growth has brought multiple employment opportunities and made the city a very popular destination for rural migrants to make a living. Migrants with children were quite comfortable with their situation because of Xiamen municipality’s liberal policy in the provision of public schooling services. In the words of Ms. Zhang, the head officer of GRGYZJ (a non-governmental organization that arranges leisure activities and provides vocational training for rural migrants): “flexible policies toward rural migrants, especially in offering possibilities in public primary schools and giving subsidies in private schools for rural migrants’ children” helps the city “to get cheap labor”. Further, Xiamen’s favorable reputation as a city with beautiful landscapes, fresh air, open social atmosphere and multiple overseas connections gave gratification to our interviewees. Many told that when sharing experiences about Xiamen with people from outside, they underscored their sense of belonging to the city. Mr. Yi, a 28-year-old migrant worker from the western part of Fujian, living in Caitang village, said: “When you hear in some news something about Xiamen in the media, it is always positive… As a resident of Xiamen, I also feel proud of it. I feel I also contribute to building a glorious Xiamen”.

152  Haoxuan Sa and Jani Vuolteenaho Beyond this veneer of pride in Xiamen’s urban affordances and its celebrated urban image, the migrants’ inferior hukouless status as urban residents, and expectations of others (especially acquaintances from home villages) affected their urban experiences in negative ways. Their comments took on pessimistic tones when they talked about personally-felt emotions of stigmatization, or a lack of trust in social relations. The migrants’ experiences in the destination city conveyed emotional hardships and social disappointments. As Mr. Li said, “I know this is not my city. I am not protected in this city. They do not care whether I am alive or not”. In many respondents’ narrations, their lived city was full of threats of becoming chronically ill or being evicted. One key source for their experiences as strangers or “virtual foreigners within the cities of their own country” (Solinger, 1999, p.4) was the friction between townspeople and rural folks that has long roots in the Chinese culture. Everyday manifestations of how the rural exodus has transposed China’s inherited urban versus rural inequalities to the new intra-urban practices of exclusion, discrimination and stigmatization featured in our Xiamen interviews (Wu, 2016; Yan, 2008). The lack of access to resources and protection made the everyday life of rural migrants full of struggles, anxieties and fears. In part, this was because of actually lived predatory relationships (Wirth, 1938) between acquaintances. Some had experiences of being cheated and losing large or small amounts of money. As an example, Mr. Yi was betrayed by his friend: “I trusted him, he is my laoxiang. He said there was a very good investment opportunity… After one year, my laoxiang disappeared. No one knew where I could get my money back. This kind of event could have not happened in my hometown…. The city is a place which makes people lose trust”. In addition to disturbing experiences with peer migrants from the same village, our interviewees’ lives were also rife with emotions of inferiority and being a stranger related to other aspects of social life in Xiamen. Nearby parks, public squares, malls and playrooms provided by NGOs were among the key places in which rural migrants spent leisure time. Some of them practiced square dancing in public squares as their hobby. However, these activities did not dismantle the social and emotional barriers between the native villagers and the rural migrants. Ms. Liu, a 27-year-old migrant who works as a receptionist in a hightech company, explained how she felt stuck with her friends who were also rural migrants when she practiced square dancing, and how she felt an invisible wall between her and the local people on such occasions. In part, this was because the latter spoke either the standard Mandarin or Xiamen dialect, which she could not speak. To return to more positive narratives of the migrants’ city home, it is not that the young adult Xiamen migrants always and unwillingly remained isolated from amenities, symbolic resources and social spaces in the rest of the city. When it comes to Xiamen’s new lavish spaces for conspicuous consumption and other beautified spaces, our informants had a mental distance from these real estate projects (Yan, 2008; Zhang, 2010). At the same time, everyday creativity in the affordable uses of consumption spaces could simultaneously be a way of

Land Relations in Turmoil 153 carving out one’s own social space in the host city. A case in point is a shopping mall abutting the migrant enclave of Xiamen’s Caitang village. Developed by a native Caitang villager’s shareholding company on a plot of newly expropriated, state-owned urban land (which the villagers were permitted to develop as compensation), many Caitang migrants told us that they spent time in the mall quite regularly. However, they did this in ways that were not compatible with the consumption-maximizing discourses prevalent in contemporary market-socialist China (Zhang, 2010). They did not always go to the mall to shop, but because of free amenities like an air-conditioned environment, toilets and seating, and for socializing with other migrants. As Ms. Wang, a 20-year-old migrant worker from Fujian, put it: During summer, I visit Caitang shopping mall with my friends after work if I do not have any other arrangements. I never go shopping there, the mall is designed for the middle class, not us. But I can enjoy free air conditioning there. I also can do some window-shopping and learn fashion trends. If the mall is organizing product testing, we also can get free cosmetic samples or free food. Despite many urban entry barriers that they faced on account of hukou, limited purchasing power and cultural stigmatization, the young adult migrants were able to appropriate real estate developments like the Caitang mall to make Xiamen a home city of their own.

Migrants’ real-life and dreamed material home As is typically the case with Chinese urban villages, in Caitang and An’dou, the native villagers have minimized investment and lack greater motivation to improve or maintain their buildings. Due to this, as our informants recognized, “the prices are here much cheaper” than in the rest of Xiamen. According to one of our interviewees in 2017, a migrant might realistically expect to earn around 4,000 yuan (c. 500 euros) per month in a good service-sector job, whereas the rent of a studio in An’dou and Caitang villages was around 300–700 yuan (39–90 euros) per month. Their living conditions were modest. Studio floor space in our interviewees’ homes (Kochan, 2016) ranged between 8 and 40 square meters. For instance, single rural migrants usually rented a studio with a small kitchen and a bathroom. Most of the interviewees’ apartments that we visited were not equipped with a refrigerator or an air conditioner. As regards cooking at home, refrigeration is a requisite for preserving basic food products due to Xiamen’s hot climate. Also, many other vital appliances and utensils found in contemporary Chinese xiaoqu (commercial housing) such as gas supply pipes were lacking. Hence, the young adult Xiamen migrants had moved to an urban village due to the cheap rentals and social accessibility that provided them with shelters and entry points to work and reside in Xiamen. The explanation our informants gave for their modest living conditions was that they had not rented their flats for

154  Haoxuan Sa and Jani Vuolteenaho long-term living, but rather to live as affordably as possible as part of a pursuit to work hard, earn money and save for the future. As Mr. Liao emphasized, “I did not choose a studio with air conditioner, because I came to Xiamen not for living in ease and comfort”. Similarly, Mr. Fei had not purchased any kitchen appliances for his flat. As he explained: “purchasing kitchen appliances is an ‘investment’. If you do not have any plan to rent the room for the long term, the investment is not rational”. Such common valuations by the interviewees did not express a desire merely to save money, but to accrue money for investing in the new Chinese dream of owning one’s home. Indeed, the ideal of home ownership, a pillar of China’s housing reform since the 1990s (Huang, 2004), had been internalized by most of our informants. It had a strong influence on the young adult rural migrants’ values and priorities. In contrast to Kochan’s (2016) finding that purchasing an urban home was not an aspiration for Beijing and Shenzhen rural migrants, our interviewees had adopted owning a home as a dream for which they were striving. In fact, rural migrants kept talking about the unaffordable prices that impeded them from purchasing a home in Xiamen. To them, renting was temporary, whereas buying a home was synonymous with “settling down”. Why did the An’dou and Caitang young adult migrants we interviewed opine that renting a flat is “a totally different matter” from buying an apartment? To unpack this, one needs to recognize that urban villages, where the migrants currently had their rental material homes, represent the reverse image of urbanized China’s upgraded living standards. Belonging to China’s new generations, the putting of industriousness and work-orientation center stage in their current urban lives instead of investing in housing and other immediate consumption needs did not mean that they disapproved of New China’s consumption-centric home-making discourses. Reflecting Löfgren’s (1998) study of successive biographical phases in “learning and de-learning” consumption habits, their narratives articulated a generational transition from individualistic and hedonistic consumption patterns and preferences to ones that are more typical of young adult phases of life, pursued particularly through the acts of housing investment and home-making. In stark contrast to those who grew up under Mao’s regime and for whom public ownership was the norm and public housing was the predominant form, our informants strongly endorsed a privatized dream homeownership. Out of necessity, they had made a (realistic) choice to postpone its realization. To be sure, such subjective ambitions for home ownership are not peculiar to contemporary China and its population segments with differing resources to realize them. In the capitalist world, private homeownership particularly in suburban zones has been a prime engine of urban-centric wealth accumulation and socio-spatial segregation. In the US, in particular, it has been an integral part of the so-called American dream (Beauregard, 2006).1 The surge of mass-­produced suburbs in the American context was also based on the privatized logic in which the marketed product was an “exclusive and permanent rights to small part of the whole suburb together with non-exclusive right to enjoy the place in its totality”

Land Relations in Turmoil 155 (Ward, 1998, p.84). How does “the Chinese dream of the new era” – also expressed by our interviewees – differ from the American model in which a single-family, detached house epitomized the admired suburban lifestyle (Beauregard, 2006, p.109)? In the contemporary Chinese urban contexts, a detached single-owned house is a realizable dream only for very few super-rich people. Instead, what our informants dreamed of was a self- or family-owned apartment in a commercial-­ residential area, in either Xiamen or some other bigger or mega-size Chinese city. Although many of them were already homeowners in their home villages, their material home in the countryside did not incarnate the new Chinese dream. Tellingly in these regards, a local legend in An’dou village pivoted around a local migrant worker, Mr. Zhang. Retold to us by many informants, Mr. Zhang used to be a maintenance man in an air conditioner shop who persistently saved money, and was able to purchase an apartment in a suburb of Xiamen. Even though our interviewees did not know Mr. Zhang personally, he had become a mythic figure among rural migrants presently living in the village. When sharing this story, our informants used appreciative phrases like “successfully settled”, “a real Xiamener” and “a model” to venerate Mr. Zhang for his success as a rural migrant in realizing the new Chinese housing dream. In contemporary China, as Yan (2008, p.82) writes, “there is almost no escape from advertisements of sparkling and stylishly furnished homes as objects of consumption and affect”. To paraphrase Huang (2004), the transition from rental to homeownership, as one of the biggest life events now common in China, had not materialized for the Caitang and An’dou migrants in an urban context. On a wider micro-geographical scale, however, they had succeeded in making the immediate living quarters in these crowded neighborhoods into their present material home. Despite the cramped living conditions, these urban villages clearly were “a place called home” (Massey, 1994) to the studied migrants without local citizenship. This held particularly true in the use-value and social terms. According to Ms. Liu, a 23-year-old rural migrant who had resided in Caitang village for five years, “we can get everything without going out of the village”. Moreover, as the practices of home-making on the neighborhood scale, the Xiamen rural migrants had brought their regional-cultural customs, traditions and tastes into Caitang and An’dou and hence contributed to the production of these low-status enclaves as the urban spaces of cultural richness. Caitang and An’dou are perhaps not expressive of “a global sense of place” in the style of some cosmopolitan neighborhoods (Massey, 1992), but as one of our informants phrased it: “Caitang village is like a China in microcosm. We [rural migrants] brought our food culture here. You will feel, it [food culture in Caitang village] is much more abundant than urban Xiamen”.

Discussion This chapter has demonstrated how the land, real estate and housing-related institutional changes have not only reshaped the physical and political-economic landscapes in China, but also social relations and place-related sentiments among

156  Haoxuan Sa and Jani Vuolteenaho Chinese people. During the urban-centered transitions in the market-socialist China, the land-related fates of two key groups in this study – native villagers in newly expanded urban areas who have turned to developers on their former agricultural lands and poorer rural migrants searching for earning and integration opportunities in cities – have been mutually dependent but highly diverging in socio-economic terms. The former have become landlords, whereas the latter are dreaming of the ideals of the new China, especially regarding urban homeownership. More broadly, we analyzed how migrants experience their relationship to a new urban place (Xiamen) and their former homes in the countryside. While geographers, philosophers and social theorists have theorized the concept of place in diverse ways (Carter, Donald, and Squires, 1993; Cresswell, 2014; de Certeau, 1984; Logan, and Molotch, 1987; Massey, 1994; Tuan, 1977), our approach was to examine the multi-pronged and trans-local migration narratives and the rural migrants’ changed emotional ties to their places of origin and destination through the malleable concept of home. Specifically, we interrogated the meanings of and ambivalences between the ancestral home located in the countryside, Xiamen as the city home and the material home of the dwelling and its immediate surroundings. Our ethnography showed that the traditional Chinese principles of xueyuan (blood ties) and diyuan (place ties) have not remained unchanged in the new urban context. This was evident both in the ambivalent ways in which the Xiamen migrants talked about their ancestral homes and how they had gradually shifted from inherited place- and kinship-based urban social networks to rescaled ones based on a wider set of shared cultural affinities and mutually supportive activities with other rural migrants living in co-ethnic villages. Further, our findings strongly echoed Yan’s (2008) notion that the post-Mao developments have robbed the countryside as a base of meaningful identity for many younger rural migrants. Traditional land and blood ties still haunt the migrant narratives in ambivalent ways, but the city has become the land around which their social relations and hopes for the future revolve. In the sense of an urban material home, private homeownership has become not only a real estate-grounded ingredient of the new Chinese urbanism, but also a factor steering even poor people’s settlement decisions and urbanized aspirations for a good life. This was graphically shown in how the young rural migrants living in Xiamen were in a way devaluing their existing properties in the countryside in favor of saving money and living modestly in the city, while aspiring for a material home apartment in the city. In the light of our analysis, the new Chinese dream of homeownership is not only strongly endorsed by the country’s rising middle classes, but also by many rural migrants, at least those of a young adult age (Kochan, 2016). One focus in the literature on Chinese urbanization has been the uneasy reception of Chinese poor rural migrants in cities where local governments aspire for growth and seek to attract increasing numbers of consumption-­ generating middle- and upper-class populations in private housing areas built on

Land Relations in Turmoil 157 state-owned leased land. In this context of urban growth, the rise of informal residential urban villages accommodating rural migrants has been a by-product of locally-specific land processes and negotiations between municipal governments and collectives owning former rural lands. It has also been steered by business prospects and a practical need to meet the housing needs of cheap rural labor working and living in cities. Avoiding conceptualizing China’s rural-urban migration in narrowly one-dimensional spatial terms, this study has sought to open a nuanced land-focused account of migration combined with attention to interconnections between land reforms in the urban and rural areas and the effects of land changes on people’s everyday practices, life decisions as well as their future aspirations. Clearly, China’s changed land relations played pivotal but complex roles in the Xiamen migrants’ lives. From a perspective of the political economy of land, one key question raised by our study concerns the relationship between the migrants’ material home in the countryside and their urban housing realities and the ideals of the dream of eventually being able to purchase an urban apartment. There were egregious differentials in the exchange-value between their urban housing aspirations and existing rural ownings. The task of future research is to delve into how and to what extent such exchange-value gaps guide Chinese rural migrants when settling in cities. Or do they prefer more circular and temporal migration decisions and practices? Undoubtedly, differences in economic prospects and possibilities emanating from the country’s rural-urban divide and its reshaped market-socialist forms are a part of the story not only in structural terms of keeping the Chinese growth machine functioning, but also in mundane terms of the rural migrants’ life decisions. The overwhelming magnetism of thriving Chinese cities (with rich economic as well as social and cultural offerings) in comparison to rural peripheries has been the outcome of Chinese-style urbanization (Lefebvre, 2003 [1970]). Mediating between structural processes and mundane everyday activities, changing land relations have been at the heart of this immense transformation. Through both land policies applied on the local scale and trans-local land relations in given institutional settings, land has a profound impact on urban development through economic, institutional and political practices and concrete effects in the social worlds of everyday struggles and rights as well.

Note 1 In Beauregard’s (2006, p.144) words, the suburbs “stood for achievement at home – the realization of the American Dream”.

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158  Haoxuan Sa and Jani Vuolteenaho Brenner N and R Keil (2016) From global cities to globalized urbanization. In LeGates R T and Stout F (eds.) The City Reader. London: Routledge, pp. 666–676. Carter E, J Donald, and J Squires (eds.) (1993) Space and Place: Theories of Identity and Location. London: Lawrence & Wishart. Chan K W (2010) The global financial crisis and migrants workers in China: ‘there is no future as a labourer; returning to the village has no meaning.’ International Journal of Urban and Regional Research 34(3): 659–677. Cieraad I (2006) At Home: An Anthropology of Domestic Space. Syracuse, NY: Syracuse University Press. Cresswell T (2014) Place: An introduction. Malden, MA: Blackwell. de Certeau M (1984) The Practice of Everyday Life. Berkeley, CA: University of California Press. Fan C C (2009) Flexible work, flexible household: Labor migration and rural families in China. In Keister L A (ed.) Work and Organization in China after Thirty Years of Transition. Bingley: Emerald, pp. 377–408. Fei X T (1992) From the Soil: The Foundations of Chinese Society. Berkeley, CA: California University Press. Friedmann J (2007) Reflections on place and place-making in the cities of China. International Journal of Urban and Regional Research 31(2):257–279. Haila A (1999) Why is Shanghai building a giant speculative property bubble? International Journal of Urban and Regional Research 23(3):583–588. Haila A (2007) The market as the new emperor. International Journal of Urban and Regional Research 31(1):3–20. Haila A (2016) Urban Land Rent. Singapore as a Property State. Oxford: Wiley Blackwell. Harvey D (2003) The New Imperialism. Oxford: Oxford University Press. Harvey D (2012) Rebel Cities: From the Right to the City to the Urban Revolution. London: Verso. He S and F Wu (2009) China’s emerging neoliberal urbanism: Perspectives from urban redevelopment. Antipode 41(2):282–304. Hsing Y (2010) The Great Urban Transformation Politics of Land and Property in China. Oxford: Oxford University Press. Huang Y (2004) Housing markets, government behaviors and housing choice: A case study of three cities in China. Environment and Planning A 36(1):45–68. Huang Y, S He, and L Gan (2021) Introduction to special issue: Unpacking the Chinese dream of homeownership. Journal of Housing and the Built Environment 36(1):1–7. Kochan D (2016) Home is where I lay down my hat? The complexities and functions of home for internal migrants in contemporary China. Geoforum 71:21–32. Lefebvre H (2003 [1970])The Urban Revolution. Minneapolis, MN: University of Minnesota Press. Lefebvre H (2017) Key Writings. Edited by S Elden, E Lebas, and E Kofman. London: Bloomsbury. Liu R (2015) Spatial Mobility of Migrant Workers in Beijing, China. Cham: Springer. Löfgren O (1998) My life as consumer. An oral history approach to the world of goods. In Chamberlain M and Thompson P (eds.) Narrative and Genre. London: Routledge, pp.114–125. Logan J R and L H Molotch (1987) Urban Fortunes: The Political Economy of Place. Berkeley, CA: University of California Press. Massey D (1992) A place called home? New Formations 17:3–15. Massey D (1994) Space, Place, and Gender. Minneapolis MN: University of Minnesota Press.

Land Relations in Turmoil 159 Mee K and S Wright (2009) Geographies of belonging. Environment and Planning A: Economy and Space 41(4):772–779. Nguyen M T N and C Locke (2014) Rural-urban migration in Vietnam and China: Gendered householding, production of space and the state. Journal of Peasant Studies 41(5):855–876. Ralph D and L Staeheli (2011. Home and migration: Mobilities, belongings and identities. Geography Compass 5(7):517–530. Sa H (2020) Do ambiguous property rights matter? Collective value logic in Lin Village. Land Use Policy. https://www.sciencedirect.com/science/article/pii/S0264837719323385 Solinger D J (1999) Contesting Citizenship in Urban China. Berkeley, CA: University of California Press. Steinmüller H (2013) Communities of Complicity: Everyday Ethics in Rural China. Oxford: Berghahn Books. Tang W (2014) Where Lefebvre meets the east: Urbanization in Hong Kong. In Stanek L, Schmid C and Moravánszky Á (eds.) Urban Revolution Now: Henri Lefebvre in Social Research and Architecture. Surrey: Ashgate, pp. 71–91. Tuan Y (1977) Space and Place: The Perspective of Experience. Minneapolis, MN: University of Minnesota Press. Vuolteenaho J and E Lyytinen (2018) Reflections on the variations and spatialities of (un) welcome – commentary to Gill. Fennia 196(1):118–123. Ward S V (1998) Selling Places: The Marketing and Promotion of Towns and Cities 1850–2000. London: Routledge. Wirth L (1938) Urbanism as a way of life. The American Journal of Sociology 44(1):1–24. Wu F (2007) China’s Emerging Cities: The Making of New Urbanism. London: Routledge. Wu F (2016) State dominance in urban redevelopment: Beyond gentrification in urban China. Urban Affairs Review 52 (5):631–658. Wu F, F Zhang, and C Webster (eds.) (2014) Rural Migrants in Urban China: Enclaves and Transient Urbanism. London: Routledge. Yan H (2008) New Masters, New Servants: Migration, Development, and Women Workers in China. Durham, NC: Duke University Press. Zhang H X (2014) Chinese cities and mobile livelihoods: Migration, risk and social networks. In Wu F, Zhang F, and Webster C (eds.) Rural Migrants in Urban China. London: Routledge, pp. 36–50. Zhang L (2010) In Search of Paradise: Middle-Class Living in a Chinese Metropolis. Ithaca, NY: Cornell University Press. Zhu Y (2007) China’s floating population and their settlement intention in the cities: Beyond the Hukou reform. Habitat International 31 (1):65–76.

9

BRIDGING BETWEEN OWNERS AND USERS IN JAPAN’S PRIVATE PROPERTY REGIME THE CASE OF FARMLAND BANKING Maiko Nishi

In the post-W WII era, when industrialization and urbanization rapidly progressed, Japan began to experience agricultural abandonment and farmland degradation and loss. Over the past 60 years, the farming population has significantly decreased as has the area under cultivation.1 Farmland abandonment has grown particularly since the mid-1980s (Ogata, 2018). Along with the overall decline in the wealth of Japanese farmland, 2 farmland prices have steadily decreased since 1995.3 Along with these trends, the national food self-sufficiency rate has reduced by half to below 40 per cent in calorie supply over the six decades, the lowest level among major industrialized countries (MAFF, 2021c; Ministry of Internal Affairs and Communications, 2020; OECD, 2019). Although the numerical targets for its recovery have been set since 2000, the national policy has failed over the past two decades (Honma, 2010; MAFF, 2021c). Against this backdrop, the national government introduced the Farmland Banking (FB) system in 2014 as a new strategy to expedite the productive use of farmland. This is an intermediary mechanism for tenancy arrangements where prefectural governments (i.e., the level between the national and municipal authorities) are given more power to call for tenants on a broader scale and facilitate farmland aggregation into large farms so as to achieve better economies of scale. Farmland ownership has been historically fragmented across numerous small plots, particularly since the post-W WII land reform which demolished landlordism and created many owner-farmers (Honma, 2010). As the inefficiency of fragmented farmland structure has been increasingly recognized, the policy to promote tenancy for farmland aggregation has evolved. Since the mid-1970s, the government has developed and introduced legislation, programs and mechanisms to facilitate tenancy contracts based on local coordination between landowners and tenants. However, the FB system legally allows the Farmland Banks (FBs) to arrange tenants, including outsider farmers and business corporations, even without landowners’ consent as to whom their land is sublet. In this regard, the introduction to the FB system is a critical turning point in the post-war private ownership system for farmland. DOI: 10.4324/9781003280255-13

The Case of Farmland Banking 161 This chapter examines how the rights to farmland have been rearranged and negotiated through the adoption of the FB system at the local level. As detailed in the next section, the governmental logic behind the FB system as a property institution is the property rights theory that hinges on the assumption that single individuals transact clearly defined property rights in an ahistorical market (Haila, 2015). In particular, it focuses on the economic dimension of farmland property, presuming that this property institution liberalizes the tenancy market: through rent payments. And, it allows new or outsider farmers who do not have a trust relationship with owners but have the economic and technical capacity of farm management to be placed on equal footing with local farmers for the access to farmland (Ando, 2017). As emphasized by Haila (2015, pp. 46; 2017), however, rent is a social relation between landlord and tenant through which the tenant is given the right to use farmland as a property that involves not merely economic but also cultural dimensions. If so, what has happened on the ground through the introduction to this new property institution? To explicate the on-the-ground social relationships of tenancy arrangements, this chapter takes a case study approach by attending to particular socio-­institutional contexts. Instead of mainstream economic theories, socio-­ institutional approaches treat land not simply as “a factor of production” but also as “a socially structured space-time continuum” (Bastiaensen and Merlet, 2012, pp. 11). One of the presumptions underlying the FB program is that the rights to farmland are clearly defined, enforced and guaranteed either by a state or a market. Socio-institutional approaches, however, shed light on the dynamic nature of farmland evolving from complex social and political processes where multiple social actors, who work individually or collectively, continuously claim and struggle for their rights to a piece of farmland and its resources (Bastiaensen and Merlet, 2012; Merlet, 2007). The notion of property as bundles of rights offers a way to examine internal relationships among social actors who together construct land rights, rather than a mere focus on external relationships of owners to non-owners (Alexander, 2012). The conceptual framework of bundles of rights was proposed by Schlager and Ostrom (1992, pp. 250–251) to rectify the imprecise assumption often drawn on by public policies, as in the case of the FB system, that resource users have no property rights other than alienation rights (i.e., a right to sell or lease their property) (Ostrom, 2008). It conceptualizes a property rights system as a set of multiple rights, instead of a single right, aggregating (1) access (i.e., a right to enter a specified property), (2) withdrawal (i.e., a right to harvest the products of a resource), (3) management (i.e., a right to transform the resource and regulate internal use patterns), (4) exclusion (i.e., a right to decide who will have access, withdrawal or management rights) and (5) alienation (i.e., a right to sell or lease any of the above rights). As demonstrated in many empirical studies, resource users often organize themselves and create relatively sustainable common-­property systems where a nominal alienation right is not a key (Ostrom, 2008). With an emphasis on the multiplicity of rights to farmland, this framework helps to detail the analysis of tenancy arrangements, addressing how

162  Maiko Nishi rights to farmland have been rearranged for tenancy and how the involved parties negotiated and coordinated these rights through adopting the FB program designed to systematically transfer a use right from owners to users. With a focus on one agricultural community in Ishikawa Prefecture, this chapter delves into the tenancy arrangements where rights to farmland were negotiated, coordinated and put in place for farming. The case represents a farming community facing the challenges of land-extensive farming for rice production against the trends of growing agricultural abandonment and recent rice-price depreciation. The next section explains the mechanism and functions of the FB system, followed by the case study of the community.

Farmland Banking system The FB system was launched in 2014 as one of the key instruments for the agrarian reform under the growth strategy of Abenomics,4 which was established in 2013 after the long-ruling party regained political power from the historical regime shift (Harada, 2015; Miura, 2015). To accelerate farmland aggregation, the national policy goal was set as a Key Performance Indicator (KPI) aiming to increase the farmland aggregation rate to 80 per cent by 2023 (c.f. 48.8 per cent in 2013) (Government of Japan, 2013; Kobari, 2015; MAFF, 2016a).5 The FB system is defined in the Act for Promotion of Farmland Bank Activities (i.e., the FB Act) enacted in December 2013. This Act increased the power of prefectural governments to implement the FB program. In the past, municipalities were the major authorities to administer the relevant programs in coordination with local communities either directly or indirectly (often through agricultural cooperatives). In the FB system, these municipal roles remain with the Community Agricultural Master Plan (CAMP) program, underway since 2012 as a municipal planning procedure to develop farmland use master plans for areas within a municipal jurisdiction (Taniguchi, 2013). The CAMP program encourages local farmers to autonomously identify central management entities responsible for farming at the local level. Subsidiary programs rendered economic incentives for farmland owners and users to promote farmland aggregation (i.e., institutional unification where multiple plots become managed by a certain farm entity) and consolidation (i.e., physical unification where multiple plots adjoining each other become managed in a certain block) for the use by central management entities (Harada, 2017; Taniguchi, 2013). The FB Act stipulates that the CAMP program facilitates coordination among local farmers for farmland aggregation (Article 26), while allowing agricultural committees (i.e., an Administrative Committee to oversee farmland transactions at the municipal level) to intervene in planning farmland distribution for tenancy (Harada, 2015; Kobari, 2014). However, the Act clearly indicates its purpose to facilitate the aggregation and consolidation with the involvement of new farmers (Article 1). To do so, it grants power to the prefectural authorities to publicly recruit farmers who are economically and technically capable of farm management and re-distribute

The Case of Farmland Banking 163 farmland to them free from the owners’ interests, without requesting permission from the agricultural committees (Kobari, 2014). In particular, it grants FBs an interim management right to authorize them to sublet farmland on behalf of owners irrespective of their wills. Executing this right, FBs are exempted from the Civic Code (Harada, 2017). With this legal basis for allowing the systematic separation of owners from users, FBs were established in all the 47 prefectures by November 2014 to intermediate tenancy arrangements with new or outsider farmers equal to local farmers in the access to superior farmland (Ando, 2017). FBs serve as semi-public intermediary agencies at the prefectural level to lease farmland from owners, improve it, if needed, and then sublet it to economically and technically capable farmers in a consolidated form. They can also draw on municipal support (see Figure 9.1). The scheme for program implementation normally includes the following steps: (1) assessing the local status of farmland and farmers (municipal); (2) publicly recruiting tenants (prefectural); (3) collecting applications from landowners for the program (municipal); (4) matchmaking between owners and users (municipal); and (5) approving and publicly notifying farmland redistribution plans (prefectural) (Kobari, 2015). FBs are also allowed to delegate the tasks to municipal governments, agricultural cooperatives and other relevant local organizations, except for tasks related to the third and fifth steps (Kobari, 2015).

Figure 9.1  Scheme for the Farmland Banking System. Source:  Adapted by author from MAFF (2014) and Kobari (2015).

164  Maiko Nishi Compared to previous tenancy programs, the FB program began with a large, national budget.6 The budget was to be used to provide subsidies to landowners and local communities (e.g., a group of landowners) but not farmland users (i.e., subtenants) who benefit from farmland aggregation and consolidation (Ando, 2014; Harada, 2015). Individual landowners were given funds once sublet contracts were concluded between an FB and subtenants under conditions deemed to contribute to aggregation and consolidation (Harada, 2015). Local communities were eligible for funds for local agricultural development when the ratio of farmland leased to an FB within a given area exceeded a certain percentage so that farmland can be aggregated in a more collective and consolidated manner: the larger the percentage, the higher the value of funds (Harada, 2015). To incentivize those eligible for participation, the national government offered a special bonus for the first two fiscal years (MAFF, 2021d). For monitoring and evaluation of program implementation at each prefecture, the national government developed an indicator called FB’s contribution ratio. This measured the ratio of the annual increase in a total farmland area aggregated through the FB program to the annual target of farmland aggregation in each prefecture and then ranked the prefectures accordingly (Kobari, 2015). The ranking results are meant to reflect the budget allocation to each prefecture – more budget for the higher rankings (MAFF, 2016b). Furthermore, with the amendment to the Land Improvement Act, the national government introduced a new system of land improvement in 2017 that exempted the beneficiaries of land improvement projects from bearing project costs if the beneficiaries work with the FB program for agricultural infrastructural development such as land consolidation and irrigation improvement (MAFF, 2021d). As such, FB program implementation has been promoted with a variety of economic incentives for landowners.

Case study site The community for the case study, District Nakamura (not its real name), is located on the peninsula in the north of Ishikawa Prefecture and approximately at the center of the Japanese west coast. It constitutes a part of the major rice-producing region. Sitting in the intermountain area of an upper river flowing from a mountain, the community lies in the less-favored farming area in the agricultural policy due to its hilly and mountainous features and distance from large consumption markets (see Figure 9.2). This district has been an agrarian community consisting of ten farming villages that have been historically united and long dominated by family-run, small-scale farming households. As in many rural agricultural communities, it has experienced a significant population decline and aging through out-migration of the younger generation: the total population decreased by 60 per cent over the 60 years.7 It thus confronts the growing abandonment of farmland and houses and is currently populated mostly by part-time or aged farmers engaging in rice cultivation on terraced paddy fields and vegetable farming.

The Case of Farmland Banking 165

Figure 9.2  Agricultural landscape of District Nakamura. Photo credit:  Maiko Nishi.

Data were collected in November and December 2016 and then in August 2018. The fieldwork included semi-structured interviews with farmers and attendance at two community meetings. The interviews were conducted with 29 farmers in total, including 26 farmers from District Nakamura and 3 farmers from three neighboring communities. The interview sample was chosen to capture various ways of participating in the FB program based on snowball sampling that began with a community leader introduced by prefectural government contacts. The interview schedule covered the following themes: (1) respondents’ background, (2) their participation in the FB program, (3) their roles and responsibilities for farmland management and (4) their value perspectives on farmland (e.g., how they define farmland, how important it is to the individual and the community, what farmland they prefer, what interest they have in owning and using farmland, what principle(s) they draw on to make a decision on farmland use). In this district, participation in the FB program began in 2015, building on the community-based farming and through a direct invitation by the prefectural authority. The major subtenant to lease farmland from the FB was Farm Nakamura which was established in January 2015 as an Agricultural Producers’ Cooperative Corporation (i.e., a legally qualified institution eligible for official farmland tenancy contracts). Farm Nakamura built on a farming cooperative, based at one of the ten villages, Village Uemura (not its real name), to farm the land districtwide.

166  Maiko Nishi This village-based cooperative stemmed from the six largest farmers (owning approximately 1 ha each) who organized themselves in 1978 to share the use of agricultural machines with municipal subsidiary support and to cooperate on the agricultural development of the village. With the increased mechanization, this group rapidly expanded its farming in response to neighbors’ requests for contract farming (instead of formal tenancy contracts). It did this not only in their base village, but also in other villages within the district. It also began processing and selling agricultural produce in 1983 to stabilize farm management. With favorable sales growth, it was incorporated in 1987 as an Agricultural Producers’ Cooperative Corporation called Cooperative Uemura. This legal institutionalization led to further expansion from 6 ha in 1978 to 27 ha in 2015. Building on the farm expansion by the Cooperative Uemura, a voluntary confederated organization covering all the ten villages, called Nakamura Hometown Development Association (NHDA), took the lead in developing a districtwide communal farming in combination with land improvement initiatives. NHDA had engaged in regional revitalization against depopulation originally in 1981 with the involvement of representatives from each of the ten villages and, additionally, since 1992, by networking with other groups (e.g., commerce and industry associations, universities). In 2008, NHDA began the local consultation process to initiate land improvement through a wait-and-see approach. Based on the positive views on land improvement initiatives, in 2013, it started planning to reorganize Cooperative Uemura into Farm Nakamura for districtwide farm management and cultivate the land that would be consolidated through land improvement. While preparing for land improvement in four villages within the district (including Village Uemura) in late 2014, the chief of the NHDA secretariat received a telephone call from a prefectural officer and was solicited to take advantage of the FB program for land improvement. In the context that the national government had recently announced its prioritization of budget allocation for land improvement to the region adopting the FB program (MAFF, 2017a), the chief was encouraged to adopt the FB program by March 2015 (within the same fiscal year). By the time the local initiatives for land improvement were noted by the prefectural authority, the District Nakamura had succeeded in implementing various governmental policies and thus exhibited the capacity to implement the new agricultural policy. This invitation helped to expand the land improvement initiatives to three more villages within the district. As a means of initial capital investment in Farm Nakamura, NHDA found an interest in the higher subsidy for earlier program adoption which could be used collectively by the local communities. The more generous subsidy was given to a community that achieved a higher aggregation ratio (i.e., the percentage of farmland contracted out to the FB in a certain area) sooner. Building on the preparatory work for land improvement (particularly the local consent and the inheritance administrative procedures), the four villages quickly adopted the FB program and attained high-level aggregation. These four villages used half of the subsidies for capital investment in Farm Nakamura

The Case of Farmland Banking 167 and the remaining half for improvements to agricultural infrastructural facilities. The neighboring three villages were also planning to participate in the FB program combined with land improvement. The other three villages located deep in the mountain upstream in the district, however, declined to initiate land improvement, given the lesser potential to agricultural revitalization due to severer depopulation and the lower efficiency of terrace farming.

Tenancy (re)arrangements for the FB program In late 2016, the land improvement projects were underway in the four villages (hereafter called the Preceding Area), while those in the succeeding three villages (hereafter called the Succeeding Area) were yet to happen, but planned to be chosen in fiscal 2018 as prefectural official projects. In the Preceding Area, where some lands were already leveled but others were under construction, tenancy arrangements were made under the FB program (see Figure 9.3). Here, almost all the landowners leased out their farmlands to the FB, among whom a few planned to farm their land on their own. The major subtenant leasing farmland from the FB was Farm Nakamura that planned to collectively farm most of the improved land and a few farmers planned to continue their farm management under the FB program. In the Succeeding Area, a broad plan for

Figure 9.3  Preceding area for land improvement. Photo credit:  Maiko Nishi.

168  Maiko Nishi tenancy arrangements was drawn that would be detailed when local consent on land improvement could be officially obtained. Nevertheless, most landowners had informally agreed to conduct land improvements with the understanding that this would solve the problems resulting from the decaying irrigation and drainage facilities and help withstand the shrinking and aging farm population. Under this situation, all respondents (n = 16) from the Preceding Area had planned to participate in the FB program through either communal farming based at Farm Nakamura (n = 13) or independent farming (n = 3). Among those involved in communal farming, all were landowners who lent their land to the FB and were given in return a standardized rent by the FB depending on the farmland condition (e.g., JPY 6,000 per 0.1 ha annually, equivalent to approximately USD53). Most of them were involved in Farm Nakamura as board members (n = 7) or cooperative members (n = 5), except for one non-cooperative member (n = 1). As of December 2016, Farm Nakamura consisted of 31 landowners in the Preceding Area who held a share as cooperative members (i.e., JPY10,000 per 0.1 ha, equivalent to approximately USD89). The cooperative corporation system allowed each of them to participate in decision-making on farm management, having a right to vote at plenary assemblies, independent of the amount of share in the capital investment. Among them, nine members served as a board of directors to represent Farm Nakamura in executing operations and arranging institutional contracts. In practice, the board members engaged in corporative planning and management (e.g., financing, human resource management) and cultivation and land management (e.g., cropping, maintenance). Farming practices, however, drew on practical support from the villagers regardless of cooperative membership. At each village, one of the board members led cropping activities by engaging in cultivation while recruiting villagers on an as-needed basis, particularly during peak periods, in return for an hourly wage.8 The responsibilities for maintaining cultivated land (e.g., weeding on levees and water management associated with the land) customarily fell under cultivators, whereas those for farm roads and water channels, perceived as common properties of each village, were collectively taken by all villagers (including farmers and non-farmers). However, given the increased workload through farmland aggregation, Farm Nakamura planned to maintain the cultivated land also by soliciting the support from villagers, while having the farm roads and water channels maintained continuously through village-based traditional seasonal events. For maintenance activities, economic incentives were provided in the form of hourly wages with the aid of government subsidies. The respondents who opted for independent farming (n = 3) planned to grow crops, maintain farmland and sell their products (and sometimes process the products) at their individual farms. One farmer in his early 60s, without land in the district, had expanded across different villages even beyond the district through conventional tenancy arrangements and planned to continue cultivation by consolidating land into one village as a central management entity after land improvement (hereafter called Large Rice Farm A). Two others were not

The Case of Farmland Banking 169 planning to expand. One of them, in his early 40s and without land in the Preceding Area but in the district, had moved back from a city in 2012 and started vegetable farming independently. He planned to continue individual farming on the same scale while changing the tenancy from the landowners to the FB (hereafter called Small Vegetable Farmer). Another, in his early 70s, who had become a full-time farmer upon retirement from his non-farm job, had been farming neighbors’ land besides his own (hereafter called Small Landed Rice Farmer). Assuming his retirement from farming in several years, he planned to halve the farming area and limit it to his land. It would then be subcontracted by Large Rice Farm A who would make an official tenancy contract with the FB. The respondents from the Succeeding Area (n = 10) were unsettled on tenancy arrangements due to the provisional planning stage for land improvement, but half of them had already determined their way of participation (n = 5) and the others were undecided (n = 5). Those decided were planning either to retire from independent farming for the FB program (n = 3) or continue independent farming (n = 2). Among the former, two were planning to be involved in communal farming at Farm Nakamura, while one was planning to retire from farming but had yet to decide to what extent he would participate in communal farming. Two respondents who planned to continue independent farming had been full-time farmers. One of them, in his early 60s, had actively expanded the farm by aggregating land across four villages including his residential village in the district (hereafter called Large Rice Farm B). After land improvement, his cultivated farmland was to be consolidated into his residential village, whereas he was hoping to further expand by taking advantage of improved efficiency. The other, in his mid-60s, had been organically growing vegetables for sale as well as rice and other crops mostly for self-consumption and conservation (hereafter called Landed Organic Farmer). To preserve organic soil, he planned to request the exclusion of his vegetable farmland from land improvement while continuing rice farming on his own land possibly through land consolidation. The respondents who were undecided had been farming their neighbors’ farmland in addition to their own. They were still capable of independent farming, but wondering whether to continue to do so under the changing farming environment.

Negotiation of a bundle of rights to farmland Alienation rights Landowners had an alienation right that enables them to sell or lease out some or all their rights to farmland to someone else, while having certain obligations (e.g., stewarding the land as farmland). With this right, they could legally sell their farmland (albeit under some rules such as permission from an agricultural committee) but, in reality, they could hardly sell it at a good price under the current farmland price depreciation, particularly in the hilly rural region. The FB program in combination with land improvement offered an opportunity for landowners to gain the standardized land rent by farming out the land to the

170  Maiko Nishi FB while keeping their ownership right. In particular, landowners were able to invest in agricultural infrastructural development for more productive farmland use only with the minimum cost share of land improvement. This was because the national policy minimized the share of the project cost borne by beneficiaries to the extent that subsidiary conditions were met for farmland aggregation and consolidation (Ishikawa Prefectural Government, 2016; MAFF, 2008, 2017b). Given that most of farmland planned to be aggregated into Farm Nakamura in a consolidated manner, the cost borne by the beneficiaries was indeed minimum.9 Landowners’ participation in the FB program also required compliance with the FB Act and the rules relevant to its program implementation. By design, the FB program systematically separates owners from subtenants in tenancy arrangements. Once landowners farm out their land to the FB, they cannot control to whom their land will be sublet while having to agree on a long-term tenancy contract (usually for 10 years). Under the prior consultation and discussions within the district, however, the major subtenant had been determined as Farm Nakamura, whereas a few other subtenants were also local farmers. Due to landowners’ familiarity with and trust in these candidate subtenants, many landowners decided to farm out their land to the FB to be farmed by the local subtenants through longer-term contracts. Nevertheless, some of the respondents, including those who planned to farm out their land to the FB, shared various views including concerns or anxieties about to what extent they could keep or otherwise lose other rights to farmland if they leave the alienation right to farmland to the FB.

Exclusion rights Under the FB program, independent farmers were able to continuously secure an exclusion right, serving as proprietors (Schlager and Ostrom, 1992) to have both rights and obligations to regulate farmland use, invest in the agricultural system and decide who has access to the system. For instance, with the presence of potential successors, Landed Organic Farmer decided to continue independent farming so as to continuously and fully control his organic farming by maintaining the exclusion right. He had made considerable efforts in developing organic farming through trial and error since 1989 (including the efforts in identifying appropriate methods, giving special care to crops and developing sales channels). At the same time, he had the zeal of overcoming the challenges and feeling fulfilled when his efforts became rewarded. Given that the organic soil was critical for the continued organic farming on his vegetable farmland (luckily existing cohesively at the fringe of the land improvement project area), he asked for the exclusion of vegetable farms from land improvement. Also, Large Rice Farm B chose the continuation of independent farming based at the incorporated farm building on the 20-year plus efforts in expanding the farm scale, while keeping the exclusion right for the continued efforts. With this right, he planned to advance cultivation methods and further expand the scale from the current 10 to 40 ha by taking advantage of the efficiency to be improved through land

The Case of Farmland Banking 171 improvement and also drawing on government subsidies for mechanical investment and additional employment. However, those who planned to retire from independent farming were risking the exclusion rights to their farmland. For instance, a cooperative member in his early 50s expressed his forlornness due to the lost feeling of his own field where he used to bear a burden in both physical and spiritual terms (e.g., worries about irrigation and weeding, daily visits to farmland for care) but looked forward to the next, arising from his direct control and management of the land. Having already handed over his farmland for land improvement reconstruction, he was puzzling over the huge shift in his lifestyle and identity from a farmer to a nonfarmer, though presuming that he would need to engage more in farm management when he would be more senior at Farm Nakamura. Also, one respondent in his 60s from the Succeeding Area, who was indecisive about his involvement, stated his anxiety about potential risks in consideration of a possible increase in the cost share for land improvement (10 December 2016): The landowners in our village … lightly signed the preliminary consent only by looking at the opening of the story, but I guess they gave consent without fully understanding each scenario of the story. … Although I was briefed on the FB program, its pros and cons didn’t go straight over my head, but after a while eventually now I understand it will take almost a decade to complete the construction work for land improvement, and after that, we should lease out our land to the FB for a decade for the initial contract. So, this initiative will last for almost two decades. In such a long run, I started wondering, what will happen if there is no heir in each household upon the end of the contract as even now we are all aging already and may not live then. … Though city officials tell us about the figures of subsidies, the figure a few years ago, that for the present, and that for the future are changing from time to time. When we first heard, there was certainly substantial advantage in initiating land improvement, but now I sometimes think there is not much. … If the work starts out late, our repayment for local cost share may even linger for many years in the future in the worst scenario.

Management rights Cooperative members secured a management right to their farmland under the collective responsibility for communal farming. They played the role of claimants (Schlager and Ostrom, 1992) to improve an agricultural facility through attaining the local consent to achieve a goal of better productivity and sustainability. Under the decision-making system of Farm Nakamura, each of all the cooperative members had an equal right to vote in plenary assemblies to participate in collective decision making on farm management regardless of the amount of capital subscription. Their participation in plenaries allowed them to understand the status and progress of farm management and evaluate the potential of further development. They could also have a say for a change in direction,

172  Maiko Nishi though a decision should be made collectively. In particular, the board members, being responsible for the execution of farm management (albeit based on the plenary decisions), had a stronger and more direct rights and responsibilities for farm management than other cooperative members. Different from the independent farmers, however, either board or other cooperative members had to collectively make decisions and take action in a concerted manner across different villages, rather than freely deciding on farm management and executing its operations. In this regard, one respondent in his early 60s was indecisive about whether to join the FB program, particularly in consideration of the limited possibility to continue the traditional, manual techniques for drying harvested rice (hazaboshi) under the FB program. Noting that practicing such farming methods at his discretion had given him a fulfilling feeling, he expressed disappointment about a likely discontinuation of such farming under the FB program (8 December 2016): It’s as if my job will be taken away. I can work at the corporation, … but it’ll be impossible to have my way with farming. … Once land is improved, farming will get nothing without mechanization, and I have to make an about-face on farming and can no longer practice hazaboshi (manual drying techniques). … Currently, I have no time in busy farming seasons. In my case it takes a few months to get it done compared to one week for others. My way produces little, while taking time and space. … But, my rice is sweeter and people say it’s tasty…. People who visit here say “spectacular”, looking at the terraced paddies with the drying harvested paddy rice. … It’s indeed laboring, as I’m doing what can’t be done particularly with no family member who can work with me. But it’s very indescribable to have a sense of accomplishment after getting my job done.

Withdrawal rights Villagers, including non-cooperative members, had a withdrawal right to farmland and associated facilities (e.g., farm roads, irrigation channels) through their participation in cultivation and farmland management activities. Even outsiders, if recruited by Farm Nakamura, were able to cultivate the land and harvest agricultural produce in return for wages or salaries. Acting as authorized users (Schlager and Ostrom, 1992), they were authorized to withdraw resources and utilities of farmland under certain restrictions controlled by the farm. Yet, the extent of the withdrawal right varied among different actors involved in these activities. Landowners participating in the FB program, if they opted out of cooperative membership, were unable to participate in a decision-making process for farm management. Nevertheless, all of them could participate in the cultivation and farmland management activities when called for by Farm Nakamura (for cultivation and maintenance of cultivated land) or village associations (for other maintenance activities). In fact, one respondent in his late 60s, who planned to

The Case of Farmland Banking 173 join the FB program as a non-cooperative landowner, shared his sense of responsibility to participate in farmland maintenance activities as a proud tradition of his village not necessarily for economic compensation but for collaborating on local heritage preservation (9 December 2016). However, several respondents from the Preceding Area shared their observation of the villagers’ receding not only from cultivation but also from farmland management practices, particularly on the cultivated land. As such, the recession from collective action was occurring despite the wage compensation given for their work, and they expressed their fear of more serious labor shortage for farmland management along with the farm scale expansion in near future through the FB program. What the respondents heard from those not involved was their excuses or unwillingness – e.g., having other jobs to do, not liking to work under the hot weather in summer, leaving such tasks to other interested villages (particularly those employed by Farm Nakamura) and being unmotivated to go out for miscellaneous works. One respondent, a board member residing in the village where farmland had been already leveled through land improvement elaborated on the declining commitment of landowners to farmland management in general through their participation in the FB program (9 November 2016): People used to care about paddies, taking care of a grass and a stone on the land. But now they have only ownership rights, and their use rights were handed over to the cooperative. It comes easy for them, but I feel something tenuous and that’s sad for only us taking care of farm. As they still have ownership rights, I wish they could go in more for a look-around or they could be a little more involved. They used to farm the land on their own. It’s indeed changing over about two years.

Access rights Villagers or even visitors, who were not involved in cultivation and farmland management, still had an access right to farmland. As authorized viewers (Schlager and Ostrom, 1992), they could enjoy seeing the agricultural landscapes, although they could not harvest agricultural produce and withdraw other tangible benefits from farmland. The significance of such a viewers’ right was highlighted by several respondents. For instance, one who continued traditional methods of drying harvested rice expressed his glory in hearing visitors’ admiration of the spectacular landscape of terraced paddies (8 December 2016), whereas other landowner who had retired from farming prior to the FB program stated the irreplaceability of the agricultural landscape intrinsically associated with his memories and remembrance (9 December 2016). While appreciating such values of intimately viewable agricultural landscapes, some of the respondents suggested that the FB program adoption may possibly reduce landowners’ rights merely to access rights in practice. For example, one respondent in his early 80s currently engaging in independent farming in the Succeeding Area alluded to possibilities of lessening the power of his village

174  Maiko Nishi and himself to control all other rights to farmland and limiting his rights to the access once farm management would be dominated by the districtwide Farm Nakamura (7 December 2016): If only about ten people farm around 100 hectares of land under the corporation, the rest of the people will only see their farming in silence and can’t do anything even though we want. … If our village takes an initiative, I think, a few of us could sufficiently manage 20 hectares of farmland once land is improved. Farmland is improved finally, but if it will be managed only by Village Uemura, that’s not so great. I think we should have our central management farm entities on our own at each village. So, I’m asking young people in our village a riddle, but they and their parents don’t provide favorable responses. If I ask them much, they say “You’re a communist!” and shrink away from me. Even with economic incentives (e.g., wages), many of the landowners were more or less receding from farmland management, and increasingly relinquishing some of their rights (e.g., withdrawal, management, etc.) under the FB program. These landowners may not be motivated to exercise an access right solely to their farmland in consideration of the opportunity cost of being there. In this connection, one respondent in his late 60s drew a plausible scenario in the next few decades (9 December 2016): I have thought many times, but have no idea about what we could change for the better. There is no way to stem the declining population. I’m scared when I start counting the households that would remain. … I feel a sense of crisis that our village will disappear. … We are now working on land improvement, but there will be some households leaving their farmland to large farms and moving away from here. Even if land is improved, but if people move out, it’s sad. … People now popularly say “U-turn” (i.e., moving back from cities), but there’re only a handful of people trying to move back in reality. In fact, there are a few but they again move back to cities. That’s indeed bitter. … Farming can’t be enough to feed themselves unless they really fully and professionally engage in it, and there’s no other job here. … We’ve cherished our village, treasured the land of our ancestors, and taken care of paddies and forests while living. But, if we leave them up to large farms, some of us may move to even a bit easier places to live. … There’s no need to be here. … Even now young people do so. They seek jobs that they like to do. There’s no such a job here, and they move out to cities.

Conclusion The FB program adoption allowed landowners to secure their ownership rights but all together changed the arrangements, extent and meaning of the bundle of rights to farmland. The landowners were able to preserve alienation rights

The Case of Farmland Banking 175 despite the designed systematic separation between owners and users under the FB program, given that subtenants were largely pre-determined through the local negotiations in this case. However, most of them, except for those who opted for independent farming, lost exclusion rights to fully and relatively freely control farm management at their individual discretion. The cooperative members of Farm Nakamura could secure management rights to some degree depending on their roles in the farm (e.g., board vs. other cooperative members), while most of the villagers (including non-cooperative members and visitors) were able to secure withdrawal rights to a certain extent in return for economic compensation. Yet, many of them were increasingly demotivated to be involved in farm management and withdraw resources even with economic compensation. Here, the program adoption radically unbundled the bundle of rights at least in two ways. On the one hand, the FB program expedited farmland aggregation by encouraging the remaining active farmers to retire from farming, particularly from independent farming. In this process, despite the preservation of management rights through participation in communal farming, they became divested of exclusion rights, lessening their direct, individual (or familial) control power on farmland. Even if they secured management rights through their involvement in the districtwide farm, the extent to which they could exercise the management rights seems to differ in accordance with the management scale. With the establishment of Farm Nakamura, the new property institution allowed for the continuation of collective action to some extent, but those who were more influential to decide on farm management at the village level could be less powerful at the district level. On the other, the land improvement projects enabled farmland consolidation through which the physical structure and appearance were drastically changing. Land consolidation allowed some farmers (particularly those who had better economic and technical capacities) to advance their farming methods in a modern sense but forced others to change their ways of life (e.g., farm retirement, discontinuation of traditional farming practices), affecting their capacities to retain and exercise exclusion rights. It also erased the boundaries of the previously fragmented paddies and thus diluted villagers’ intimate attachment to farmland. Even with vested rights to manage farmland collectively and withdraw resources through the involvement in communal farm, the landowners became less interested in doing so in practice. As such, multiple rights to farmland were bundled and intricately interconnected, affecting landowners’ motivation and commitment to steward their land. Those involved more or less in farmland management – including landowners, tenants and other villagers – have embodied the meaning of farmland both individually and collectively by finding their power on the land, negotiating their multiple rights to farmland internally and externally, competing and compromising with each other, recalling their memories and experiences in the land, and building on the history and culture of farming as a way of life. Their motivation to manage and withdraw the resources from farmland in practice was deeply connected to these value perceptions on farmland (i.e., what farmland means to them) involving economic, biophysical, cultural, social and historical

176  Maiko Nishi dimensions. Thus, tenancy arrangements cannot be modeled in mere economic terms but need to more preciously account for rent as a social relation. The adoption of the FB program was expected to adverse the trends of agricultural abandonment and promote more sustainable regional development, while contributing to the achievement of the national policy goals for agrarian reform. Reducing landowners’ rights to mere alienation rights (though access rights can be accordingly preserved in many cases), however, appeared not to buttonhole them in the community but rather to let them move away in recognition of the opportunity cost of staying there (e.g., decent job and educational opportunities). The study implies that the program adoption with favorable economic incentives may contradictorily enhance agricultural abandonment in the long run. The findings suggest that land tenure is more than an economic relationship and that complementary attention has to be given to subjective, cultural and communal aspects.

Notes

1 The population mainly engaged in farming in farm households was reduced to oneninth from 11.75 million in 1960 (MAFF, 2018) to 1.36 million in 2020 (MAFF, 2021a). The area under cultivation has diminished by 28 per cent from the postwar peak of 6.086 million ha in 1961 (MAFF, 2020) to 4.372 million ha in 2020 (MAFF, 2021b). 2 For instance, the farmland wealth index of Japan (i.e., the account for the comprehensive wealth of farmland considering crop yields, crop prices, rent, crop harvest acreage, discount rate, acreage under permanent cultivation and acreage under permanent grazing) calculated for the period between 1990 and 2008 shows a continuous decline (Sato et al., 2014). 3 The average prices of rice paddies and dry fields decreased respectively by 43.4 per cent and 39.2 per cent between 1995 and 2020 (National Chamber of Agriculture, 2021, p. 1). 4 A package of economic development measures initiated by the second Abe administration (2012–2014). 5 A rate of nationwide farmland farmed by major entities that are technically capable of efficient and stable farm management; e.g., corporate farms and large family-­ owned farms. 6 The budget for the first fiscal year of 2014 was JPY70.5 billion equivalent to approximately USD643 million, much larger than that for previous tenancy programs (Ando, 2014; Kobari, 2015). 7 The population decreased from 2,390 (468 households) in 1954 to 948 (329 households) in 2014 (according to the document shared by NHDA). 8 The board members were also paid an hourly wage besides the annual compensation if they engaged in cultivation practices. 9 In one of the project areas, the cost borne by the beneficiaries was JPY177,975 (approximately USD1,567) for the five-year construction work.

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10 UNAUTHORIZED NEIGHBORHOODS, LAND RENT, AND WORKING-CLASS STRUGGLES IN INDIAN CITIES THE SLUM QUESTION REVISITED Sai Balakrishnan In the 1970s, countries such as India, Brazil, and Mexico – which had been at the forefront of the Third World political project and that had pursued strategies of import-substitution industrialization as a way of breaking out of dependency on the former colonial cores – saw an explosive rise of unauthorized neighborhoods. Different from the earlier generation of inner-city slums,1 these unauthorized neighborhoods represented a new urban politics of what Holston (2007) calls insurgent citizenship, whereby, bucking western-liberal notions of propertied citizenship, the non-propertied working classes staked their claims on the city and urban amenities via land occupancy. A key aim of this chapter is to link the timing of the proliferation in unauthorized neighborhoods and insurgent land occupation to the global economic restructuring in the 1970s, including the rise of transnational firms and the global turn to flexible-­ specialization (the pressures of which undid the former Third World commitment to import–­substitution–industrialization). In short, how can we read in tandem the proliferation of insurgent land occupations alongside the swelling ranks of casualized and informalized workers in the 1970s? How does reframing unauthorized housing not as a slum or housing question (cf. Engels, 1887) but as a labor question allow us to recuperate the working-class struggles that are at the crux of these land occupations? In this chapter, I argue that what gets glossed over as slums are in effect working-class neighborhoods whose resident-workers organize themselves collectively not only to stake claims on urban consumption amenities such as housing, but also to gain control over the generation and allocation of land rents as a way of staking claims on the urban economy. In making this argument, I write alongside three important and inspiring strands of critical urban scholarship, but I also push back against some of the assumptions underlying these works in an effort to re-politicize land-rent struggles as working-class struggles. The first of these works is around slums and collective consumption. In the 1970s and beyond, in the face of intensifying territorial competitiveness and fiscal austerity, the informal working class started making claims on the state for collective access to land, housing, water as public services, and not as DOI: 10.4324/9781003280255-14

The Slum Question Revisited 181 commodities to be purchased individually via the market (Castells, 1983; Mayer, 2006). These were critical struggles, not least in an era of heightened privatization of public services. But viewing unauthorized neighborhoods as sites of collective consumption runs the risk of reducing the informal working class to homeowners or slum-dwellers, identities that strip them of their vital role as workers in the capitalist city. Borrowing from Benjamin’s (2008) pioneering work on “occupancy urbanism,” this chapter analyzes the 1970s unauthorized neighborhoods as sites of productive capital and foregrounds the working-class struggles that underpin these land occupations. The second strand of scholarship is around the revived interest in progressive planning circles around Henry George’s (1879) ideas of land value capture. The argument here is that land values increase not due to the labor of landowners, but rather due to state actions (such as the provisioning of public services) and that these publicly generated land value increments need to be recaptured for the public benefit. Public land ownership – exemplified by Amsterdam, Hong Kong, Singapore – is seen as one of the most effective property regimes for realizing these Georgist social-equity and just-city ideals (Fainstein, 2012; Haila, 2015). The planning sequence here – of planned urban growth and then capture of the windfall rents – privileges the state as the arbiter of the public interest. In contrast, unauthorized neighborhoods, with their initial act of occupying land, upend these familiar planning sequences and open up far more radical notions of the just city with urban subaltern classes retaining control over the generation and allocation of land rents. In fact, the very language of land rent, which takes from Marxist theories of surplus and is entrenched in class struggles, is in stark contrast to the more neutral and consensual term of land value capture. Viewing unauthorized neighborhoods as struggles over the capture of land rent can re-politicize land-use planning. The third strand of critique is a reaction to how trade-unions in Indian cities adjusted to the 1970s global context of industrial restructuring and flexible-­ specialization. Drawing from the experiences of Bengaluru (formerly known by its anglicized name, Bangalore), this chapter takes a close look at the critical juncture of the 1970s and shows how decisions taken by labor leaders during that decade steered the city toward a more placatory working-class politics. Capitulating to the terms of capital, trade-union leaders dealt with the urban crisis as a housing question (cf. Engels, 1887), and they played a decisive role in the explosive rise of unauthorized housing layouts by becoming informal land developers themselves. In so doing, and in a reprisal of Engels’ critique on the bourgeois-socialist solutions to the housing crisis of the working class, trade-union leaders largely left the processes of capitalist accumulation unchecked. In fact, they placated what could have become a dangerous class of precarious and surplus labor through mediating their access to land and land rents. I am particularly interested in an anatomy of the 1970s for exploring the paths not taken, and to ask how land rent can be re-politicized not only in Indian cities, but also in the global north with its own histories of insurgent land occupations.

182  Sai Balakrishnan The rest of this chapter is organized as follows. The next section situates unauthorized neighborhoods within critical urban scholarship and introduces some key analytics – collective consumption, the housing question, land rent, land value capture – that form the scaffolding for my argument. I then explore how an urban crisis was depoliticized as the slum question in the 1970s using the instances of slum patronage and clearance from Bengaluru. I conclude by reflecting on the paths not taken and gesture toward some possibilities for re-­ politicizing land-use planning with insights from Bengaluru and Indian cities.

Of slums, land rent, and working-class struggles In the 1970s, cities in the global south (or, more precisely, Third World cities) saw an explosion in a new form of unauthorized neighborhood variously called periferias in Brazil, colonias proletarias in Mexico, and Revenue Layouts in India. Though managing and disciplining the laboring poor through the spatial rule of slums has a long history tracing back to colonialism (cf. Chhabria, 2019), the 1970s unauthorized neighborhoods demanded new vocabularies and frames of analysis that took into account the global economic and democratic restructuring of that tumultuous decade. In their analysis of the 1970s unauthorized neighborhoods in São Paulo, Holston and Caldeira point to how these auto-constructed neighborhoods opened up an unprecedented new paradigm of urban citizenship: “in contradiction to much 19th- and 20th-century social theory about the working classes, Brazil’s urban poor became citizens not primarily through the struggles of labor but through those of the city - a process prevalent, indeed, throughout the developing world” (Holston and Caldeira, 2008, p. 20). In other words, the politically enfranchised urban poor staked their claims on the city via land occupation. In the context of deindustrialization, they managed to transform these “sites of metropolitan degradation [into] emergent spaces of invention and agency” (Ibid, p. 18). In Castells’ (1983) work, even as he celebrates the collective consumption struggles of squatter settlements, Castells points to the possible limits of grassroots collective action. After all, these “squatter settlements are crucial as a means of consumption that allow for a cheap reproduction of labor power, itself making possible the lowering of the social wage assumed by capital or the state in the economies of developing countries” (Ibid, p. 212). In short, Castells reminds us of the consolidation of unauthorized neighborhoods within the context of a new social division of labor characterized by the rise of the transnational corporation and unauthorized neighborhoods as the reservoir of cheap labor power within flexible new forms of supply-chain capitalism. These works open up new ways of seeing and analyzing the 1970s unauthorized neighborhoods and raise key questions on how to make sense of large-scale unauthorized land occupations. Are these land occupations a reiteration of Engels’ housing critique, in that they solve the housing question for a flexibly organized working class, and, in the process, reproduce, as opposed to resist, the institutional arrangements of capitalism? Or do these

The Slum Question Revisited 183 land occupations open new political possibilities wherein land can be the terrain for subverting and challenging capitalism? To explore these questions, a key target of this chapter is the framing of unauthorized neighborhoods as the sites of working-class housing and collective consumption. The context of the 1970s, with the turn toward spatially dispersed and flexible forms of industrial organization – marking a departure away from the Fordist–Keynesian regime of industrial organization in the US and away from the import–substitution–industrialization regime in former Third World countries – is important here. This decade of flexible specialization brought sharp relief to new readings of unauthorized working-class neighborhoods not only as sites of collective consumption, but also crucially as sites of productive capital. The workings of flexible-specialization made visible the realization that the big factory is not the sole and inevitable endpoint of industrial ­capitalism and that the trajectories of industrial capitalism can be variegated with the big ­factory in creative combinations with the putting-out, artisanal, and informal economy. In other words, though urban historians had focused on working-class neighborhoods as sites of political mobilization and claims-making (see, for instance, Katznelson, 1986), the 1970s flexible-specialization turn revived a neo-­Marshallian focus on the neighborhood itself as a working-class economic cluster or industrial district. In this context, Benjamin’s (1985) ethnography of unauthorized neighborhoods in Indian cities reframes these neighborhoods as “pro-poor agglomeration economies.” In short, if the post-1970s saw radical new theories in economic geography with scholars seeking to make sense of the new forms of post-Fordist industrial agglomeration exemplified by the flexible technopoles such as Silicon Valley, Benjamin affords the same close urban analysis to the unauthorized working-class neighborhoods and recuperates them as sophisticated and thriving sites of flexible industrial clusters. At stake in this reframing of unauthorized neighborhoods is the very notion of land rent. Land rent, which Marx (1894, Ch 37) defined as the economic form in which landed property is realized under capitalism, is the surplus, or planned increment, appropriated through priority claims over landed property. In much of the Western scholarship which is premised on cities with private property as the dominant mode of organizing the land-use, land rent is framed as a property contradiction (Foglesong, 1986) between, on the one hand, propertied fractions of capital whose surplus relies on rising land rents and, on the other, manufacturing capital that benefits from socialized land as a form of the social wage so firms can depress the money wage. In contrast, Benjamin’s analysis of unauthorized neighborhoods as flexible industrial clusters shows how these neighborhoods with mixed land-uses and with diverse, non-privatized forms of land tenure (that get lumped into the totalizing language of slums) allow for a nexus of real-estate surpluses and industrial profits. Key here is what Benjamin (2008) calls occupancy urbanism; i.e., the collective democratic power of propoor groups to occupy and stake claims not only on the land, but also on the rents that accrue from these lands. These captured land rents can then be invested as much-needed forms of scarce capital into localized firms and economies. In

184  Sai Balakrishnan other words, the non-privatized forms of land tenure and the democratic power of poor groups to occupy land enables them to appropriate real-estate surpluses for industrial profits. Benjamin’s argument recalls an earlier critique of urbanization and planning by Baross (1990), who showed how the taken-for-granted planning sequence in land and neighborhood development – of planning a neighborhood, extending public services such as water and sanitation to it, building to code, and then occupying the land and buildings – has a normative bias against the poor. Instead, the flipped sequence of occupying the land, then exerting collective pressure on the state to extend public services, and, finally, negotiating with the state to grant ex-post facto recognition as a planned neighborhood enables the resident-workers to incrementally capture the capitalized land values of successive phases of land development. In short, these insurgent practices of subverting and reversing the land-use planning sequence are a form of what has now become a fashionable buzzword within planning circles: land value capture. But unlike the vaunted land value capture mechanisms that reproduce the capitalist planning sequence of planning urban growth and then capturing the speculative windfall land rents for the public coffers, these unauthorized neighborhoods upend bourgeois planning practices and allow urban working classes (and I use this term beyond the narrow imagination of the proletariat in the big factory) to capture land rents and gain access not only to urban amenities, but also to the urban economy. To unpack this argument on unauthorized neighborhoods and land rent, this chapter focuses on the South Indian city of Bengaluru. In the early decades of post-Independence, Bengaluru was the haloed center of public-sector industries and its industrial base ran the gamut from manufacturing tractors to watches. By the early 2000s, the city had made a new mark for itself on the global map as the Silicon Valley of the East, with a crescent-shaped ring of information technology (IT) enclaves ringing the old city center. Bengaluru as an instructive case reveals how unauthorized neighborhoods and land-rent dynamics are transformed across these regimes of industrial accumulation. Here, I am particularly interested in the pivotal decade of the 1970s, when import-substitution industrialization started unraveling and gave way to flexible new forms of industrial districts such as the IT agglomeration. Though unauthorized neighborhoods had existed in Bengaluru since the turn of the 20th century (if not earlier), in the 1970s, trade-union leaders and land-housing parastatals resorted to new ways – slum patronage and slum clearance – of managing an economically precarious but electorally mobilized constituency of labor-voters. In the process, these labor leaders and parastatals captured rising land rents and foreclosed the possibilities for more insurgent and emancipatory cities. In a nutshell, the slum question is fundamentally about locational conflicts around land rent: who captures the land rent through what process and what do they do with it? The next section turns to the political-economic alliances around land rent across different regimes of industrial accumulation in Bengaluru to tap into the core of the struggles around unauthorized neighborhoods as working-class struggles.

The Slum Question Revisited 185

Depoliticizing Bengaluru’s slums: 1970s and beyond Bengaluru’s postcolonial industrial history can be broadly periodized into three eras: (1) the 1947–1971 public-sector industrialization period of patriotic production (Nair, 2005, p. 136), (2) the 1971–1991 period of flexible specialization, and (3) the post-1991 period of IT-fueled growth of the network city (Heitzman, 2004). (1991 was the year when India’s Central Government officially announced its economic liberalization reforms.) Though Bengaluru’s economic history had been crucially shaped by textiles and liquor, it was the public-sector enterprises of the 1940s and 1950s that marked the city’s planning institutions in decisive ways. The earliest of these public-sector enterprises was Hindustan Aeronautics Limited (HAL), set up in 1940 for wartime production and with ownership transferred to the Indian government after Independence. As the “dreamworlds of postcolonial nationalism” (Roy, 2007, p. 134), these public-sector enterprises were spatially planned as enclaved townships. They had enterprise-wise unions representing all classes of employees and planners envisioned these enclaves to be protected from surrounding slums and villages (Nair, 2005). In reality, the public-sector townships had dense social and economic linkages with the surrounding unauthorized neighborhoods, with township employees relying on their markets and other consumption amenities. Furthermore, the unauthorized neighborhoods were sites of informal economies that had backward- and forward-linkages with the large firms. By the 1980s, the public-­sector city had made way for the private-sector-driven IT city. Like Silicon Valley, whose just-so myth of “immaculate innovation” belies the strong institutional foundation of the military-industrial complex on which it was built (Markusen et al., 1991; Walker, 2016), Bengaluru’s spectacular rise as the “new argonaut” (Saxenian, 2007) of IT similarly sedimented onto older economic-geographies of public-sector enterprises and their close linkages with defense manufacturing. Like their public-sector predecessors, the IT economy is also enclaved, with IT parks and gated communities set amidst agricultural lands and unauthorized neighborhoods that teem with speculative real-estate activity. It is against this brief backdrop that I focus on the decisive decade of the 1970s and of how trade-union and parastatal responses to Bengaluru’s economic restructuring during this decade have enduring effects on the city’s land-rent and labor dynamics.

Slum patronage In the 1970s, reflecting global shifts in the internationalization of capital and industrial restructuring into global supply chains, the former Third World countries turned away from their earlier commitment to import-substitution industrialization and toward flexible specialization. In India, an economic recession in the early 1960s prompted a reconsideration of the vertically integrated stateowned factory and, from 1966 onwards, public-sector enterprises had started

186  Sai Balakrishnan subcontracting their manufacturing to small firms. By 1977–1978, for instance, the city’s first public-sector enterprise, the Hindustan Aeronautics Limited, had subcontracting linkages with 113 small-scale firms and 10 exclusive ancillaries (Nagaraj, 1984; 1989). Subcontracting, aligned with the small-batch and justin-time imperatives of flexible specialization, offered public-sector enterprises immense flexibility to deal with market vagaries by passing on the risks to smallscale firms. Bengaluru’s small-scale firms were largely clustered in the Peenya Industrial Estate set up in the early 1970s and touted to be the largest flexible-specialization industrial cluster in Asia (Holmstrom, 1994). The small-scale subcontracting firms deliberately kept firm sizes at less than 50 workers, thus making them exempt from labor regulations. As the large factories got reorganized into these industrial clusters, the city witnessed a spurt in unorganized workers. These flexible workers were often left out of the representational politics of traditional trade-unions which generally confined their organizing to ­factory-based workers. As flexible workers reorganized into new unions, they came under the brunt of repressive state policing. The unorganized workers in Peenya Industrial Estate, for instance, organized as an affiliate of the Bengaluru Labor Union, an umbrella union that represented a range of unorganized workers from hotel workers to garment workers to small-scale metal fabrication workers, but the state-government set up a police station within Peenya “to protect the property of the owners and arrest the striking workers” (Nagaraj, 1989, p. 26). Under these circumstances, trade-union leaders, capitulating to their weakened structural leverage vis-à-vis firms, made a foray into informal land development as a response to the housing needs of the swelling ranks of unorganized workers. In collusion with peri-urban agricultural landowners whose lands were being subsumed by the expanding municipality, trade-union leaders became developers of large unauthorized housing layouts called Revenue Layouts. In becoming land brokers and developers, trade-union leaders became interlopers in a previously unmediated, informal land development process and, in the process, changed the dynamics of land rent capture. During the heyday of public-­sector industrialization in the 1950s and 1960s, the lower ranks of ­public-sector employees, such as helpers, learners, and watchmen, accessed land by directly engaging in informal market transactions with agricultural landowners and/or occupying state-owned land. In processes reminiscent of Baross’ (1990) reversed land-development sequence, they organized themselves into a vote bank and exerted pressure on local elected representatives to extend public services and urban amenities to their neighborhoods. (For more details, see the next section on K.R. Market). The 1970s maneuver of trade-union leaders reclaiming their legitimacy in the wake of global economic restructuring by mediating the access of unorganized workers to land and housing inaugurated a new form of land rent capture that we have called the rise of the real-estate politician (Balakrishnan and Pani, 2021). As informal developers in the 1970s, these trade-union leaders had first-mover advantage in the post-1991 liberalizing land regime. As part of a wider wave of post-Cold War land transformations, India, like other former communist and socialist countries, repealed protective laws

The Slum Question Revisited 187 that regulated land transactions and, in the euphemistic verbiage of the market, “opened up” its land market to private developers and investors. Having amassed vast land banks, the real-estate developers of trade-union origins have gained almost monopoly control over the windfall profits of a booming real-estate market. They then invested the captured land rent in expensive election campaigns, since winning elections grants them regulatory access to having their unauthorized layouts legalized ex post facto. Here then is a developer-politician nexus of land-rent capture that does not fit within the sanitized bourgeois conceptualization of value capture and that is often mistakenly dismissed by critical scholars and activists as corruption. Though real-estate politicians are deepening their pockets, the rise of these politicians whose source of wealth is real estate cannot be written off as individual cases of corrupt developer-politicians, but instead reveals a deeper urban crisis and the resolution of that crisis. If trade-union leaders made their foray into informal land development in the 1970s as a response to the housing needs of a flexible labor force, the IT revolution in Bengaluru, like in Silicon Valley and other technopoles, has fueled a spike in the gig and contract workers overwhelmingly comprised of security guards, Uber and Ola drivers, and Swiggy food-­ delivery workers. Of immense concern is the fact that countries like India are in the throes of what economists call jobless growth with a vast surplus population that cannot be absorbed into the productive economy. It is this economic crisis that the real-estate politicians effectively manage. Through their slum patronage, real-estate politicians mediate the access of a surplus reserve army of labor to capture some of the land rent themselves as homeowners. In effect, slum patronage becomes an astute political strategy for managing an informal and surplus labor constituency that runs the risk of becoming a dangerous class.

Slum clearance The 1970s saw trade-union leaders reframing the urban working-class crisis as a housing problem and solving the problem of worker housing through recourse to unauthorized housing layouts. During the same decade, the state resolved the housing question through a different strategy, viz. through setting up a panoply of land and housing parastatals. One of these housing institutions is the Karnataka Slum Clearance Board whose institutional workings offer a clear window into the role of the state in land rent dynamics. As its name suggests, the Karnataka Slum Clearance Board was set up in 1973 with the mandate of clearing and improving slums. At the core of its mandate is the contested question of what constitutes a slum. The city’s planners defined slums as pockets of blight and as “a most shocking spectacle” (Hasan, 1970, as quoted in Sudarshan, 1998, p. 74) that had to be spatially cleansed. This mode of governing space is what Ghertner (2015) calls rule by aesthetics, where city-planners “make intensely political decisions about who and what belongs in the City” (p. 22) via aesthetic markers of visual order and disorder. Alongside the aesthetic gaze was also the ascendant World Bank dogma of rationalizing land-uses; i.e., of calculating what

188  Sai Balakrishnan economists call the hidden land subsidy of informal sites located on prime land of high land values and of pursuing an economic rationale of relocating these residents to sites of low land-values. Here, Indian cities also took inspiration from Singapore and Hong Kong’s locational logics of public housing: demolishing low-income neighborhoods on prime inner-city land, relocating them to large public housing complexes located on peripheral land, and financing public housing through redeveloping the inner-city areas to their highest and best use (Drakakis-Smith and Yeung, 1974). In effect, what we have in these city-states is the state deploying its unchallenged coercive power to gain monopoly control over land rents and legitimizing its accumulation strategies through building dignified public housing for its resettled citizens (cf. Castells et al., 1990; Haila, 2015). That the slum-clearance parastatals in Indian cities did not have carte blanche over their municipal territories and that the urban subaltern classes had effectively organized themselves into formidable electoral constituencies was a matter of democratic triumph. But democratic deepening was also a source of grave concern for international-financial institutions like the World Bank since an organized electorate could interrupt the rollout of market-friendly reforms. It was largely at the Bank’s behest that the land and housing parastatals were designed as parastatals; i.e., as special-purpose governments that could circumvent messy local democratic processes. To understand the workings of land rent during this regime of land parastatals, let us take the case of Laggere, the largest tenement built by the Karnataka Slum Clearance Board in Bengaluru. Summarily evicted from their inner-city location in the Central Administrative Area, close to the state legislative complex of Vidhan Soudha, in the early 1980s, informal residents were relocated to agricultural scrub land near the then-newly set up Peenya Industrial Area (Sudarshan, 1998). It took the parastatal nearly ten years to complete the construction of the Laggere tenement complex. The intervening decade plunged the resettled residents into severe social crisis (Ibid). Their earlier inner-city unauthorized neighborhood was less than two kilometers from K.R. Market, one of the oldest and most thriving economic clusters that provide varied and heterogeneous livelihoods for the city’s most vulnerable laboring classes. In their ethnography of unauthorized neighborhoods in Bengaluru, Benjamin and Raman (2001) give us a deeply grounded view of the pro-poor agglomeration economy of K.R. Market and its various spillover unauthorized neighborhoods such as Azad Nagar. They show how these unauthorized neighborhoods are spatially dense localized economies supporting a range of manufacturing clusters, such as “retail and wholesale trade in household items, confectioneries, repair shops, hardware businesses, small fabricators, food businesses, jewelry, shops and bamboo baskets” (Ibid, p. 90). Resident-workers initially gained access to these lands through various routes: some of them had occupied the agricultural or gramthana land and formed informal Revenue Layouts, while others had been granted free sites as part of state welfare programs; and yet others had occupied low-lying and other land

The Slum Question Revisited 189 that was marginal and undesirable to the capitalist city. Gradually, over time, resident-workers organized themselves into informal associations that nego­ tiated with local elected representatives. A patchwork of public services was incrementally extended into these neighborhoods. Benjamin and Raman’s ethnography (2001) of the Weavers Layout illustrates what Baross (1990) called the reverse sequence of land development. In 1950, a motley group of lowlevel public-sector employees and various artisanal castes, including an ethnic weaving caste, occupied land in a western ward of the city. In 1961, the weavers organized themselves into an association and, over the next three decades, they exerted pressure on the ward councilor (the local elected representative) to extend roads, drainage and water pipelines, and electricity networks into their neighborhood. After each successful effort at making claims on the local state, the resident-workers were able to capture the real-estate surpluses and reinvest these surpluses as much-needed forms of scarce capital into their localized firms and economies. It is these localized economies that were demolished by the bulldozer and the state’s eviction and relocation plans. In short, what city planners saw as a shocking spectacle (Sudarshan, 1998) was in fact pro-poor agglomeration economies (Benjamin, 2008) that functioned with a degree of sophistication that rivals the celebrated industrial districts such as Silicon Valley. In its logic of agglomeration and clustering, these informal industrial clusters are not unlike Silicon Valley or Bengaluru’s own Electronic City. As Nair (2005, p. 135) emphasizes, in its nascent stages, the IT firms clustered in certain neighborhoods to avail themselves of the economic benefits of spatial proximity and clustering. These neighborhoods were rife with violations as these IT firms did not conform to land-use zoning and building codes. But whereas these land-use deviations were seen as necessary violations for entrepreneurial firms in their early stages of agglomeration and sanctioned not only by the state but also by USAID that exhorted Bengaluru and other local governments to resort to flexible forms of zoning, the pro-poor agglomeration economies enjoy state patronage not through moral claims of citizenship, but strategic negotiations (cf. Chatterjee, 2004). The capitalist city and its politicians cannot ignore these informal resident-workers because they hold democratic power in the form of providing electoral support to competing political parties. Moreover, they have to be pacified to avoid the social costs of them turning into dangerous classes. For this reason, residents of unauthorized neighborhoods in Indian cities can strategically negotiate their occupancy claims with the state and are often granted de facto tenure security. But they are not exempt from the threat of eviction, a case in point being the Laggere tenement whose resident-workers were violently evicted from their inner-city neighborhoods to peripheral sites. Why certain unauthorized neighborhoods resist eviction but not others is beyond the scope of this chapter. Still, a key variable is caste discrimination and its mediating role in vote-bank politics; for instance, the informal residents relocated to Laggere public housing were overwhelmingly of the subaltern Dalit caste (Sudarshan, 1998). The point I want to underscore apropos land rent is that slum-clearance planning enables the state to expropriate land rents that had earlier been under the

190  Sai Balakrishnan control of informal resident-workers. Viewing unauthorized neighborhoods as sites of collective consumption, rather than as sites of productive capital and localized agglomeration economies, flattens the personhood of the resident-worker into slum-dwellers or homeowners. However dignified the new public-housing complexes might be, this form of planning is a discursive sleight of hand that renders invisible the role and subjectivities of these resident-workers as workers. Strangely enough, though the trade-union leaders and the parastatals had seemingly oppositional approaches to the 1970s slums, they inadvertently aligned in their framing of the urban crisis of the time as a housing/slum question as opposed to a question of livelihood. In their own way, they usurped from unauthorized neighborhoods the latter’s unmediated control over the generation and allocation of land rents.

Re-politicizing land In conclusion, what insights do the land occupation and land-rent dynamics of Bengaluru’s unauthorized neighborhood have on the long-debated and vexed slum question? Here, I want to focus on the critical juncture of the 1970s as a way of exploring the paths not taken and ask how urban working-class politics might have taken a different, more insurgent turn if the city’s power brokers had not made the fateful decisions that they did. How, for instance, would ­resident-worker struggles in unauthorized neighborhoods have been different if trade-union leaders had recognized these neighborhoods as industrial clusters and backed resident-workers’ claims to land as worker struggles. By returning to the 1970s critical juncture, I conclude with the implications of the paths not taken: what if unauthorized neighborhoods had been viewed as sites and struggles over productive capital; what if the resident-workers had been backed in their struggles as workers as opposed to homeowners/slum dwellers; and what if the land occupations had gained recognition as instruments of land-value capture? First, though much has been written on the language of slums as an unhelpful placeholder for a diversity of tenure and settlement arrangements stigmatizing and criminalizing the most marginal places and people, it is also important to be cognizant of the important work done by the category of slums. When Bengaluru’s trade-union leaders made their foray into informal land development, they reframed an urban crisis of growing precarious and flexible work as a housing crisis. In a replay of Engels’ critique of the housing question as a bourgeois-socialist solution, they did little or nothing to check the capitalist industrial restructuring that has spiraled into jobless growth. The schism has now widened to a point where these former trade-union leaders are in the thick of slum patronage through facilitating the access of Bengaluru’s precarious and surplus labor-force to land, housing, schools, and other forms of collective consumption. But, in their new avatar as real-estate politicians, they are completely disconnected from any efforts to mobilize workers against an exclusionary urban economy. The political stakes of these 1970s trade-union decisions are high. Many of these real-estate politicians as well as retrenched industrial workers are

The Slum Question Revisited 191 now staunch supporters of a pro-business political party, the BJP, which has been all too effective in mobilizing the anger and frustration stemming from an urban crisis into the dangerous new political project of Hindutva. Reframing unauthorized neighborhoods as sites of productive capital (as opposed to solely sites of collective consumption) exposes the inaction of the state in addressing the economic lives of urban subaltern classes. Second, though the trade-union leaders and the state-parastatal took different approaches to the 1970s slum question, with the former fueling the production of unauthorized neighborhoods and the latter demolishing these neighborhoods, both of them converged in their framing of the resident-workers as homeowners or slum-dwellers. In other words, though one viewed the unauthorized neighborhoods through an aspirational gaze and the other through a pejorative one, they nonetheless reproduced the binary of resident and worker whose spheres of production and social reproduction are cleanly separated into the spatial sites of the factory and the residential neighborhood. Indian cities are today besieged with an alphabet soup of slum development programs – the Valmiki Ambedkar Awas Yojana (VAMBAY), the National Slum Development Program (NSDP), the Indira Awas Yojana (IAY) – all of which view the city’s subaltern constituencies not as laboring classes, but as aspirational homeowners or slum-dwellers. If trade-union leaders of the 1970s had eschewed their teleological assumption of the industrial wage-worker on the factory shop floor as the vanguard of working-­ class struggles and had instead recognized land occupations in unauthorized neighborhoods as one of the many occupations and spaces that workers inhabit, a very different urban oppositional politics could have emerged.2 Third, the reversed sequence of land-use planning in unauthorized neighborhoods upends conventional understandings of land rent. The agglomeration economies in unauthorized neighborhoods show how land rents are incrementally captured by subaltern groups. When these captured land rents are reinvested in localized economies, they open up a new nexus between land rents and industrial profits. As argued earlier, these logics of agglomeration where real-estate surpluses are generated in violation of existing land-use and zoning codes in order to further industrial profits resemble the workings of valorized industrial districts such as Silicon Valley in the Bay Area and Electronics City in Bengaluru. When subaltern groups have the agency to capture land rents through these reversed land-use sequences, it makes the allocative politics around land rent open to contestation and thus keeps open the political possibility for these groups to appropriate land rents vis-à-vis other more powerful factions of capital. This process was foreclosed by the entry of trade-union leaders into informal land development and by the parastatal’s eviction and relocation of residents to public housing. However democratically responsive the real-estate patrons might be, or however dignified public housing complexes might be, slum patronage and slum clearance are a form of land expropriation with expropriation not limited to the taking of terra-firma land, but also about who has control over the land rents and surpluses that accrue from the urban redevelopment. Even if city politicians decide to implement land-value capture instruments, they would be

192  Sai Balakrishnan reproducing the capitalist planning sequence that expropriates from unauthorized workers their earlier direct and unmediated access to land rent. Only when workers who are exploited and expelled from the urban economy regain control over the generation and allocation of land rent can land occupations be re-­politicized as working-class struggles. In short, what is glossed over as slums are, in fact, insurgent forms of wresting control over land rents with urban subaltern classes refusing to be disciplined by capital and creatively and collectively staking claims on urban livelihoods. The what-if implications from the Bengaluru case can widen the horizon of the political possibilities of an insurgent city and inch us closer toward utopian ideals of the just city.

Notes

1 I use the term “unauthorized neighborhoods” to avoid the stigmatizing language of slums. Where I do use the term “slums,” it is in the context of specific planning actors and institutions deploying this term. 2 The question of who is a worker is at the crux of the post-colonial critique of the influential Subaltern Studies collective vis-à-vis Marxists, though, barring a few notable exceptions such as Chatterjee (2004), the post-colonial focus is on peasant insurgencies at the expense of urban subaltern struggles.

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11 PUBLIC LAND AS A SOCIAL RELATION THE CASE OF EAST RIVER PARK IN NEW YORK CITY Robert Beauregard One of the dominant themes in the contemporary literature on the political economy of land is the extent to which land has become simply another tradable commodity (Haila, 1988, 2021; Christophers, 2021) such that the cultural meanings, daily satisfactions, practicalities, and collective memories that attach people to place have been erased (Ghertner and Lake, 2021, pp. 1–25). Disembedded from these relations, land has lost both its material affordances and its enchantments. These losses diminish the quality of people’s lives. This normative stance is foundational to a critical political economy rooted in the alienation of labor lamented by Karl Marx and in Karl Polanyi’s documentation of how land became a fictitious commodity in 18th-century England (Harvey, 1982; Polanyi, 1957; Ghertner and Lake, 2021). The implication is that financial obligations and private property rights elevate class antagonisms over the cultural, symbolic, and experiential relations that matter to people (Harvey, 1982, pp. 362–366). The distinction is problematic as Anne Haila (2016) has pointed out in her discussion of property rights and rent as social relations. She writes (p. 58): “the institution of property also involves social relations, necessitates acknowledging others, and is backed up by customs and legal sanctions” (emphasis added). Haila, in effect, implies two types of social relations, one in which people relate to land authentically as fully formed individuals and the other in which land is stripped of these relationships and positioned instead in real estate markets where price and economic transactions dominate. While the comparison is empirically credible, its power lies in its normative distinction between real people living their preferred lives and a fictitious world of financialization and government-sanctioned rights. The dual categorization of land’s social relations is partly a function of the propensity of critical political economists to favor economics over politics in their argument (Harvey, 1982; Weber, 2015), while downplaying the material relations people have with land. Finance capitalism – to be condemned – is hegemonic and ascendant, while the state, although complicit in the harm done by capitalism, is considered of lesser importance. The extent to which land has become a “pure financial asset” (Harvey, 1982, pp. 347–348) is considered so dominant that land becomes theoretically relevant only in economic terms. By contrast, Lake (2021, p. 21) has argued for the recognition of a plurality of values DOI: 10.4324/9781003280255-15

Public Land as a Social Relation 195 attached to land: “Land in its economic identity as a commodity is ontologically distinct from land as a planetary surface, an ecological habitat, an aesthetic landscape, a spiritual abode, or the stabilized form of temporal continuity.” And, Haila (2016) attempted to strike a balance between the political and economic by situating land rent in state formations and focusing on property states. Within the mainstream of critical political economy, the economy, and not the state, is the driving force.1 In addition, materiality is seldom considered central to how people relate to the land. Notwithstanding critical political economy’s roots in Marxist materialism, the built environment and the elements of nature are treated as passive. To this extent, they can be placed in the background. Nevertheless, material things affect how people behave and the decisions they make (Beauregard, 2015). To this extent, the social is not a “distinct domain of reality” (Latour, 2005, p. 4). Social relations are produced in conjunction with the material world (Law and Mol, 1995; Law, 2002) and thus entangled in diverse associations whose influence is not pre-ordained (Lake, 2018). Whether alone or in collaboration with humans, matter influences what people think, feel, and do (Bennett, 2010). Drawing on this assessment of the critical political economy of land, I explore three issues that challenge critical political economy. The first focuses on the kinds of social relations that people have with land, the second concerns the state’s involvement with the public that uses this land, and the third reflects on the importance of materiality to these relations. My exploration is empirical rather than theoretical and utilizes a case in which residents engaged with the re-design of a public park. A case of this type echoes those concerning land conflict and dispossession (e.g., Harvey, 2004; Balakrishnan, 2019) that are frequently discussed in the critical political economy literature while directing our attention to how people relate to the land in the absence of compelling economic or ownership obligations. In presenting the case, I focus on what people said about their relationship with the park. My goal is to follow the actors and allow them to tell us how the park fits into their lives (Latour, 2005, pp.  11, 153). Although I am exploring critical political economy, I do so without a critical theory that searches for what is hidden from people and thus what (a theorist might believe) should have mattered to them (Beauregard, 2012, pp. 478–481). I allow the residents to speak for themselves. The case is the East Side Coastal Resiliency (ESCR) project in New York City, a government-led initiative to re-design a major park in order to protect it and the adjacent highway from flooding due to storm surges and sea-level rise.

ESCR project On November 1, 2021, the City of New York broke ground for a US$1.45 billion flood prevention project along 2.4 miles of the East River waterfront in Manhattan. The project’s official purpose was to address “coastal flooding vulnerability in a manner that reduces flooding risk while enhancing waterfront open spaces and access to the waterfront.”2 Designed to mitigate the consequences of

196  Robert Beauregard climate change, it was a response to Hurricane Sandy that struck the city in 2012 and whose flooding left approximately 2 million people without electrical power, substantially impaired about 800 buildings, displaced tens of thousands of people, caused an estimated US$19 billion in damages, and led to the deaths of 49 individuals (Duggan, 2021; Kaur, 2021). One of the hardest-hit areas was a swath of land along the East River waterfront that encompasses a large, 46-acre linear park and a major highway – the FDR Drive – that channeled vehicles around Manhattan’s densely populated residential and commercial core. The lives of nearly 100,000 nearby residents were significantly disrupted by the storm. In areas adjacent to the park, 94% of the residents lost power, subway tunnels were flooded, and essential services such as drug stores and grocery stores were closed for days. In response to the extensive destruction, the federal Department of Housing and Urban Development (HUD) in 2013 undertook a competition named Rebuild by Design. HUD requested design proposals that would mitigate the effects of sea level rise and the increasingly severe storms in New York City (Feuer, 2014). The winning design – the Big U by the Bjarke Ingels Group – involved the construction of an 8- to 10-foot-high landscaped berm along the waterfront. In addition, the new park would be constructed in such a way as to allow for inundation during heavy rains (Ingels et al., 2017). The cost for this green infrastructure project was pegged at US$760 million (Figure 11.1). From 2014 to 2017, the project, as described in the Draft Environmental Impact Statement (DEIS) and associated site plans and renderings, went

Figure 11.1  East River Park re-design. Source:  Mayor’s Office of Climate Resiliency.

Public Land as a Social Relation 197 through an extensive public review process that solicited input from community groups, individual residents, the business community, environmental advocacy organizations, and other interested parties. During this time, there was no organized opposition, only individuals and organizations expressing their concerns about the specifics of the design. Everyone favored a new, flood-proof park. This changed in October 2018 when the Mayor’s Office announced that it was discarding the original plan that had been widely debated and generally approved by the various publics surrounding the park. Based on a “constructabiltiy review,” the city government (hereafter City) announced that “it didn’t have the money, workers or expertise to maintain infrastructure in a park built to flood” (Kimmelman, 2021, p. 4). Instead, the City proposed a new design that would do away with the waterfront berm and raise the whole park 8–10 feet in elevation while building gates on and flood walls along the FDR Drive (Hanania, 2019). The new cost would be approximately twice the cost of the original design. Many people in the community were outraged that they had not been consulted and their input ignored. Of major concern was the destruction of all of the existing trees in the park and the removal of the park’s wildlife habitats. A group of residents filed a lawsuit to halt the project, but were unable to compel the City to reconsider the new design. In early November 2021, the construction began.

Resident engagement with the park Throughout the public review process, residents of adjacent neighborhoods, either individually or as members of advocacy groups or representatives of the two local Community Boards, expressed the many ways that they valued the park.3 They talked and wrote about it in terms of the satisfaction they derived from using the park and having it nearby. Residents considered the park to be an urban amenity essential to city living. And, although individuals commented in terms of personal use, they also expressed communal and public-regarding concerns.4 With 27 acres – 55% of the land area – devoted to recreational activities, the park afforded a wide variety of uses for residents and their comments mainly voiced their interest in preserving and enhancing these uses. The activities that they mentioned encompassed biking, walking, and jogging; engaging in group sports such as softball, tennis, and basketball; bringing their children to play in the different age-specific playgrounds; mingling with friends and family for picnics and barbeques; attending musical or dance performances at the amphitheater; dancing at the oval or meeting for Tai Chi; sitting in the shade of the trees; contemplating the views across the river; attending the Arts in the Parks program; making use of the comfort stations; exercising on the grass; recycling compost from their kitchens; working at the East Side Ecology Center; or just bicycling through the park on the way to work. People related to the park as individuals and in groups from the collective (e.g., a softball team) to the singular (e.g., parents strolling with their baby carriages).

198  Robert Beauregard Consider a sampling of the many comments from the public review process that speaks to the wide array of affordances the park made available: The Dance Oval, has a colorful labyrinth pattern painted on the concrete and asphalt ground, in a circle delineated by trees that survived Sandy. The East River Reflections Labyrinth has been there since 2004 … soccer ­players … practice their kicks upon it. Early morning exercisers are there and throughout the day; visitors use it for reasons that range from walking their dogs, to tracing its labyrinthine paths known to help us focus. (Carulli, p. 84) I am an 82-year-old senior. I use the park every day to stay active and healthy. This summer with its unusually frequent heat/humidity advisories indicative of global warming has been hard on everybody, particularly us Loisaida seniors. The park with its shade giving trees is a life saver. (Boster, p. 78)5 Covering a variety of activities afforded by the park, one resident noted both how they and others use it: I recently got a puppy and we spend our days walking through the park, exploring different parts of the drive, and enjoying socialization with other dogs and people. The park is currently the only green space in the vicinity. It is used consistently (sic) by thousands of people for running, jogging, cycling, and general enjoyment. As a 9th grade biology teacher, I have taken my students on field trips to East River Park to build community and learn about our own beautiful and intricate ecosystem in NYC. (Rediker, p. 84) And, as three, last examples of how individuals relate to the park: Design should include enough space for the Stuyvesant Cove annual summer music series that is currently set up on the south side of Solar One. Musicians perform on stage and utilize Solar One outlets for electrical service, and the audience sits on folding chairs facing north in front of the stage. (Koestler, p. 80) In the past few weeks alone, I ‘ve seen my wheelchair-bound neighbor enjoying a concert at solar one, traveled to Rockaway beach from the Stuyvesant Cove ferry stop, and taken several of the dogs who I walk along the path for exercise. I often think how lucky I am to live so close to East River Park and have all these amenities and this natural space at my disposal – it’s a rare treat in the city, and a great escape from the hubub on the streets. (Gilson, p. 23)

Public Land as a Social Relation 199 An expansive view of the Park and the river can be seen from this walkway across the FDR. Once the Park is elevated to the height of 8 to 10 feet, the view of the Park waterfront will be non-existent for the people walking along this path as well as for all the residents on the low numbered floors in all the housing complexes along the FDR on that side. (Ip, p. 146) Other residents commented on the relationship of the park with adjacent neighborhoods and the city, rather than commenting only in personal terms. One summed up this sentiment in the following way: As a long-time resident of the area, I can assure you that the East River Park is an essential place for members of a very large community of communities to socialize, exercise, play sports, fish for livelihood and recreation, make arts and theater and music, enjoy arts and theater and music, and come together in an almost endlessly diverse way that no other place in the vicinity can offer. (Hawley, p. 21) Reinforcing this sentiment, another person was equally evocative in stating the importance of the park and the emotional attachment that people have to it: I cannot begin to tell you how important the park is for everyone. It is an oasis for us, and always has been. After the terrible crime and disinvestment in the city in the 1970s, when the park became increasingly run down and dangerous, it is now one of the most beautiful places in the city. Every day, I see a wonderful diversity of people from many places using the park in friendly and harmonious ways. Young people jog, older Chinese women do Tai Chi together. Older Hispanic and Chinese men fish. Our Jewish neighbors run, exercise, visit with friends and stroll together. Children play baseball and football in the fields. Young men play soccer. People use the tennis courts. The amphitheater provides concerts, and everywhere, we see people using benches, walls, and railings to exercise. People use the dog parks and walk their pets. A beautiful clean and green space of diversity, joyful gatherings, and daily routines. It is the essence of positive public space (Goldman, p.83) People also expressed interest in the wildlife from birds to squirrels, the visual and environmental importance of trees and plants, the protection of historic sites, the park’s contribution to public health for people living nearby, the importance of making the park accessible to the disabled, and the potential for the new park to inflate land values and cause gentrification. As regards the last item, one resident noted: “I’ve watched the East Village change drastically in my lifetime and my family had to move out of the neighborhood as a result of increasing rent

200  Robert Beauregard caused by gentrification and “beautification” of the East Village” (Ryan, p. 70), while another, seemingly well read in the academic literature, stated that: New peer-reviewed scholarship by sociologists Tammy Lewis and Kenneth Gould documents a direct correlation between heightened housing market pressures and the construction of resiliency infrastructure in New York City. The investment in infrastructure to protect the neighborhood from flooding will increase surrounding land values. (Schiller, p. 72) Although not extensively discussed, a few residents framed their public-­regarding concerns in terms of environmental justice (pp. 148–155). Despite the City’s claim that “no minority or low-income communities or children would be disproportionately or adversely impacted under any of the analyzed alternatives including the Preferred Alternative” (p. 150), a number of residents doubted that this would be the case and accused the City of using a study area that diminished the negative impacts on low-income people and people of color. As one of the respondents commented: “These figures [in the DEIS] appear to understate the extent to which the Project would affect environmental justice communities” (James, p. 153). The City responded to the residents and local groups by modifying the design and offering written replies in the Final Environmental Impact Statement (FEIS). These replies took various forms, sometimes patiently engaging with resident concerns, many times accommodating, frequently referring to expert justifications and material and technological limitations, and often justifying what the City decided by referring to regulatory constraints. In this way, the city government and the various local and state agencies and consultants involved in the design mediated between the wide array of interests voiced by residents and the multiple interests of the City. The tendency to be accommodating is exemplified in the City’s response to a comment by one of the local Community Boards asking about how the signage and public art installations set the historical context and differentiate the park in relation to the identities of the adjacent neighborhoods. The City replied that the Parks and Recreation Department and the Department of Design and Construction (the two lead agencies) would “assess interpretive signage and art opportunities within the proposed project’s open spaces and would incorporate them where feasible and appropriate as part of the final design process” (p. 37). And, when a resident proposed adding a gazebo with seating, the response was that “Final design is ongoing and park elements for inclusion in the redesigned park are being assessed” (p. 79). A resident who questioned whether the most current data were used to assess traffic safety was essentially told that the City’s experts had already done so: The latest three years of verified crash data available from NYSDOT [New York State Department of Transportation] at the time the DEIS analysis was

Public Land as a Social Relation 201 prepared were used in the Vehicular and Pedestrian Safety assessment and no updates are needed. (p. 140) Then, in response to a person who asked why the park had to be fully unusable during construction rather than constructing it in phases, the response was that in order to deliver flood protection as quickly as possible and to achieve the five-year construction period, “there must be several simultaneous construction staging locations where expanded work zones, barging, and material storage areas are required” (p. 160). In its responses, the City was generally accommodating, and also unyielding. And even though resident comments were almost always grouped thematically to allow for a single response, the substance of their comments was acknowledged. Of course, the process did not and could not have allowed for the City to engage in discussions with every respondent on every point. That said, the City was listening and respectful, though it also made clear that it controlled the design and the construction process. Although the City engaged with residents and community organizations in the public review process, it did not consult them when it made the decision to abandon the Big U design and replace it with one that covered the whole park with landfill. The announcement of the new design turned disagreement into conflict and raised new public concerns. Many residents supported the new plan, but the earlier consensus eroded. To list just one disgruntled resident: “I am devastated about the scrapping of the original plan that afforded the same flood protection, preserved our trees and kept the park open for periods of time. This is an outright betrayal of the lower income people of the Lower East Side who can’t afford vacations. All kinds of people living here need this oasis” (Barkoff, p. 18). Three issues that had not been expressed previously were now part of the public discussion. One had to do with the removal of all of the existing trees and plants, play areas, structures, walkways, benches, and lawns in order to bring in gravel and soil to elevate the level of the park. Many residents were appalled that mature trees would be destroyed and replaced by saplings lacking the canopy and the history of the existing trees. The extensive landfill would also disrupt all of the park’s bird, insect, and animal life. One resident commented that “We CB3ers urge you to reconsider the senseless destruction of a beautiful, mature, and beloved park” (Boster, p. 15), while another noted: “It’s simply unjust to destroy every part of an ecosystem in order to construct a flood protection plan that isn’t considered best practice” (Rediker, p. 23).6 And, in an equally evocative tone: to shrug off the destruction of hundreds of old, beautiful, shade-providing trees is to not understand human nature and this constituency. The trees are not a nicety; they are the park. The shadeless, manmade spaces of the proposed plan cannot replace what we have now (Sillen, p. 11)

202  Robert Beauregard To the extent that one can gauge community sentiment from the public comments, most of the community favored the previous design. Second, the new design seemed to give priority to the FDR Drive over the park and dispensed with the “green” response to flooding in the previous design. Consider the former in a comment attributed to three people (Rosario, Wolfson, and Gers) and one organization, the East River Park Action Group (ERPAG): “Concern that this alternative is being pursued to avoid disruption of traffic on the FDR. FDR Drive service is being prioritized over the needs of the community to access the waterfront” (p. 164). And, on the latter: Many members of the community stated a preference for the previous design iteration because it utilized a method of resiliency well-established in modern environmental thinking of using parkland as a natural buffer for protection of upland regions, and replicated a system of floodplains and floodwalls as a defense to protect the neighborhood. (Community Board 3, p. 14) The third issue had to do with the about-face by the City when it announced that the design initially presented to the community was being replaced (Kimmelman, 2021). Many residents were angry at the lack of transparency in the sudden shift and appalled that the City seemed to have wasted all of the community input. One respondent summed up the prevailing sentiment: It seems that city agencies took no lessons from the original plan, which largely had community approval, and have decided to go in the opposite direction. Residents have strongly and consistently communicated that they do not feel listened to, nor represented by the current plan, and the design team, and Parks department has consistently ignored us. (Frisk, p. 21) A few residents accused the City of tricking them with an initial plan it had no intention of adopting, while others noted that by not valuing residents’ commitment to the initial plan, the City created an atmosphere of distrust around the whole public review process. As one resident asked: “If you are not willing to listen to the community and get independent counsel, please explain to me and the rest of the community why not” (Porteous, p. 30). Community engagement around the new park did not conclude with a design that people found to be satisfactory but with a top-down imposition of a less consensual and more expensive design. At this point in time, a group of residents formed the East River Park Action (ERPA) to oppose the City’s new design for the waterfront (Kaur, 2021; Kimmelman, 2021). ESPA’s slogan became “don’t kill a great park for a bad flood control plan” and listed a host of reasons to justify its opposition: a better plan already existed at about half the cost, the current design was environmentally destructive, the community had not been adequately consulted on the new

Public Land as a Social Relation 203 design, a hard seawall represented by the raised elevation of the park was not a best practice in resiliency work, there was insufficient planning for interim flood control during construction, the design destroyed the unique features of the park such as the Art Deco restroom facilities and the historic Amphitheater, the plan for replacing all of the affordances of the park during construction was inadequate, and the new design was environment-unfriendly.7 Members of ERPA lobbied elected officials, circulated press releases, organized a petition signed by 16,000 people, including 2,000 public housing residents, and protested at the site when construction began. In addition, the organization filed a lawsuit to stop the project. All of this was in vain when the ESPA lost the suit on appeal in December 2021, At the time of this writing, two other lawsuits were still unresolved (Anderson, 2021). One accused the City of discrimination for lowering the hiring percentage for sub-contracting to minority and women-­ owned business enterprises on the project from 30 to 10 and the other questioned the qualifications of the newly formed joint venture that submitted the lowest bid and was awarded the contract for the project.

Commentary To the extent that this case involves public land and is seemingly bereft of issues around financialization and private property rights, it challenges critical political economy in three ways. The first challenge is how to treat social relations in the absence of economic and legal disagreements. The second is how to think about the state’s role in mediating these relations. And the third is how to integrate the materiality of the land into an understanding of social relations. When the residents voiced their concerns about the design of the new park, financial and ownership issues were rarely mentioned and the power of the government to override local concerns (prior to the design shift) was not discussed. Instead, the respondents talked and wrote about how they used and appreciated the park as individuals, as members of various, use-based publics, and as the single public that values the park’s place in the life of the city and as an amenity accessible to them almost without restriction.8 First, social relations. Individuals go to the park to jog on one of the paths, stroll along the promenade, sit under a tree in contemplation, or skateboard. They also relate to the park as publics that have the park’s affordances in common: as basketball players, picnickers, gatherings of retirees, birdwatchers, fishing enthusiasts, concert attendees, picnickers, and parents bringing their children to the playgrounds. The park is also used by more formally organized groups such as softball leagues and park volunteers who help with maintenance along with members of the two local Community Boards, the Lower East Side Ecology Center, Arts in the Park, and ERPA. Residents additionally portrayed themselves as part of a general public that supports the park simply for being part of the city. In this category are residents who voiced their concerns for the trees, birds, insects, and animals that establish habitats there; who value the park for its positive contributions to air quality and physical fitness; and who understand

204  Robert Beauregard the park’s importance in mitigating problems related to sea-level rise and storm surges. The park provides recreational opportunities, softens the hard streetscape, has public health advantages, and provides habitats for birds and animals. Social relations are personal, collective, and civic-regarding. None of these relationships pertain to private property rights and financialization.9 Neither the original design nor the re-design was perceived, for example, as an instance of dispossession, while the comments about gentrification were few and relatively muted. The park is publicly owned and the residents simply accept that it is there for their use. Access to and enjoyment of the park were not debated. What was at issue was the park’s place in the quality of urban life. People did not express a sense of private ownership, even though many felt a strong attachment to the park, but rather a sense of public ownership that was settled and uncontested. Financial issues were also peripheral to residents’ concerns. It was a rare resident who complained about the cost of the first design or the tax implications of such an expensive infrastructure project. Only when the new design was announced as doubling the cost did the issue arise. Even when residents mentioned financial consequences, they did not delve deeply into them. The federal government was making a significant contribution, monies from the City’s operating budget were being allocated to specific projects (e.g., replacement of the amphitheater), and the City was funding the remainder through its capital budget. From a policy perspective, all of this spending is relevant; it will affect the taxes that residents will pay and the cost of living in the city. None of this, though, seemed to have influenced how the resident described their relationship with the park. How can a critical political economist make sense of these kinds of social relations with land? The resident comments and other public discussions of the re-designed park hardly made mention of class relationships or race, two themes commonly found in the critical political economy literature. As regards class, the residents of the nearby public housing are likely of lower income than those in the market-rate housing, and much of the latter (this being Manhattan) is quite expensive. Yet, people did not relate to the park in class terms – the only exception being the brief commentary on gentrification. And while residents of public housing are more likely to be people of color than those in private-sector housing, this, too, went almost wholly unmentioned, although Kimmelman (2021, p. 4) claims that some residents of subsidized public housing saw the opponents of the new design as “interlopers” with “more than a few of them wealthier, white people living in apartments that were not on the front lines” [of flooding and personal risk]. However, Kimmelman’s comment was not based on what residents said during the public review process. In short, this case offers neither class nor race to a critical political economist. One could argue that class and race are always present in the US. But, to make them explicit would require assuming that residents do not know their own interests, an assumption that raises a host of epistemological issues regarding false consciousness and how scholars relate to empirical evidence. For a critical political economy scholar to address the social relations portrayed here, a sociological perspective seems more promising than the usual

Public Land as a Social Relation 205 economic or political perspective (Tonkiss, 2005, pp. 8–29). These relations have to be understood as part of how people balance work and leisure, how they engage with each other in families and with strangers, friends, and acquaintances; how they bring up their children; and the psychological needs they have to connect with nature and escape the frictions of urban living. The question is how to situate this within a Marxist-inflected political economy perspective without suppressing the richness of these engagements or so subjugating land relations to economistic thinking as to strip them of the meanings that people confer on them. Second, the role of the state. More promising because it draws on the political side of critical political economy is how the City enabled resident-park relations to be made public while mediating them throughout the design phase and the public review process. State involvement, of course, began with the City’s recognition that, given its extensive shoreline, the City needed to plan for the storm surges and the flooding associated with climate change. Recognizing the importance of flood control for the lives of its residents, for commerce, and for the property values on which it depends for its tax revenues, the City took the initiative and residents accepted the City’s decision to do so. That the City opened the process to resident input reflects its related commitment to democratic governance, an impulse that cannot be simply dismissed as a need to maintain legitimacy or characterized simply as a public investment meant as a spatial-temporal fix (Harvey, 2004, pp. 64–68). Undeniable is that the New York City government is a capitalist state. This might lead the critical political economist to consider the extent to which large, infrastructure projects such as the ESCR project are central to gathering political support from economic elites. As urban regime theorists have pointed out, such initiatives distribute large sums of money across a number of major actors – construction companies, lawyers, labor unions, bankers – whose businesses and investments benefit from improvements to the city and who, in response, provide political support to the governing coalition (Stone, 1993). That the City will pay for the park by floating bonds creates business for the investment banks, bond lawyers, accounting firms, and intermediaries that arrange such borrowing and repayment. In addition, consider the private owners of buildings adjacent to the park. The buildings are most likely part of a property portfolio of a major firm or a real estate investment trust and these businesses will benefit from a rebuilt park that stabilizes and likely enhances the market value of their holdings. These understandings, though, did not figure in how residents described their relationship to the park. While they might be of interest to the critical political economist and are undoubtedly important, they were not of interest to those who use and appreciate the park. Even ERPA, the opposition group that might have taken a financial angle in criticizing how the City was managing the design and rebuilding, opted not to do so. For it, the Community Boards, and residents, public financing was irrelevant to their concerns. Of course, we need to keep in mind that the City controlled the structure and format of the public review process, if not the substance of the comments

206  Robert Beauregard that were submitted. The comments were to be limited to environmental consequences and were not, for example, to stray into how the project was being funded or whether the site should be privatized and made available to developers. This could be considered a factor in the relative absence of financial issues in the residents’ comments. Yet, governmental control and financing hardly appeared in the public commentary – e.g., newspaper articles – that the City did not control. Still, the City did mediate how the public responses were distributed: It decided how to memorialize those comments in the FEIS. Though I doubt any comments were deliberately suppressed, grouping comments thematically involved a good deal of discretion. Additionally, the City officially responded to the groupings in a way that silenced those who had spoken; i.e., the residents had no official channels through which to respond to the City’s responses. In short, the City had the “last word.” To this extent, by expediting the process and dampening conflict, the City constrained the public review process to its advantage. Yet, there was no evidence in the resident comments that the project had become politicized on ideological grounds. Except for the brief discussion of environmental justice, all of the disagreements involved how much and whether to do one thing or another and not how to redistribute the park’s affordances from one group to another. (Regarding equity concerns, there was the lawsuit on the inclusion of minority and women-owned businesses in the construction of the park, but I did not find this issue in the resident comments.) In its official responses, the City was accommodating rather than confrontational. When it resisted what residents proposed, it did so by calling forth both legal constraints and expert assessments. Prior to the design switch, the politics of the project were contentious but not politically conflictual. Power imbalances certainly operated within the public review process, with the City having the greater legal, technological, planning, and environmental expertise, but these powers were only contested by the residents after the re-design was announced. Prior to that, the City’s control over the public review process and the design was not an issue. Third, socio-materiality. The vibrant matter of the world is hardly acknowledged in critical political economy. In the ESCR project, however, materiality played a significant role. Reflecting briefly on this, we could start with water. If it were not for the effects of climate change on storm systems, sea levels, and tides, the East Side of Manhattan would not be in danger of significant and destructive flooding on a more frequent basis. Water, moreover, is intransigent and not easily brought under the control of humans and its intransigence influenced many aspects of the designs. The site itself (e.g., its adjacency to the FDR Drive) affected both the design and how the City responded to resident comments. Additionally, the tightly bounded and already fully developed site could not easily accommodate new uses: for something to be added, something would have to be subtracted or diminished, posing political problems for the City. Nor could the site be expanded, given the physical constraints of the river on the one side and a heavily used highway on the other.10 The materiality of the site affected residents in other ways as well: park uses are highly dependent on surfaces and

Public Land as a Social Relation 207 objects. The seating of the amphitheater afforded skateboarding, the trees provided shade, and the water features entertained young children. Additionally, residents expressed their concerns about peregrine falcons, pigeons, squirrels, rats, shrubbery, trees, pavement, and grass and the substitution of landfill for the berm of the original design generated controversy. In assessing the factors that most influenced the kinds of social relations residents had with the park, the park’s materiality was much more important than either economic or political considerations.

Final remarks To say that land is a social relation is to point out that whatever value and meaning it has is a function of how it is positioned in socio-material entanglements that bring together individual people, organizations, and institutions on the social side and things and places on the material side. In the case of the ESCR project, those relations were grounded in the affordances provided by the park as well as the contributions – actual and imagined – that the park makes to the city. None of the social relations that people expressed hinged on financialization, private property rights, class, or race. Neither were they, at least prior to the announcement of the new design, explicitly concerned with the power that the City could wield. During the early phases of the public review process, concerns and disagreements rather than conflict were the norm. This is not to dismiss the extent to which the City was controlling and mediating the process. However, to situate the case in the framework of critical political economy requires attending to how social relations are formed and expressed while striking a balance between economic and political theorizing that acknowledges how people relate to land as a material presence in their lives.

Research statement The background for this case comes mainly from published articles in print and on the web, the ERPA website, and the documentation provided by the City of New York regarding the East River Coastal Resiliency project. Of particular importance was the FEIS and, specifically, Chapter 10.0, “Response to Comments on the DEIS.” (The DEIS is the Draft Environmental Impact Statement.) The main page for this material can be found at https://ww1.nycgov/site/escr/index.page. The website was originally accessed on December 16, 2021. On pages 10–267 of Chapter 10.0, the comments gathered during the public review process are grouped thematically under such headings as socio-economic conditions, open space, water and sewer infrastructure, and construction. In total, there are 374 groupings of comments each with a response by the City. Each comment is attributed to a person – acting individually or representing a group – who submitted either an e-mail, a written comment, or made in-person comments at the approximately 69 public meetings that were held with over 100,000 attendees. Approximately 350 respondents are listed at the front of Chapter 10.0. Because

208  Robert Beauregard the names of the respondents are already in the public domain, I have used last names to give a sense of the different people I included. I also supply a page number from Chapter 10.0 to allow the reader to access the comments and responses. I drew selectively on the comments to make my points and make no claims to their statistical representativeness. As regards the comments, I have assumed that the City more or less accurately reported them. The City’s responses, I assume, were written by various experts involved in the public review process and the writing of the DEIS. In addition to consultants, these experts included staff from various City departments and agencies such as Parks and Recreation, Design and Construction, Environmental Protection, Transportation, and the Mayor’s Office of Climate Resiliency along with State agencies including Environmental Conservation, Transportation, and General Services as well as authorities such as the NYC Housing Authority and the NY Power Authority. The public review was mandated by the federal National Environmental Policy Act that requires an Environmental Impact Statement for such projects and the City’s Uniform Land Use Review Process that invites residents, community boards, and elected officials to comment on proposed projects that do not qualify for automatic approval by the City Planning Commission.

Acknowledgments Thanks to Robert Lake and Mika Hyötyläinen for their extremely helpful comments on an earlier draft.

Notes 1 Numerous studies exist on the importance of land and property to states (e.g., Bhandar, 2018) and the extent to which states are central to property rights and land transactions (Becher, 2015). The state relationship to land is most obvious in apartheid regimes such as Israel (Weizman, 2007) and South Africa prior to the early 1990s (Mabin, 1992). 2 FEIS, Chapter 1.0, p. 4. See Research Statement for the web address. 3 New York City is divided into 59 Community Boards that provide residents with a venue for formal comment on land use and other issues that affect their neighborhood (Beauregard, 2022, p. 18). 4 The source of these comments can be found in the Research Statement. All quotations include the last name of the person who commented and the page number from Chapter 10.0 of the FEIS. 5 Loisaida is the name of a Lower East Side neighborhood adjacent to the southern end of the park. 6 A CB3er is a resident in the catchment area of Manhattan’s Community Board 3. 7 “Stop the Death Sentence for East River Park: a Dozen Reasons Why,” accessed December 22, 2021, https://eastriverparkaction.org/2019/10/01/ stop-the-death-sentence–for-East-River-Park-a-dozen-reasons- why/. 8 New York City parks are closed during the late evening and early morning hours. 9 Strictly speaking, the residents’ relations to the park involved engagement, one of the bundle of property rights that also include control, exclusion, and disposition. 10 Any attempt to expand into the river would have to overcome significant environmental and navigational restrictions.

Public Land as a Social Relation 209

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210  Robert Beauregard Law J and A Mol (1995) Notes on materiality and sociality. The Sociological Review 43(2):274–294. Mabin A (1992) Dispossession, exploitation, and struggle: An historical overview of South African urbanization. In Smith D M (ed.) The Apartheid City and Beyond. London: Routledge, pp. 13–24. Polanyi K (1957, orig. 1944) The Great Transformation. Boston: Beacon Press. Stone C (1993) Urban regimes and the capacity to govern: A political economy approach. Journal of Urban Affairs 15(1):1–28. Tonkiss F (2005) Space, the City and Social Theory. Cambridge, UK: Polity Press. Weber R (2015) From Boom to Bubble: How Finance Built the New Chicago. Chicago, IL: University of Chicago Press. Weizman E (2007) Hollow Land: Israel’s Architecture of Occupation. London: Verso.

12 LAND RENT AND THE STRUGGLE FOR THE URBAN COMMONS IN HELSINKI’S SUVILAHTI DIY SKATEPARK Mika Hyötyläinen In the land market, the prospect of future land rent always casts a shadow of uncertainty over current land uses. Communities and individuals often find themselves under the threat of displacement by landowners looking for land uses that might yield a higher rent. Land rent, paid by the users of land to its owners, is well defined as a social relation of power and control (Haila, 2016). Traditionally, the state has been the “final line of defense” (Harvey, 2006) against displacement pressures caused by rent maximization efforts of landowners. By exercising the power and control vested in it, such as public landownership, planning and regulation, the state has protected individuals and communities from the negative consequences of private landed interests. But even in contexts where planning and regulation have usually ruled over the land market, such as the Nordic welfare state, local governments are now increasingly exercising their power to treat land as a financial asset according to the rent it yields. For example, in February 2022, the City of Helsinki1 made a radical reform to its land policy and decided that it will lease public land in the future for residential purposes with the market rent. Of course, we also find people organizing land use around very different social relations than those of power or control. One such alternative is the urban commons, which has attracted the growing attention of critical urban scholars. The urban commons refers to the use and management of urban land based on the principles of collective empowerment, autonomy, and solidarity. Housing cooperatives (Huron, 2018), squats (Martínez, 2020), autonomous social venues (Bresnihan and Byrne, 2015), and urban gardens (Eizenberg, 2012) are familiar examples of urban commons from the mushrooming research literature. It is often, though by no means exclusively, where the state fails in its task of providing resources, services, or goods connected to urban land that people take it upon themselves as a community to address this failure by treating land as a commons. This community may or may not express anti-capitalist or anti-state sentiment. Scholars have explored how urban commons are managed and maintained, how decision making is organized, and the notion of commoning, or the very complex process of making the commons in the city. Finally, political economists have highlighted the precarity of commons as it creates barriers to accumulation, is then subjected to enclosure and the land opened for further capital circulation and accumulation (Harvey, 2013; Karakilic, 2021). DOI: 10.4324/9781003280255-16

212  Mika Hyötyläinen However, what has not been explored in any detail is how the urban commons may be mobilized in the very process of rent maximization. In this process, we may find the urban commons abused in the redevelopment of urban areas, to trigger rent gaps (Smith, 1979), and to open urban land for new rounds of investment and accumulation. In this chapter, paying particular attention to the role of the state, I illustrate the features of the opposing, unequal, and abusive relationship between capital and the urban commons and the implications of this dialectic for urban land uses. The case I draw on was not framed by the commoners as anti-state or anti-capitalist. Rather, the case is one of the playful and creative appropriations of vacant land by a group whose needs were neglected by the state. The case is the Suvilahti DIY (do-it-yourself) skatepark in Helsinki that was built on an unplanned lot in a brownfield development site a few kilometers outside of the city center. For over a decade, skateboarders have been occupying and using the site for their particular purpose and, in doing so, they created and nurtured an urban commons with a social and cultural significance beyond skateboarding. The area of Suvilahti is part of the old industrial harbor of Kalasatama, one of Helsinki’s largest urban development projects, a waterfront site where new highrise towers, shopping center, hotels, residential real estate, offices, and high-profile cultural and event spaces have been planned, developed, or are under construction. Acknowledging not only the skatepark’s significance for the residents of Helsinki, but also its advantage for city branding and marketing the area of Kalasatama, the City has allowed its temporary operation. However, the City recently accepted a private investor’s proposal to develop the area into a high-end event facility, hotel, and commercial space and has decided to demolish the skatepark and sell the site. A conflict has stirred, since the temporary use has become a permanent urban commons, and skateboarders are now struggling to save the park by challenging the City and private developer’s plans of enclosure. I suggest that Suvilahti DIY has contributed to the old harbor’s cultural and creative image and reputation, or ambiance (Tsavdaroglou, 2016), which are now being exploited by changing the land use to a rent-yielding purpose. A rent gap was consciously activated by the City of Helsinki when, in its apparent benevolence, it not only allowed but supported the cultivation of the urban commons while the area awaited redevelopment. From a real-estate investment perspective, Suvilahti now has great potential. Using the concept of value grabbing to talk about rent extraction (Andreucci et al., 2017), I argue that the value produced in the urban commons is now effectively being grabbed by the developers of the event facility – a land use change that will see a local, free, and user-created cultural space turn into private, high-end, profit-oriented, cultural production space – and the City, which wants to maximize land rent by selling and privatizing public land. But Suvilahti DIY also serves a deep and rich local social life that will be displaced, calling into question the recent plans. When Haila (2016) writes that the value of urban land for a city’s residents is its use value, the skatepark is an illuminating example. It is a place embedded with various use values of youth socialization, learning, and passing on skills, meaningful free time, physical activity, culture and self-expression, and autonomous action of organizing events, and solidarity in stewarding the land.

The Struggle for the Urban Commons 213 In illustrating the case of Suvilahti DIY, I juxtapose the skaters’ perspective with that of the City. I draw on interviews in an independent documentary film called Do It Together2 by filmmaker Ines Särkkä (2021). The film traces the building and management of the skatepark over the past decade, and its relevance for local skaters and the wider public. The interviews with skaters involved in the construction of the park and members of the Suvilahti DIY Association describe their struggle to save the urban commons from displacement under the coming land use changes. I interviewed skateboarder and supporter of Suvilahti DIY Vesa Korkkula, who is also a Helsinki city council member representing the Left Alliance, the fourth largest party in the council. And to introduce the City’s view, and its strategies and plans for Kalasatama and Suvilahti, I draw on minutes from the City of Helsinki Urban Environment Division meetings, the City Board’s Economic Development Sub-committee meetings, City of Helsinki dispatches on the development process, minutes from residents’ meeting with city representatives, and public officials’ online interviews. Lastly, I interviewed the project manager of the Kalasatama redevelopment program. This chapter is structured as follows. I begin by introducing the concepts of land rent and value grabbing and follow with a discussion of the concepts of commons in general and urban commons more specifically. I then present the case – intended more as an illustration of the dialectic between land rent and the commons than an empirical case of the skatepark per se. Using this illustration, I discuss how the urban commons are abused for rent maximization purposes and rendered precarious by value grabbing.

Urban land rent as an instrument of coordination and extraction Landowners have the power to treat land as a financial asset, according to the rent it yields (Haila, 1988). Various landowners from individuals to transnational investment companies are increasingly prone to exercise this power. Under advanced capitalism, land rent has been suggested to play both coordinative and extractive purposes. First, land is commodified and traded in the land market. As interest-bearing capital circulates in the land market in search of future rents, land is put to its “highest and best” use in relation to capital and labor allocation, surplus value production and, finally, further accumulation (Harvey, 2006). When rent coordinates urban development in this way, the built environment increasingly represents capital in material form (Harvey, 1978). The spatial outcome of this is the growing prevalence of abstract “McSpaces” (Peck, 2002, p. 334): hotels, waterfront developments, luxury residential buildings, offices, and high-end shopping malls. Meanwhile, urban space is made volatile as it is treated as an open field for interest-bearing capital to circulate, investing here, disinvesting there, and displacing former and local land uses in the process, all the while forcing spatial unevenness in its search of accumulation. And, second, extraction takes place as value produced in the various collective efforts of people living in cities is siphoned off in the form of rent by landowners and landlords who enjoy a position of monopoly. These landowners represent a class of rentier capitalists who see capital accumulation via rent without

214  Mika Hyötyläinen themselves producing anything (Christophers, 2020). Here, the social relation between owners and users of urban land is well described by the concept of value grabbing (Andreucci et al., 2017).3 In value grabbing, “the central dynamic at play is the instituting of property rights that are not used exclusively or even mainly to produce new commodities, but rather are mobilized to extract value through rent relations,” while the urban is now increasingly the sphere in and through which capital accumulation takes place based on the multiple ways that “capital circulation flows increasingly through assets from which value is appropriated by means of dispossession and rent extraction” (Andreucci et al., 2017, p. 29). Marx talked about this as “one of the secrets of the increasing enrichment of landowners, the constant inflation of their rents, and the growing money-­ value of their estates as economic development progresses. They put away in their own private purses the result of a social development achieved without their participation” (Marx, 1991, p. 757). He was here writing about agricultural land, but social development can be interpreted as people’s collective efforts in the city, whether as wage labor, public improvements to land, entrepreneurial work, or non-income generating activities. The value produced through such various activities can now be grabbed in the form of land rent. Municipalities play a role in all this. They can not only use their land for the public good but can also attempt to maximize rent revenues. The City of Helsinki in a clear break from its traditional land policy that emphasizes use values and robust public planning, now wants to sell and lease public land to developers at market rent, thereby attracting private investment and maximizing what Haila (2016) calls fiscal rent. The justification is that money locked up in public land can be returned to the taxpayer by using rent revenue to pay for public services and taxes can be reduced. The fundamental problem with this fiscal rent for urban development and residents is that rent still coordinates land use. A city dependent on fiscal rent will likely encourage the highest and best rent-yielding land use to displace previous uses and local social lives. Both rent-coordinated land use and value grabbing make urban lives precarious and place communities under threat of displacement. The urban commons have recently captured the imaginations of critical urban scholars writing on the manifold struggles with rentiers and capitalist urbanization and the possibilities of city residents to participate in urban development to make the city accord more with their desires. There is wide interest, particularly in self-organized arrangements that manage urban land and provide services in a solidaristic, nonprofit, de-commodified manner.

The commons: a social relation of sharing and reciprocity In feudal Britain, land was owned by the Crown. Peasants held use rights to the commons – agricultural land and land for grazing animals. In the eighteenth century, the commons were divided and fenced, and the use rights were entitled to single owners. The social ramifications of this enclosure are well known. Excluding the peasants from the use and access to land dispossessed them of their very means

The Struggle for the Urban Commons 215 of production and social reproduction. Similar processes took place across Europe. In Sweden and Finland, the land reforms of the 1700s, known, respectively, as storskiftet and isojako – translated as The Great Partition – were inspired by the British enclosure movement. Enclosure was a prerequisite for industrial capitalism. Peasants were dispossessed, proletarianized, and forced into cities with nothing to sell but their labor in the factories. Marx (1990) called this dispossession primitive accumulation. For Polanyi (2009), these were features of the great transformation from economic mentalities based on local social relations, sharing, and reciprocity to increasingly individualistic, competitive attitudes. Scholars have also discussed different global and local resources as commons. These debates can be traced back to Gordon’s (1954) article on the vulnerability of fisheries under common property. Gordon defined common property resources as “free goods for the individual and scarce goods for society” (Gordon, 1954, p. 135). He argued that economic inefficiencies and over-exploitation were inevitable in fisheries if fish were treated as a common rather than private resource. Over-exploitation and eventual resource depletion, suggests Gordon, are “manifestations of the fact that the natural resources of the sea yield no economic rent” (Ibid). Hence, the argument follows, we should enforce private property rights and give rent a coordinating role in the use of natural resources. Hardin’s (1968) essay, “The Tragedy of the Commons,” is often cited as the defense par excellence of private property rights and seen by many as an irrefutable justification for privatization. Hardin’s famous cattle-herding example argued that individual herders using a common pasture would over-exploit the pasture as each herder is driven purely by self-interest. More recently, economists like Hernando De Soto (2000) have argued that the poor of the world remain trapped in a tragedy of the commons due to undefined property rights and the inability to unlock the exchange value in the lands they inhabit as commons. Harvey (2013) points out how Hardin deliberately skirted the actual issue of resource depletion. The problem was never about the common pasture, but about the private property in cattle and competition between self-interested herders. If the cattle had been common property, the problem would have solved itself. Most well-known challenges to the ideas of Gordon and Hardin are those of public choice theorist Elinor Ostrom (1990), who studied how local communities can manage what she called common pool resources in sustainable ways. She distinguished certain principles for such a management system and refuted Hardin’s thesis by showing how herdsmen will overcome their ostensibly individual profit-maximizing tendencies and collaborate for the efficient common use of pastures. Ostrom’s interest was not in the commons as a tenure, but in how small communities effectively manage local resources. Although praised by many on the Left, Ostrom also avoided consideration of how communities are threatened by enclosure from the state and capitalists (Martínez, 2020). Marxist scholars have discussed the continued aggression of capitalist enclosure and how primitive accumulation is not simply a feature of the origins of capitalism. The displacement of peasants, depletion of the environmental commons, the privatization of public assets, the commodification of public housing, and

216  Mika Hyötyläinen the conversion of collective and public properties into exclusive private property are examples of what Harvey terms accumulation by dispossession, an intensified “new wave of ‘enclosing the commons’” (Harvey, 2003, p. 148) to open up new landscapes for capitalist investment. Privatizing land and defining property rights have been instrumental in this to the effect that enclosures have established “the common denominator of proletarian experience across the globe” (Midnight Notes Collective, 1990, p. 2). Enclosures are used to create monopolies, which then allow rent to be extracted from the users of assets. Under the extractive pressures of rentier capitalism are the natural commons, resources like water, the atmosphere, forests, fuel and solar energy, and commons in rural settings like village woodlots, pastures, and irrigation systems and community-managed forests (see also Standing, 2019). Different types of knowledge and cultural commons are being patented by rentiers – take, for example, academic publishing that places user fees on content created by researchers and paid mostly by the public. Finally, resources and services provided and managed through collective effort in cities are rendered precarious by privatization and capitalist urbanization.

The urban commons Much time and effort have been devoted to defining the urban commons. Some authors count public spaces, streets and squares, train stations, cafés, gardens, and “all forms of space where urbanites can rub shoulders and gather” (Susser and Tonnelat, 2013, p. 11) as urban commons. Others include the plazas and parks that “draw to them the ‘unorganized public’ and are places where proximity breeds interaction among city inhabitants” (Foster and Iaione, 2016, p. 297). And there are those who suggest that the urban commons are represented by commercial spaces of public interaction where people “congregate to relax, walk, play, dine, shop, attend an event or watch a movie” (Boydell and Searle, 2014, p. 329). Suggestions that public spaces are urban commons, I contend, create unnecessary ambiguity. Martínez (2020) distinguishes between public spaces and urban commons and attends to the uneven social geography of who shapes, produces, uses, and benefits from public space. Take public plazas for example, or, in the US context, shopping malls, which are there considered public spaces. First, there is an important difference between the public “construed as productive state expenditures” and the commons that is “established or used in a completely different way and for a completely different purpose” (Harvey, 2013, pp. 73–74). Second, public spaces for dining, shopping, and watching a movie are produced and managed by private businesses. None are designed, created, or managed by an autonomous community of people, in an egalitarian and non-profit manner. Concurring with Martínez, it is misleading to name them urban commons. Kenton Card defines the urban commons neatly as “resources reclaimed, produced, used, and maintained over time through solidarity-based action for the collective” (Card, 2020, p. 159). To extend this, Ruiz Cayuela proposes “a

The Struggle for the Urban Commons 217 politicised understanding of the commons as autonomous spaces dialectically negotiated among the commoners” (Cayuela, 2021, p. 2). She defines autonomous spaces as commons because “they challenge the structures and modes of doing of capital, while, at the same time, propose alternatives based on voluntary cooperation and horizontality” (Ibid). In urban commons, the “principle that the relation between the social group and that aspect of the environment being treated as a common shall be both collective and non-commodified” (Harvey, 2013, pp. 73–74) is central. This reclaiming, producing, using, and maintaining of urban resources is then a social relation, a project based on empowerment, collective action, reciprocity, solidarity, inclusiveness, and sharing. The urban commons emerge not through the actions of state or market authority, but often exactly when those authorities fail in their task of provision. For example, when the state and market fail to provide decent, affordable housing, people are prone to create urban housing commons like co-operatives (Huron, 2018) or squats (Martínez, 2020). In such cases, there is, first, a failure of the state to provide for the needs of certain communities, which then compels those communities to create autonomously an alternative form of provision. Second, urban commons do not emerge only in the face of the failure of state and market provision, but also in the face of state and market actions that deprive people of their very place in the city such as state-led gentrification, social housing privatization, the demolition of a public park for real-estate development or, finally, the enclosure of a previous urban commons. Capital is, of course, averse to any alternatives that threaten profits, and will eventually strive to enclose the urban commons, commodify them and make them, too, available for rent extraction. The urban commons are “continuously being produced, it is just as continuously being enclosed and appropriated by capital in its commodified and monetized form, even as it is being continuously produced by collective labor. The primary means by which it is appropriated in urban contexts is, of course, through the extraction of land rent” (Harvey, 2013, p. 77.) It is as land rent that the value produced in urban commons is appropriated (Karakilic, 2021). And it is rent maximization that drives the displacement of the urban commons as the example below will discuss. A final caveat. In summoning the urban commons as a critical and emancipatory project, it is preferable to steer clear of “nostalgia for a once-upon-a-time, supposedly moral economy of common action” (Harvey, 2011, p. 101). There is a naivety lurking in the urban commons literature. The urban commons are viewed by many as a “catch-all remedy for the faults of present-day capitalism” and to hold revolutionary “powers for overthrowing the dominance of capitalism and states alike” (Martínez, 2020, p. 1391). The existing urban commons are represented by local practices and moments when people try to rid themselves of the power and control of the rent relation. Often the commons are of a playful and carnivalesque nature, and the commoners incognizant of their role in any class struggle. The urban commons is not a universal answer for how to organize revolutionary action. But it can be a waystation to understand revolutionary alternatives through moments of imagining a more playful, less alienated, more

218  Mika Hyötyläinen meaningful urban life (Harvey, 2013). And participating in an urban commons can provide emancipatory moments, and even spark class consciousness when the struggle to maintain the commons politicizes social actors and they become aware of the nature of their predicament.

Suvilahti DIY The roots of skateboarding on concrete ramps go back to 1970s Southern California, where skaters would trespass on suburban backyards to skate in empty swimming pools that allowed them to mimic surf maneuvers.4 Today, street skaters use elements like stairs, curbs, and handrails in public spaces to perform contemporary maneuvers. Mundane elements with little purpose, besides easing the movement through the city for most, can be widely known locations and sites in the city for the skateboard community. The construction of DIY obstacles and skateparks in public spaces and vacant lots can be viewed as a continuation of the appropriation, use, and imbuing with new meaning of urban space.5 Skateboarding today is a popular and inclusive hobby and an established subculture. It attracts participants widely, also children from low-income households who may not have the resources for expensive costs or access fees in more established sports.6 Skateboarding had no formal representation in Finland until the 2000s and the needs of skaters were largely neglected by the authorities. The building of Suvilahti DIY began in 2011, at a time when there were no proper skateparks with concrete ramps in Helsinki. What began as a few makeshift structures is today a world-renowned DIY skatepark covering some 900 square meters in total, comparable to and more prominent even than international DIY parks like Burnside in Portland, FDR in Philadelphia, 2er in Hanover and Steppen in Malmö.7 Some of these skateparks were first illegal constructs answering a similar deficit of proper places for skateboarding, were later legalized, and even provided with state funding to operate. For some time, skateboarders in Helsinki have been using concrete to build ramps and ledges on which they then perform tricks. These contrivances have been built guerrilla-style on vacant lots and in public spaces, and with the permission of the City in an underused part of the Brahe Park, a free sports field in the central, residential area of Kallio, since the early 2000s. In 2010, unannounced, the City demolished the obstacles in the park, which sent the skaters on a search for a better-suited place to build. They settled on a vacant plot of land in Suvilahti about four kilometers from the city center. Here, a vast empty asphalt field sat as a remnant of the old industrial harbor of Kalasatama, the operations of which the City had moved elsewhere to open the site for brownfield development. A few of the skaters had vocational education in construction work, while most had no experience whatsoever. With little planning or knowledge, the skaters started building – mixing cement, bending and welding frames from reinforcement bar, casting, and shaping the concrete elements. The obstacles – different ramps and protrusions – were built outside of work and school hours and during weekends and summer holidays. The tools were

The Struggle for the Urban Commons 219 borrowed, and materials were received through donations. Anyone interested was welcomed to join the building activities, and once obstacles were finished, they were open for everyone to skate. When the skaters first began occupying the land and building in Suvilahti, there was no city plan for the area. The City agreed to give the vacant land for skaters’ temporary use for a nominal lease. The Finnish Skateboard Association, founded in 2003 to represent skateboarders and operating today under the Ministry of Education as a national youth organization, acts as the official tenant. Back then, the deal was that skaters could use the empty lot until the adjacent land development extended to the site. Then, the City would need and take back the land. Nobody anticipated the importance this urban commons would take on in the coming years and no strategy was developed for what to do in case the skatepark did become more established. Today, Suvilahti DIY is a free and popular training ground for skaters of all ages and skill levels (Figure 12.1). There are local and international skateboarding competitions organized at the park. Some of the skaters have gone on to become entrepreneurs, using the knowledge gained in experimenting with Suvilahti DIY to establish professional skatepark construction companies. The skatepark has also been used to shoot scenes for movies and TV and as a backdrop in music videos. It is used as a large concrete canvas by graffiti artists. It is a popular place to hang out during the summer with barbecues, punk-rock concerts, and parties often lasting into the night. There is an undefined core group of skaters who

Figure 12.1  Skateboarders of all ages practice at Suvilahti DIY in 2018. Photo credit:  Keke Leppälä.

220  Mika Hyötyläinen have been building the park over ten years now. They have continued building the park in a collaborative way, negotiating with different users, and managing it autonomously. In Do It Together, Skateboarder Samu Karvonen explains that Suvilahti DIY “has put skaters on the map, not as a group who just appropriate the city, but also as the ones building it.” However, Suvilahti DIY is a fixture of not just the city’s skateboarding scene, but participants of related action sports and subcultures and the wider public enjoy it. The skaters were using the vacant lot for their own purpose, but in doing so created urban commons with much greater public purpose and significance. Carol Rose (1986) famously described such success of the commons as the “comedy of the commons” – the commons not depleted and destroyed in use by self-interested individuals, as Hardin cynically imagined, but its use value increasing with its use.

Suvilahti Event Hub The Helsinki City Board’s Economic Development Sub-committee is a body that directs policy, makes decisions on and follows the execution of principles regarding business and competitiveness, the City’s international marketing, the use of its innovation fund, and, importantly, the reserving of public land for the use of industries and entrepreneurs. In 2017, the mayor of Helsinki called on developers to make suggestions for the development of facilities for cultural events on the site in Suvilahti. This was a new approach in a city with a long tradition of public planning monopoly and strict allocation of land uses. The City now increasingly asks private developers to make suggestions for urban development, ceding its sole right over urban planning (Hautajärvi et al., 2021). The mayor was soliciting ideas on how to develop the area and support what the city calls “its original and local culture.”8 In June 2020, the sub-committee reserved the plot on which Suvilahti DIY is located for a company called Suvilahti Event Hub, a real-estate development project backed by private investment.9 What reserving the land means in practice is that before planning takes place, the city earmarks the land to a private company, which has made an attractive proposal for developing the land. The proposal made by Suvilahti Event Hub was to develop spaces for high-end public events, movie and TV productions, commercial space, offices, a conference hotel, restaurants, and art galleries. The City is now preparing a new plan for Suvilahti to allow the development of the Event Hub, while it will displace Suvilahti DIY. What the City sees as developing original and local culture is to privatize the land and demolish an existing local, culturally and socially original, and internationally significant urban commons. Despite the socially and culturally rich urban commons, the highest and best land values are not being realized by Suvilahti DIY. There is a potential in the area for much more economically efficient activity. This is the “ugly corollary to Locke’s labor theory of value: individuals who fail to produce enough value have no claim to property” (Harvey, 2011, p. 104). The displacement of the skaters and the community enjoying the skatepark is justified by the city by claiming that the alternative land use will create greater efficiency, meaning it

The Struggle for the Urban Commons 221 will bring in land rent revenue. But what the officials fail to see is that at issue in urban development is not just efficiency and exchange value, but also matters of “justice, externalities, exclusion and environmental preservation” (Haila, 2016, p. 113). As Suvilahti DIY Association member Teemu Korhonen asks in the documentary: “Why should they build anything else here? Why should some privately funded event center be more important than this? That center would be closed: it has walls around it. This [Suvilahti DIY] doesn’t. Anyone can come here.” Encouraging development or redevelopment so that land is brought to its highest and best use, forces displacement and the destruction of existing built environments and collective land uses. As city councilor and skateboarder Vesa Korkkula described the City’s position, the skatepark “has no value in their eyes. They are so devoted to investor-led urban development.” I argue below, however, that, in fact, the City did see value in the skatepark. The local, distinctive land use of the urban commons that will be displaced was first mobilized to attract interest bearing capital to the area and activate it for future rent.

Activating the rent gap for the value grab Before the brownfield development began in Kalasatama, the City designated it as an “arts neighborhood.” The project manager explained that developers who bought land in the area were charged roughly ten euros extra per square meter by the City, which then used the money to fund permanent and temporary public works of art in the area. While the seafront land awaited its development, parts of the site were also free to be used for cultural activities by different grassroots actors. Some actors collaborated with the City and others, like the skatepark, grew on their own terms. The strategy of the City and the developers was to let collective practices and urban commons first build an image of culture and creativity for the area, while it awaited its regeneration. This is what Krivý (2013) calls “cultural governmentality.” Here, culture becomes a policy instrument to build the image of a “creative city” (at the time a hot urban policy buzzword). The purpose of both public art and temporary and permanent grassroots activities from the City’s perspective was to increase the appeal of the unfinished area. Events were organized and art was implemented to attract people and investments to the area and enhance its reputation and profile. Or, as the Arts Coordinator of REDI, a large shopping mall developed in Kalasatama, explained “to develop and enhance the story of the area.”10 And as the Kalasatama project manager explained, the skatepark has fit in well with the City’s narrative about Kalasatama as a neighborhood of arts and creativity. For the City, the notion of “culture” was an instrument to activate a rent gap in the area. The pioneer and frontier rhetoric of gentrification has always been strongly present in the redevelopment of Kalasatama. The City of Helsinki’s online introduction to new residential developments waxes lyrical about the new high-rise development: “The pioneers of Kalasatama look to the sea. That’s where the sun will rise to shine a light on its proud towers, this pocket-sized metropolis’s very own skyscrapers.”11 Now, the rent gap is being closed by allocating the land to

222  Mika Hyötyläinen rent-paying developers. The design of the winning architect for the Event Hub has named its project Continki. The name is telling: it refers to the shipping containers stacked on the site when it used to be an industrial harbor. But it also recalls the Container Square, a well-known grassroots event and workshop space run for many years in empty containers as another urban commons near the skatepark. The Container Square is long gone, but the creative ambiance and image it left for the area is being milked for rent, just as the subculture of skateboarding will be. Chairman of the Suvilahti DIY Association Joni Kiiskilä’s comment in the documentary film “Do It Together” reveals how the value grab operates: “Skaters bring their culture but then the businesses reap the fruits of that labor by raising the rents, raising house prices and land prices. They see it in very narrow terms, that you can just come and take it with money. But this has been built without money.” The uncomfortable situation for the City is that while it saw Suvilahti DIY as a fruitful image boost, it neither anticipated nor prepared for the skatepark to become so established a symbol of grassroots urbanism, an urban commons, and the second largest DIY skatepark in the world with an international reputation. The skateboarders were aware the city would eventually re-claim the land for development purposes. But as time went on, and as the urban commons of Suvilahti DIY became more established, the skaters had started to emphasize their right to not be displaced from Suvilahti. Through the very act of creating the urban commons on the vacant lot, Suvilahti DIY has become common property and it “forces us to go beyond an exclusive focus on the workings of private [and state] property and to acknowledge the existence of counterposed property claims that are collective in scope” (Blomley, 2008, p. 316). From a Lefebvrian right to the city perspective, it makes little difference whether the land value is grabbed by private rentiers or by the state. The City and the developers’ right to extract rent and exclude use values are opposed by the claim that the skaters and the commons have a right to not be excluded (Blomley, 2008). The question over the preservation of the park was slowly becoming political and a conflict broke out. The skaters voiced their anger on social media. They established the Suvilahti DIY Association in 2017, and its members have since been trying to save the skatepark, distributing petitions and negotiating with the city, raising awareness of the park, and lobbying council members. Member of the Suvilahti DIY Association Teemu Korhonen said: “the people who appreciate this skatepark, all we really have is our voices to try to emphasize to the city its importance.” Petitions and addresses were circulated, sympathizers of the skatepark voiced their opinion in participatory planning events, while council and board members who represented the skaters contested reserving the plot to the Event Hub. Although the Economic Development Sub-committee overruled a motion to save the skatepark and moved the decision to the Urban Environment Board, the board members voted 11 to 2 to allocate another plot for the skatepark in Suvilahti due to the pressure from the skaters and likeminded residents. However, as it stands, the Suvilahti DIY will be demolished.

The Struggle for the Urban Commons 223 The minutes from a Kalasatama resident’s evening attest to this.12 A resident of Kalasatama had questioned the saving of the skatepark. The city representative’s answer was that the skatepark cannot continue its current location. This was later confirmed to me by the project manager, who was adamant that the skatepark must go. Even if another place is given to the skaters, it will not replace the current structure, its history, and its social symbolism will be lost. Skateboarder and city council member Korkkula illustrated the irreplaceability of the skatepark: “Suvilahti DIY should be protected. I’m not kidding, they should place it on the UNESCO list of world heritage sites as an example of urban commons in the twenty-first century. It’s that important!” The value of land for the City depends on the role it assumes as a landowner and whether it calculates potential rents. If the City wants to maximize rent revenue, it will “replace schools, libraries and day-care centers with offices, restaurants and hotels that can bid more rent for the land. If they value social consequences and the public good in their land allocation decisions, they calculate the use value of their land” (Haila, 2016, p. 118). It is the former role that the City of Helsinki has now adopted, making the urban commons precarious. In the documentary Do It Together is a comment by Tero Pikkarainen, a skateboarder involved in building Suvilahti DIY, that highlights this dichotomy of use values and exchange values dictating land use and urban development: “We [Suvilahti DIY] don’t really have value in money terms. Once you start calculating floor areas in square meters, apartment rents, tax revenues, and so on, it’s not hard to see what weighs more for the City.” Currently, rent maximization weighs the most for the City. And when land is treated as a commodity and the land market coordinates urban development, the tendency is to produce exclusive, enclosed, and abstract spaces over which most people have little control and to which many people lack any access.

Alternatives to abstract space Spaces that are not strictly designated to uses either by planning or exchange value in the city can grant people release from the systemic pressures of urban life and the abstract spaces of a capitalist city and enable them to find a breathing space and distance from state and market controls and exercise self-expression (Haila, 2009). Tero Pikkarainen highlights the importance of such open spaces in the city that are outside of state and market designations of value and property: “It’s important to let the people decide for themselves where and what the places for their hobbies are and that we leave some open space in the city for people to express themselves.” But when use does become established in such open spaces, they may also create monopoly advantages for the city: places like the urban commons of Suvilahti DIY are, in many ways, unique. Many cities have DIY skateparks, but none are exactly alike, while any city can hire an international skatepark company to build the exact same ramp. The City was very well aware of this monopoly advantage when the harbor was assigned to grassroots cultural actors and alternative uses.

224  Mika Hyötyläinen But in the end, capital absorbs alternatives, eradicates fixed barriers to accumulation, and “the bland homogeneity that goes with pure commodification erases monopoly advantages. Cultural products become no different from commodities in general” (Harvey, 2002, p. 96). Monopoly advantages and local idiosyncrasies are replaced with abstract, homogeneous, and depressingly similar spaces of sports stadia, high-class shopping malls, waterfront redevelopments, and vanity projects for image rebranding (Peck, 2002). From the perspective of use values, the land as an urban commons in Suvilahti DIY was open for all, and the community would negotiate the uses. It is the selling of the land that will enclose the land and exclude the community. From the perspective of exchange value, the current use of the land as a commons is the barrier. Selling the land will render the land an open field for capital circulation. “The land must become a form of fictitious capital and be treated as an open field for the circulation of interest bearing capital” (Harvey, 2006, p. 371). Any land use that does not treat land as fictitious capital – whether use assigned strictly in the city plan, or use assigned through the appropriation of space as an urban commons – will eventually be a barrier for capital. When land rent coordinates urban development, that development also has a distinct temporality that enforces the abstractness of space. An urban commons serves the community in the present as a resource to meet current needs. Of course, predictions and planning about how that certain need will change and how the change should be met are made by said community. For example, in Suvilahti DIY, the skaters were constantly building and shaping the park as their skills developed and ever more challenging obstacles were required. But use value determines the development of this commons based on purposeful, current activity. Land rent “is determined relationally with future expectations also incorporated into the calculation. Land and improvements are valued at their highest and best use rather than with respect to their actual use. The value of any one parcel of land ‘contains’ the values of all other parcels at the present time as well as the expectations held on future times” (Harvey, 2009, p. 186). This temporal discrepancy renders the commons increasingly precarious. The monopoly advantage of the urban commons was abused for potential future rent.

Conclusion This chapter discussed and illustrated the relationship between land rent and urban commons. In the case of Suvilahti DIY, the more that skaters and wider public reclaimed, produced, used, and maintained the skatepark through solidarity-based action for collective purposes, the more uses and meaning ­ became attached to the park. Instead of a social relation of top-down power endemic to the rent relation, the skatepark users were collectively empowered, and the commons were open to all. Suvilahti DIY is about the social relations of production of a meaningful place, a place over which the users had control but were not controlled in using it. It reflected not a tragedy as Hardin understood it, but Rose’s comedy of the commons. Unfortunately, the true tragedy of

The Struggle for the Urban Commons 225 the commons is that “those who create an interesting and stimulating everyday neighborhood life lose it to the predatory practices of the real-estate entrepreneurs, the financiers and upper-class consumers bereft of any social imagination. The better the common qualities a social group creates, the more likely it is to be raided and appropriated by private profit-maximizing interests” (Harvey, 2013, p. 78). This raiding happens via the extraction of land rent. For years, the City of Helsinki has used Suvilahti DIY in its online city marketing and tourist brochures, using the skatepark in branding the city as attractive to tourists, companies, and mobile capital. The urban commons in Suvilahti has been a useful instrument to enforce the cultural ambiance of the area and convey the narrative of creativity the City hopes to tell about Kalasatama. All this has fed into the potential land rent of the area. Now that the park has served its image-­building purpose and merely stands as a barrier to capital investment, the City is ready to tear down the skatepark in favor of a rent-yielding real-estate development. But, in time, skaters and the wider public also became aware of the challenge they were posing to the City and developers. I would like to think that it is the sparking of this awareness which allows different kinds of urban commons, while subaltern to capital, to offer political material to imagine emancipatory alternatives to land-rent-driven, uneven, and often unjust urbanization. Importantly, the urban commons can also shed light on how to develop and preserve urban spaces through solidarity and collective action as opposed to the incessant development of abstract spaces aiming for constant expansion and capital accumulation.

Acknowledgments I thank Robert Beauregard and Miguel Martínez for comments and suggestions that helped improve an earlier version of this chapter. Many thanks to Ines Särkkä for the permission to use her documentary film Do It Together as material for this chapter. Any possible errors in the text remain mine alone.

Notes 1 I use the capitalized City as shorthand for the City of Helsinki, which consists of the politically elected decision-making body of the city council, and the different boards and offices that execute the decisions. 2 Do it Together: youtube.com/watch?v=J8Sy4p-Fwkg (accessed on 23 December 2021). 3 Value grabbing differs from land value capture, which refers to the suggestion that land value increases on private land due to public investment should be taxed back to the society. Value grabbing, instead, denotes the very appropriation of (surplus) value as rent by monopolistic landowners. 4 The history of pool skating has an interesting link to Finnish architecture: skateboarding.transworld.net/features/f irst-kidney-shaped-pool/#wV38fu7 UGoVhoq4F.97 (accessed on 15 January 2022). 5 Not all spaces that skaters appropriate are mundane or meaningless to others. The West Los Angeles Civic Centre (known to skaters worldwide as “The Courthouse”) had a long history as both a homeless encampment and a skateboarding site. When Nike sponsored the restoration of the Courthouse as a publicity stunt to win over

226  Mika Hyötyläinen the hearts of the skaters, the homeless were evicted. Now, skateboarding is a corporate business safely part of mainstream culture financially in the hands of transnational sports corporations and appropriated by the Olympics. Official skateparks built with public investments are mushrooming in cities across the world, including Helsinki. And even DIY parks are allowed and supported by some cities as revanchist policies in places where the city hopes to displace groups like drug users and the homeless by allowing skaters to build their parks. 6 According to the Finnish Skateboard Association rullalauta.fi/yhdenvertaisuus/ (accessed on 15 January 2022). 7 time.com/3809029/diy-skateparks (accessed on 19 December 2021), kingpinmag. com/features/europes-most-legendary-diy-spots.html (accessed on 19 December 2021). 8 uuttahelsinkia.fi/fi/kalasatama/suvilahti (accessed on 19 December 2021). 9 Minutes from the sub-committee meeting 5/20 §26 Alueen varaaminen Suvilahti Event Hub Oy:lle tapahtumakeskuksen toteutusedellytysten jatkoselvittämistä varten (Kalasatama, Suvilahti). 10 City of Helsinki introduction to Kalasatama arts and events: https://www. youtube.com/watch?v=rhUxe0sRC88 (accessed on 19 February 2022). 11 City of Helsinki introduction to new neighborhoods: http://en.uuttahelsinkia.fi/ kalasatama-tale-result-teamwork (accessed in 2017, link has expired). 12 Minutes from a Kalasatama residents’ meeting with city representatives: uuttahelsinkia. fi/fi/uutiset/2021-02-11/vastaukset-kalasataman-asukasillassa-esitettyihin-kysymyksiin (accessed on 15 January 2022).

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The Struggle for the Urban Commons 227 Haila A (2009) Chinese alternatives. International Journal of Urban and Regional Research 33(2):572–575. Haila A (2016) Urban Land Rent: Singapore as a Property State. Chichester: John Wiley & Sons. Hardin G (1968) The tragedy of the commons. Science 162:1243–1248. Harvey D (1978) The urban process under capitalism: A framework for analysis. International Journal of Urban and Regional Research 2:101–131. Harvey D (2002) The art of rent: Globalization, monopoly and the commodification of culture. Socialist Register 38:93–110 Harvey D (2003) The New Imperialism. Oxford: Oxford University Press. Harvey D (2006) Limits to Capital. London: Verso. Harvey D (2009) Social Justice and the City. Athens: University of Georgia Press Harvey D (2011) The future of the commons. Radical History Review 2011(109):101–107. Harvey D (2013) Rebel Cities: From the Right to the City to the Urban Revolution. London: Verso. Hautajärvi H, J Heikonen, P Kummala, and T Tuomi (eds) (2021) Kenen kaupunki? Helsingin kaupunkisuunnittelu ja kulttuuriympäristö törmäyskurssilla. Helsinki: Docomomo Suomi Finland, ICOMOSin Suomen osasto, Rakennustaiteen Seura, Rakennusperintö-SAFA. Huron A (2018) Carving Out the Commons: Tenant Organizing and Housing Cooperatives in Washington, DC. Minneapolis: University of Minnesota Press. Karakilic E (2021) Rentierism and the commons: A critical contribution to Brett Christophers’ rentier capitalism. Environment and Planning A 54(2):422–429. Krivý M (2013) Don’t Plan! The use of the notion of ‘culture’ in transforming obsolete industrial space. International Journal of Urban and Regional Research 37(5):1724–1746. Martínez M A (2020) Urban commons from an anti-capitalist approach. Partecipazione e conflitto 13(3):1390–1410. Marx K (1990, orig. 1867) Capital: A Critique of Political Economy Volume One. London: Penguin. Marx K (1991, orig. 1894) Capital: A Critique of Political Economy Volume Three. London: Penguin. Midnight Notes Collective (1990) The new enclosures. The Commoner 2:1–15. Ostrom E (1990) Governing the Commons: The Evolution of Institutions for Collective Action. Cambridge: Cambridge University Press. Peck J (2002) Political economies of scale: Fast policy, interscalar relations, and neoliberal workfare. Economic Geography 78(3):331–360. Polanyi K (2009) The Great Transformation (Finnish translation: Suuri murros). Tampere: Vastapaino. Rose C (1986) The comedy of the commons: Custom, commerce, and inherently public property. The University of Chicago Law Review 53(3):711–781. Smith N (1979) Toward a theory of gentrification a back to the city movement by capital, not people. Journal of the American Planning Association 45(4):538–548. Standing G (2019) Plunder of the Commons: A Manifesto for Sharing Public Wealth. London: Penguin. Susser I and S Tonnelat (2013) Transformative cities: The three urban commons. Focaal 2013(66):105–121. Särkkä I (2021) Do it Together. youtube.com/watch?v=J8Sy4p-Fwkg Tsavdaroglou T (2016) Urban commons and the right to ambiance: Gentrification policies and urban social movements in Barcelona, Athens and Istanbul. Proceedings of 3rd International Congress on Ambiances (Volos, Greece), pp. 707–712.

CONCLUSION A SUMMARY FROM THE PERSPECTIVE OF RENT THEORY Mika Hyötyläinen

What aspects of land and its use, as they relate to the economy, should we concern ourselves with? Mainstream economists focus on questions related to its supply and demand in the land market. Land in their models is simply another commodity that yields profit through direct sale and leasing and an asset that can be traded in the financial market (Haila, 1988). Any distinctive features that land might have, which might make it different from other commodities, are often ignored. Neoclassical economists tend to hold the view that land should be privately owned, that real property is an absolute right, and that land and real estate should be freely traded with equilibrium prices set on the market. They see this as promoting economic efficiency and transparency and deterring unjust free-rider problems. The social relations in which the use and exchange of land are embedded are seen as quite irrelevant to their analyses. Land under collective and common property regimes are understood as unwanted remnants of a pre-capitalist past, distorting the smooth operation of the land market, and leading to over-use and exploitation by self-interested individuals. Furthermore, state regulation and public planning will simply hinder the efficient use of land. The role of the state, from this perspective, should preferably be to protect private property rights, provide the legal and institutional framework for real estate markets, and discharge public land and real estate to private actors such as developers and businesses. Institutionalist, heterodox, and Marxist economists, who we have here collected under the title critical political economists, continue to insist that land does have distinct features and that social relations matter and are worthy of distinct theoretical treatment (Haila, 1991). They agree that land and buildings today are commodified. Some suggest that under advanced financial capitalism they are so tied up in the financial market and traded as financial assets that we best call them hypercommodified (Madden and Marcuse, 2016). However, critical political economists observe that commodification should not be taken at face value, but continuously critiqued and analyzed. From this perspective, land has some essential features that make its privatization and commodification highly problematic (Virtanen, 2000). Among these features are that all human activity requires land. It follows, that the use of urban land is particularly collective and embedded in complex social relations. Land is of limited quantity and no more habitable land will ever be available than there already is. Land is DOI: 10.4324/9781003280255-17

The Perspective of Rent Theory 229 spatially fixed and unique, placing its owner in a position of monopoly. Land also does not have production costs and its owner can extract income and profits from its users allowed by her monopoly position. Its supply is inelastic – it cannot simply be increased to meet growing demand. Due to such features, the land market and, ergo, the housing market will always be imperfect. Land’s special features mean that it can never be freely traded as the neo-classical logic would have it such that it dynamically responds to the fluctuations in demand and reaches an equilibrium. Land markets are not a self-correcting arrangement, but they pivot on hierarchies and power relations. Land is also intricately involved in capitalism’s many periodic crises in uneven spatial development (Smith, 2008), and state policies that support capital accumulation. The task of critical political economy is then to ask broader questions regarding the place of land and landowners in the capitalist mode of production. What role does land, specifically property in land, play in capital circulation and accumulation? Why do we pay for the use of land? How is private property justified? What is the role of the state in a national regime of land use and management, on the one hand, and that of the land market on the other? Questions of central interest to political economists deal not simply with the supply and demand of land and its improvements in the market, but more profound questions of why and how land is treated as a commodity in the first instance and the social consequences of land’s commodification. A political economy of land is in many ways a critique of many of the notions that neoclassical economics appears to take as given and it questions the very ideological anchors of the commodification of land. This book is a collection of recent thinking on land and its place in the economy as it has formed around such a political economy perspective. The writers are interested in the place of real estate finance and property ownership in the performance of urban and national economies and the consequences this has for state revenues, politics, inequality, housing opportunities, alternative forms of ownership, and the spatial distribution of land use, alternative property arrangements such as collective land management, and the commons. What they share is the understanding that land is deeply embedded in social relations. In this extended abridgment of the book, I hope to highlight a theoretical undercurrent running through its various contributions; that is, the land rent theory developed in the works of the late Anne Haila. The chapters in the book draw on empirical studies and illustrate concrete cases that explore the curious place of land and land rent in the economy in Finland, India, Spain, Singapore, Hong Kong, Japan, Italy, China, and the United States. A key insight that birthed Haila’s decades-long development of her critical political economy of land can be found in her suggestion that we should take very seriously David Harvey’s (1982) pioneering contribution to Marxist theory on rent, which describes how under capitalism, land tends to be treated as a financial asset according to the rent it yields. This notion, Haila (1988; 1991) proposed, should be the starting point for our political economic analysis of the real estate sector. To begin, what exactly does it mean to treat land as a financial asset?

230  Mika Hyötyläinen

The strange role of land as a financial asset The concept of financialization gets thrown around a lot these days and scholars have discussed the financialization of the economy, space, the municipality, real estate, housing, and of course, land (Haila, 2021). Financialization has been discussed to a great extent since the 2007–2008 financial crisis. The crisis showed, once again, how intricately land and real estate are linked to the financial market and the detrimental, material, and social consequences when a bubble in the real estate market bursts. However, the concept of financialization of land eludes a robust definition. As Haila (2021, p. 562) writes, “the extension of the category of financialization is stretched” and “its meaning is indeterminate.” Furthermore, this buzzword of the recent era makes it seem as if the phenomenon were entirely new. But as Christophers (2015, p. 188) points out, financialization denotes largely the same process that David Harvey (1982, p. 347), three decades earlier, described as “the increasing tendency to treat the land as a pure financial asset.” In mainstream finance lexicon, assets are crudely categorized as real, financial, or intangible. Real assets include precious metals and commodities like oils and foodstuffs. Land and real estate are often included here. Intangible assets include patents, trademarks, and intellectual property – they are not physical. Finally, financial assets fall between real and intangible assets. They may appear intangible with only a document to prove ownership ever moving from one portfolio to the next. However, that document is a contract and a claim of ownership to, for instance, the interest on a bond, a public company, or a piece of real estate. The value of a financial asset stems from that claim on some underlying asset. In our case, private property in land gives the owner the power to claim future land rent revenue. Instead of the concept of financialization of land, but pointing to the very process of treating land as a financial asset, Haila (1991, p. 348) articulated three points to allow the development of a theoretical framework to explore the role of land under capitalism: (a) the goal of investment in land is to maximize land rent; (b) rent is sought continuously and, as opposed to Harvey’s proposal of the theory of switched investment, investment in land and property is not a secondary process; and (c) rent coordinates land use as investors actively intent on maximizing their rent revenue control the construction, use, and pricing of urban space. In Limits to Capital, Harvey (1982) introduced a rich discussion of the role of land rent in the capitalist mode of production. He compared rent to the role that interest plays in the economy, that is, one of coordinating investments. Haila (1988) found Harvey’s suggestion to be one of the most fascinating guidelines for a new theory of rent. This is particularly so because it used the theory of rent to analyze land markets and land speculation. Haila always saw speculation with land rent as one of the most detrimental exploits for urban development, and she wanted to stress the role and agency of private landowners in speculation. She then introduces an amendment to Harvey’s idea regarding the tendency of landowners to treat land as a financial asset. In a classic article from 1988, included in

The Perspective of Rent Theory 231 this volume as Chapter 1, she proposed that instead of a tendency, they have the power to do so. By this reformulation, Haila wanted to move from the somewhat ambiguous notion of the tendency to argue that landowners wield powerful agency and, indeed, control over urban development. Building on Haila’s insight, in Chapter 2, Erik Swyngedouw and Callum Ward provide a thorough introduction of the key political, legal, and economic processes that lay behind the powerful agency of landowners. An illustrated review of the place of land in the capitalist economy, they offer an important opening to the discussions that walk us through key concepts of enclosure, primitive accumulation, fetishization, and commodification of land. A restatement of said concepts here would be superfluous. Instead, I draw your attention to one goal of their chapter. For the goal of Swyngedouw and Ward is not to merely provide an overview, but also, following Harvey and Haila, to contribute to the Marxist approach to land rent. The starting point for these authors is that rent is a distributional process; it transfers value from one agent to another without adding value. Establishing private property relations over land permits the capturing of land rent. It is this extraction of rent that renders land open to what Swyngedouw and Ward call its assetization. It constitutes the process through which land titles begin to circulate as purely financial assets within the broader circulation of financial capital while attempting to overcome and erode the special characteristics we relate with land. As Harvey (1982, p. 347) noted, “trade in land is reduced to a special branch of the circulation of interest bearing capital.” This is essentially what contemporary scholars call the financialization of land – land no longer as the object of external investments but treated and traded itself as a pure financial asset. Having established the above well-rehearsed chain of events, the authors of Chapter 2 then make an interesting suggestion and claim that the empirical question of whether what Harvey called the tendency (and Haila the power) of landowners to treat land as a financial asset exists has in fact been settled. Those tendencies/powers exist and the very nature of contemporary capitalism attests that they are being exercised. Land is an asset, these authors state, and its treatment as such is now a ubiquitous feature of global capitalism. We have moved to an economic system structurally predicated on assetization of land which has become an omnipresent and irrefutable feature of the global economy, not merely a tendency of landowners that only materializes under some conditions. Swyngedouw and Ward describe assetization as a process in which the qualitative, concrete, and specific features of land are being stripped down to quantitative, homogeneous, and general market measurements. Harvey explored this as the true capitalist form of land ownership. Having been mobilized as a pure financial asset, land is utilized for exchange value maximization as opposed to its enjoyment for its use values. The rent relation now more than ever coordinates landscapes of supply, demand, and surplus value production through land’s market allocation. The land market assigns capital to distinct locations and activities based on the potential for rent, thereby driving uneven development.

232  Mika Hyötyläinen No matter how seemingly ubiquitous the assetization of land has become, we must not tire of empirically verifying it. It is only by repeating this arduous task that we can emphasize the special characteristics of land and not take for granted the treatment of land as a liquid asset. The political economy critique of assetization is a political and an empirical task, and we should continue to develop the questions we ask regarding assetization. Where do landowners get their power to treat land according to the rent it yields in different contexts? What are the fixed, material consequences of treating land as a liquid asset? And how do the physical features of land and its improvements feed into their assetization? Through an intriguing case study of a single building in Chicago, Renee Tapp and Rachel Weber in Chapter 3 illuminate some answers to these questions as they explore what essential and concrete attributes of land and buildings are being stripped and assetized. In examining how a building is disaggregated into its component parts, Tapp and Weber contribute to the literature by providing a framework to explore how the materiality of the built environment, even a single building, is used in their assetization and what features of buildings underlie the assets that are circulated and exchanged in the real estate market. Real estate assets trade on the market merely based on their potential to yield rent and those doing the trading have little interest in the attributes of the underlying land and its improvements. And yet, real buildings are set in space in which people live, work, play and consume. Land and its improvements continue to be curious commodities with features that make their treatment as liquid assets highly problematic. When land and buildings are assetized, the intent is to condense physical property to mere market metrics and dis-embed land from social relations. Unique material aspects of a building like its age, condition, design, and use are transformed into statistics that measure existing – and project future – cash flows, appreciation, tax rates, and yields. It is important that scholars continue to illustrate the material and social implications of assetization. Tapp and Weber develop a framework under which we can study the material– financial nexus of assetization. The framework as presented in Chapter 3 can be said to be at a stage of early development and is formulated as a set of questions posed to a single building. These questions concern the building’s material features such as location, use, size, construction material, and age. These features meet with immaterial features of ownership, value, tax revenue, and financial performance of the building. This framework gives important tools and can be further developed for researchers to widen the scope of the political economy of assetization. The framework allows us to develop our questions regarding uneven development of the built environment based on how land is put to its highest and best use and utilized for rent maximization.

More than a secondary process We have established that as land and buildings are traded in the real estate market, what is traded are not the physical structures as such but the promise of future rent revenue. As Tapp and Weber showed, these are obviously fundamentally

The Perspective of Rent Theory 233 connected: the materiality and use of buildings play into the potential rent. The more rent that can be extracted, the better this asset performs. And this is all that those trading in real estate will truly ever care about. It is rent itself that has increasingly become a means of accumulation under capitalism’s contemporary rentier mode. In Chapter 4, Brett Christophers contributes to the growing field of debates on rentier capitalism, by a close analysis of the actions of the transnational real estate investor Blackstone. The world’s largest manager of alternative assets, Blackstone’s portfolio increasingly also includes real estate. There is a widely accepted narrative that Blackstone’s high rewards on the investments it makes are justified by the high risks it takes in making those investments. The essence of this narrative is that allocating their capital to alternative asset managers represents a way for individuals, pension funds, and insurance companies to take greater risk in investments and boost returns available from traditional assets like cash, bonds, and publicly listed equity. Christophers argues, that to equate Blackstone’s actions with risk-taking is to misrepresent the very nature of its business. He then deconstructs this narrative and shows how Blackstone’s profits in fact amass from a very careful avoidance of risks. Blackstone is a rentier capitalist, meaning that its profit logic is based on the exclusive control over rent-generating assets, but also on substantial political and economic power and privilege that limits competition. All this allows Blackstone to avoid risk by rolling it over to third parties. Chapter 4 undoes the high risk, high return myth that circulates in mainstream economic theory, the media, and even accounts of political economists. It is this myth that works to justify rentier accumulation strategies. Illustrating how Blackstone’s vast returns on these investments reflect the privileged position it enjoys within national and international investment settings, this chapter gives yet more sustenance to Haila’s argument that investments in land are not indeed of merely secondary importance in circulation. Investing in the alternative asset class of real estate reflects Blackstone’s primary way of accumulating capital as a rentier capitalist. And as Haila explained, it is such investors, actively intent on maximizing their rent revenue, who are today in control of the construction, use, and pricing of urban space. From the perspective of urban dwellers, this can have painful outcomes. For example, it often means extracting relatively higher rent from individuals who can least afford to pay and allocating to them poor-quality dwellings. In many instances, the poor will pay the greatest share of their income for housing. Like the dilapidating inner city neighborhoods of American cities featuring in so many analyses of gentrification, where landlords first extract sweet rents from poor, working-class, African-American families, until potentially higher rents encourage capital investments, followed by displacement and renting or selling the houses to the white middle class. Another example of the detrimental consequences of such uneven development can be found in the American rust belt. Using a case study of the land sales in the city of Muncie, Indiana, John West in Chapter 5 explores the policy framework that permits predatory and speculative landlords to buy tax-delinquent properties and use them as financial assets to

234  Mika Hyötyläinen maximize land rent. West, chair of a local land bank, a non-profit organization that acquires, maintains, and reuses abandoned property, has been advocating for the salvaging of abandoned property to address problems including the lack of affordable housing, the lack of green space, and the need for community gathering spaces in disinvested neighborhoods. Abandoned, tax-foreclosed properties are a major burden in old industrial towns like Muncie that are experiencing severe population decline. We saw in Tapp and Weber’s case study of a property in Chicago how the valuable, central location in a major metropolis makes land and buildings attractive financial assets. But what could attract outside investors to buy abandoned properties in dying rust belt towns? West introduces a useful categorization and groups these investors into four: (1) rehabbers, who renovate properties and sell for instance to first-time homebuyers; (2) holders, who rent out properties for example to students; (3) flippers, who resell properties as they are with a profit for example to the city’s development needs; and (4) milkers, predatory landlords who rent substandard housing to the most vulnerable residents of disinvested neighborhoods. These different actors have found ways to profit from acquiring mortgage- and tax-foreclosed properties. Particularly the two latter groups profit from abandoned properties with little or no investment in the upgrading of the properties. As Christophers taught us, the mainstream financial lexicon tends to emphasize risk to the investor. But, in the political economy of shrinking cities, the risks fall on dwellers, their neighbors, communities, and the cities where speculators purchase an abandoned property. Abandoned property speculators are not interested in making improvements in the physical condition of buildings, lots, or blocks nor do they care for the social relations in neighborhoods and communities. Through his work at the land bank, West pays witness to the process through which land becomes an asset owned by non-local financial actors. This enables him to analyze the strategic decisions of buyers of abandoned properties and discuss the very political economy of abandoned tax-delinquent property. In a story of diminishing trust in the public sector’s ability to take responsibility for land management, we encounter the difficulty of a publicly appointed land bank to promote their policy initiatives. Delaware County government and the State of Indiana had embraced entrepreneurial and market-oriented strategies for addressing blight and abandonment of urban land. Describing the well-known follies of uneven development under capitalism, abandoned properties reside mostly in African-American neighborhoods and sit untended through multiple cycles of sales, leading to decay in the physical structure and deterioration of values for adjacent properties in areas of concentrated poverty. As Haila (1988) discussed, investors actively intent on maximizing their rent revenue control the construction, use, and pricing of urban space. In Muncie, private landowners minimize costs in maintenance over multiple cycles adding to the socio-spatial plight of the communities. In Europe, public landownership has traditionally been central to ensuring a more even urban development and the welfare of residents. A cause of growing

The Perspective of Rent Theory 235 concern for European political economists is public real estate privatization. Why are municipalities across Europe selling public land and extracting ­market rent for real estate? One explanation offered for land privatization is that budget constraints, especially during recessions, lead to austerity measures that force public officials to seek new means to fund public expenses. But are these privatizations merely a temporary measure implemented during the inevitable, periodical meltdowns and slumps of the capitalist economy? Felix Adisson suggests in Chapter 6 that much closer attention needs to be paid to the durability of European public austerity. He argues that several demographic and economic factors, namely economic globalization, falling economic growth, population aging, and growth in welfare spending have ensued a state of permanent austerity. The difficult equation constituted by the above elements for state fiscal policies has caused a deeper dependence on the bond and capital markets to finance the rising cost of welfare spending. Moreover, the tightening grip of financial institutions over European states associated with the latter’s increasing reliance on financial markets leads to policies that target public companies and property privatizations. Today, attempts by public organizations to obtain capital by selling and leasing their properties are meant to provide a substitute for public debt repayment as well as financing public policies addressing issues such as welfare provision or regional development. Adisson describes how the state in Italy introduced investment instruments from the real estate sector into its legislation and then entrusted asset management companies with the selling of public properties to institutional investors, thereby leading to a financialization of the public real estate policy. Public landowners in Italy have adopted the tools and practices of a real estate business and are now closely intertwined with financial markets. An innovative contribution to critical political economy of land comes from Adisson’s operationalization of the notion of enrichment economy (Boltanski and Esquerre, 2020) to discuss how the privatization of public real estate not only consists of the dismantling of state functions that leads to a surplus to sell – a paradigmatic neoliberal move of state deregulation and retrenchment – but also a complicated process of selectively transforming specific locations in the old urban and rural landscapes into rent-yielding, novel places of tourism and consumption. I am reminded of the Finnish state real estate company, Senate Properties, which Haila (2008) called “a real estate company among real estate companies.” Recently, it established a subsidiary company called Senate Stations. This company oversees the development of old train stations in 22 locations throughout Finland in collaboration with private developers. This enrichment of existing public infrastructure has one goal; to sell off the train stations and their surrounding public properties for a profit. Adisson’s operationalization of the enrichment concept will allow the development of novel research questions regarding state real estate management across Europe. But is the only role the state can assume one of enriching and discharging public land to the market, facilitating the increasing treatment of land as a financial asset, and even itself acting as a real estate entrepreneur maximizing rents?

236  Mika Hyötyläinen One alternative approach comes from Singapore. Singapore has been extremely successful in attracting multinational companies, foreign investments, and technologies. In a relatively short period, it has managed to develop into a financial center and global city. Yet, there is something distinctive about its institutions of land management that go against the grain of received neoclassical wisdom. In Chapter 7, Haila (2000) unpacks the dominant and popular explanations regarding the success of this Asian economy. By analyzing global real estate investment flows, she locates overlooked reasons for the success of Singapore in urban, global city policies. Two different types of global city politics are identified: first, those seeking to attract multinational companies and global capital and investments and, second, those attempting to regulate the property market. The first includes industrial policy, finance policy, information city policy, production of office spaces, and image-building and city-branding. The risk with all this is that the location becomes part of the global property market (Beauregard and Haila, 1997) and property prices skyrocket to the extent that companies no longer want to locate in the city. This would threaten the city’s status as a global city. Haila then introduces the second set of programs and institutions that have the effect of curbing the rise of property prices. These are based on the British heritage of public landed property and the legislation on land policy and land use control. In Singapore, public authorities are allowed to expropriate land, a power that has been used extensively. The state provides industries with space and premises, thus deterring speculation in industrial properties. Because of this public ownership, the market for industrial space is unexposed to global investment cycles and companies are protected from being bankrupted by property market crashes. Comparably, the adverse effects of housing price hikes on labor power are prevented by separating the private and public housing sectors. Most workers live in public housing and are protected from any increase in house prices in the private sector. Such control and regulation are looked down upon by neoclassical economists, who condemn them as authoritarian or a hindrance to the free market. But Haila argues that both private enterprises and labor benefit from land regulation in Singapore. It is only the unproductive rentier class that does not. Today we pay witness to the rise of the rentier class even in many, surprising contexts.

The social lives of land China transformed from an agrarian society with a poor, rural population to an industrial juggernaut and economic superpower with an exploding urban middle class in a matter of a couple of decades. Among the many national changes that abetted its new role were China’s land reforms implemented in cities and peri-urban areas. Vast quantities of farmland have been expropriated by the state (Shih, 2021) and re-purposed for developing urban space, most notably residential space. The state-led urbanization boom of China is well reported. Rural and village land are expropriated by the state, and then leased to real

The Perspective of Rent Theory 237 estate developers, while the land rent is used to finance high-rise towers in which villagers are housed (Shih, 2021). But the unprecedented scale and extent of Chinese urbanization – the country consumed more concrete between 2011 and 2013 that the US did over the entire 20th century (McCarthy, 2014) – has also met with a transformation from a system of housing provision based largely on public rental housing to a homeowner society. Arguably, this has changed the attitudes of individuals and communities to land. Collectively-owned village land in China continues to be a key land tenure, but how are homeownership and urban development on farmland affecting the political economy of collective land use? Homeownership obviously makes individuals into propertied actors who will be concerned not simply with the use value but also the exchange value of their homes. Once discouraged by the government, owner-occupation and entrepreneurial housing development are now championed by Chinese policymakers and businesses. Riding on the crest of the swell of the homeowner society are the new middle classes. One significant related change in residential land use is the growth in so-called urban villages, particularly in southern China. In Chapter 8, analyzing in-depth interviews, Sa and Vuolteenaho illustrate how native villagers have established cooperatives to develop residential spaces and now enjoy rental income by accommodating rural migrants. In these urban villages, locals have abandoned agriculture and developed their collectively owned land parcels in urban peripheries into rental accommodations. Today, mushrooming numbers of rural migrants without urban hukous (residential permit to live in the city) settle in urban villages. Local governments have also benefitted from this process and collected rent from villagers by auctioning fixed-term land use rights on state-owned land. Research on Chinese land use changes has tended to welcome institutional changes of private property rights and omit an analysis of the ramification for social relations (Haila, 2017). In the Marxist analysis, “private property is a form of dispossession that separates individuals from the means of production and forces them into wage labor. But the converse is also true; private property creates owners and makes them efficient, profit-seeking, ‘rational’ individuals. In other words, property disciplines both owners and non-owners to become market subjects” (Mansfield, 2007, p. 396). An interesting parallel may be drawn between Chinese urban villages and the platform rental economy common in western cities. In the West, many households lease their homes on short term rental platforms such as Airbnb and unlock potential rents. The attitudes to home as a private sphere have changed to a financial mindset as even individuals now calculate untapped profits from short-term leasing as a cost (Haila, 2021). In both cases, households are becoming petit rentiers, treating their residential space as a financial asset. In the West, this has ensued in conflicts with local tenants who see a shortage of affordable housing as apartments are rented out as short-term leases instead. In Chinese urban villages, collectives now extract rent from migrants. Exchange values are prioritized above use values as communities begin to see their collective lands as

238  Mika Hyötyläinen financial assets. This is also changing the social relations that land is embedded in. The lives and relations of these groups are becoming hierarchically entangled under the reforms of the recent era: they have become mutually dependent but are highly diverging in socio-economic terms. All this has reordered China’s inherited urban versus rural inequalities to the new intra-urban practices of exclusion, discrimination, and stigmatization. These feature in Sa and Vuolteenaho’s interviews, as they demonstrate how the land, real estate, and housing-related institutional changes have not only reshaped the physical and political-economic landscapes in China, but also those very social relations that hinge on land and housing. The notion that land and real estate are best treated as financial assets has permeated everyday practices of managing residential property. The rent maximizing mindset is not merely a characteristic of huge, transnational rentiers like Blackstone, but one exercised by individuals and households. Even in a country like China with a long history of public housing and a system under which the private rent extraction was inhibited and frowned upon, now shows individuals extending a business mindset to the management of the residential property. The alternative cost logic of neoclassical economics is writ large in a mindset that views untapped, potential profit as, in fact, a cost. We discussed how uneven development of land vis-à-vis urbanization, reorganization of global economy and industrialization leads to shrinking size and economic stagnation of old industrial towns in the US. And we discussed the state-led redevelopment of the rural landscape in favor of rent-bearing land uses and adaptation of new land use logics by village collectives in China. A third, common story regarding the political economy of rural and peri-urban land is the abandonment of the agricultural landscape. Farmland abandonment affects countries the world over. Especially in developed countries industrialization, urbanization, the shrinking of the agricultural labor force, and land reforms are the main causes. One country that saw a growing risk of stagnating agricultural output and farmland abandonment in the face of vast structural, socio-economic shifts as early as the immediate post-WWII years is Japan. But instead of the expropriation and redevelopment of farmland for residential purposes, several institutional changes have been implemented to boost national agricultural productivity and ensure self-sufficiency. Over recent decades the Japanese government has realigned its approach to land use and intervened to diversify the ownership and management of farms (Ito et al., 2016). The Agricultural Land Act has been in place in Japan since 1952 but saw major amendments in the 1970s. These amendments enabled the change in policy and attitudes from the principle of individual owner-cultivators toward the advancement of large-scale farming by developing a land lease system. Small-size individual family farms were argued to hinder balanced, national income growth between cities and the countryside. The legal amendments introduced a redesign of the land use policy and its institutions. The government’s goal has been to encourage small rural landowners whose main source of income was no longer in agriculture to transfer

The Perspective of Rent Theory 239 their land use rights to farming cooperatives (Ito et al., 2016). One of the most recent reforms in line with this is from 2014 when the Japanese national government introduced the Farmland Banking (FB) system. This new strategy was established to expedite the productive use of farmland. It is essentially a system that allows rearrangements in farmland tenancy with prefectural governments who call for tenants and facilitate farmland aggregation to increase productivity. These calls can be extended to external farmers and businesses and tenancies can be rearranged and plots sublet without landowners’ consent. The system is a radical reform to the private ownership system. While the traditional agricultural landscape and its private property relations are transforming, so is its social and cultural landscape. Nishi, in Chapter 9, explores the consequences this has for local social relations and the relationship of landowners with their land. Nishi discusses the problems that arise from attempts to switch from one property regime to another. Land consolidation has enabled farmers with better economic and technical resources to advance farming methods. But this has also forced local farmers to change their traditional ways of life. It erased the boundaries of the fragmented paddies and villagers’ intimate attachment to their parcels of land. Nishi’s respondents, mainly aging farmers whose private farms had been consolidated into land banks, expressed mixed sentiments. Among these are a loss of feeling over the physical and spiritual connection to a parcel of land one has toiled over for a major part of their life. There was bewilderment over the shifts in lifestyle and identity one was expected to make from a farmer to a non-farmer. And there were blows to the pride farmers had taken in practicing traditional but comparatively arduous and timely farming practices as mechanical farming was being developed on collective farms. The final point opens an interesting question for further research on the environmental impact of changing land regimes. Traditional, low-intensity farming systems may be vital for biodiversity conservation. Beyond the need for further studies on the social consequences and economic opportunities of FB, if small-scale individual farmers are replaced by large corporate and cooperative farmers that consolidate plots and intensify output, what are the environmental consequences for Japan’s rural landscape and its biodiversity? During the period Japan was reforming its agricultural policies in the 1970s to halt the effects of urbanization on farming, India was experiencing explosive growth in unauthorized residential neighborhoods that were often considered as a last resort answer to the housing problems of the urban poor. In her study of unauthorized neighborhoods in Bangalore, Balakrishnan in Chapter 10 wants to shake up our notion of unauthorized residential areas as merely a housing question and suggests repositioning them instead as a labor question. She considers the spaces as representative of what Holston (2007) calls insurgent citizenship emerging when non-propertied working classes appropriate urban space and amenities by occupying land. Importantly, the surge in unauthorized neighborhoods in India overlaps with the 1970s explosion in informalized labor. Balakrishnan suggests we look at these neighborhoods not merely as residential,

240  Mika Hyötyläinen but also as sites of both informal, artisanal production and labor organization, indeed, as pro-poor agglomeration economies. This organization, she argues, happens around claims to amenities, including housing, but intriguingly, also to the generation and allocation of land rent. Two players then emerge historically whose actions have thwarted such potentials of these neighborhoods. First, trade union bosses in the 1970s made concessions to capital that rendered Bangalore’s working class irremediably informal and precarious and contributed to jobless growth in the city. Union bosses played a great role in depicting the working-class struggle as a housing problem and then themselves adopted the role of developers of unauthorized neighborhoods in partnerships with peri-urban landowners. Balakrishnan calls these union leaders real estate politicians who mediate informal workers’ access to land and housing and look to capture rent. Today, these real estate politicians have gained monopoly control over the real estate market. They then invest the rent revenues in political campaigns as electoral victory provides them regulatory access to legalize their unauthorized properties. Second, Indian cities demolish low-income neighborhoods on prime innercity land, relocating the low-income and working classes to large public-housing complexes in the urban periphery and financing public housing development by redeveloping the inner-city according to its highest and best use. The cities drew inspiration from Singapore’s public housing policies which Haila mentioned as part of its successful global city policy. Singapore’s land reforms were inspired by the American journalist Henry George’s suggestion of taxing land value increases on private land due to public investment or what he called the uneven increment, thus returning that value back to society. Haila understood this policy as an essential element of Singapore’s economic success and booming urban development. Balakrishnan, however, is less favorable of Georgist reforms as implemented in Bangalore and criticizes modernist planning and Georgistinfluenced taxing of land value increase back to the state. The state political elite, she fears, would simply pocket the land rent and allocate it to uses that were not in line with public needs. Balakrishnan equates the rent-seeking political elite with the ineptitude of the bourgeoisie to solve the working-class housing question, which it would instead simply move around, a point already raised by Engels more than a century earlier. What Balakrishnan argues to have happened in Singapore is the state using coercive power to gain monopoly control over land rents and legitimizing its accumulation strategies through building dignified public housing for its resettled citizens. In India, similar policies have simply seen local, pro-poor economies bulldozed and evicted. Balakrishnan urges us to entertain the following notion: what if subaltern classes were to appropriate control over the extraction and allocation of land rent in unauthorized neighborhoods, instead of the state or powerful developer-­ politicians? She refers here to Benjamin’s (2008) notion of occupancy urbanism, the collective democratic power of pro-poor groups to occupy and stake claims not only on the land, but also on the rents that accrue from these lands. What if these captured land rents could then be invested as much-needed forms of

The Perspective of Rent Theory 241 scarce capital into localized firms and economies? The fact that Balakrishnan ends this chapter with an assortment of important “what if” questions suggests that the field remains open for further empirical research. Beyond the question over who captures rents, one fundamental question of continued relevance for critical political economy is why land carries great rewards in the first place. For land to be treated as a financial asset, property rights must be clearly defined. The continuing enclosure of common land and the privatization of collective and public lands under which such rights might be fuzzier have the purpose of disentangling land from its complicated social relations and clearly assigning property to distinct entities. Yet, no matter how far this process of displacing collective uses and making the land into a commodity proceeds, land continues to be essential for our social lives. Furthermore, cultural, symbolic, and experiential relations related to land obviously continue to matter to people a great deal even during our era of hyper-commodification and financial capitalism. Land continues to be essential also for everyday social relations that are not primarily characterized by class conflict. But do such relations have a place in our political economic analysis? This question puzzles Robert Beauregard. Posing a sympathetic challenge to critical political economy, Beauregard introduces a case study of the redevelopment of New York City’s East River Park in Chapter 11. Here, the many social lives of the park are being affected as the local government is preparing for sea-level rise and has planned to completely redo the park for flood prevention purposes. Beauregard focuses on the many kinds of social relations that the park affords. These he argues, are social relations not so much revolving around class struggle or struggle over the right to the city, but land as an integral element in how people balance work and free time, how they engage with each other as families, friends, and strangers, and how they address the need to detach from the frenzy of urban living and reconnect with nature. Referring to Latour’s notion of following the actor, Beauregard wants to draw our attention to how people relate to the public park and its redevelopment and to focus on how their relationship to the park featured in their accounts of how the park fits into their social lives. What is revealed is that when the users of urban land discuss their relation to land and each other via the land, use values are prioritized. This is what Haila emphasized theoretically in her critical political economy of land: the value of urban land for the residents is its use value. While Beauregard illustrates this empirically, he is concerned with how to situate such relations within a critical political economy perspective without suppressing the land relations to economistic thinking as to strip them of their meanings. Beauregard leaves the question open. The question is, of course, epistemological and ontological. What aspects of our social reality do we want to give precedence to in our research? Should it even be considered a task of political economy to unpack the richness of social relations of land? Is it methodologically designed for that? Maintaining the focus on the local scale with a case study of a rather different kind of park, and its social relations, this time in the Finnish capital of Helsinki, in Chapter 12, I introduced a case study of the Suvilahti DIY skatepark

242  Mika Hyötyläinen as an example of the urban commons. I return to a Marxist political economy approach and attempt to show how we might fit the richness of social relations of land in a dialectic discussion with the growing tendency for public landowners to treat land as a financial asset. The precarity of those use values of land, even in a Nordic welfare city, became highlighted in moments of struggle for the urban commons. We find an urban community defending their uses of a meaningful urban space in the face of rent-coordinated land use changes as investors actively intent on maximizing their rent revenue and abetted by an entrepreneurial state control the construction, use and pricing of urban space.

A critical political economy of land The corpus of work on rent that Anne Haila left us is a fountain of inspiration for developing a political economy of land. In this final chapter, I have then discussed this book’s contributions to a political economy approach with a particular focus on land rent theory. The authors of this book have highlighted several sets of questions that may help in developing a political economy of land. The first set of questions concerns landowners. Classical economists were sure that the power of landowners would subside as capitalism developed. Quite the contrary is true today and landowners continue to exercise ever greater power in the spatial development and accumulate great wealth from the users of those spaces. From where does the continued power of landowners derive? What is the purpose of landowners in advanced capitalism? How are they able to affect spatial development? Second, the various, often violent processes of enclosure of common lands and privatization of public and collective lands continue and even intensify across the globe. They must be kept under close analytical scrutiny. Why is public housing being privatized? How to defend precarious urban commons from rentier tactics? How are the exploitative actions of transnational investors and asset managers legitimized? What explains the rise of petit rentiers in various contexts? Essentially what these questions highlight is that we must keep exploring the ideological moorings of private property. The third set of questions concerns the role of the state. The role the state assumes in any national regime of land use and management is not a straightforward issue but must always be unpacked. Why are public bodies today selling public land and extracting market rent for public real estate? Is it the purpose of the state to discharge public land to the market or to oversee and regulate private landowners? How does the state facilitate and provide the institutional setting for the increasing treatment of land as a financial asset? How does state appropriation of land affect local traditions and lifestyles? And why are some states themselves acting as real estate entrepreneurs and maximizing rents? Fourth, land rent. We know there are different approaches to rent. Some argue it simply goes with the territory that private owners extract payments for use of their assets. Others suggest rents should accrue to the public as any increases in

The Perspective of Rent Theory 243 land values are due to public investment and collective effort. But what precisely justifies the extraction of rent, whether to private pockets or public coffers? What the contributors in this book share is a strong commitment to the idea that land is something more than a commodity to be traded in the land market and that there is something questionable about its treatment according to exchange values. It is embedded in social relations where its value is its use value. Land and its use have deep implications for social justice and equality. The task for a political economy of land is a theoretical, empirical, moral, and political one, and, as such, highly complex. The above list of questions is far from exhaustive, but we hope it illustrates some of the paths that future scholarship on the political economy of land might take. Rent theory should hold a central place in this venture.

References Beauregard R A and A Haila (1997) The unavoidable incompleteness of the city. American Behavioral Scientist 41(3):327–341. Benjamin S (2008) Occupancy urbanism: Radicalizing politics and economy beyond policy and programs. International Journal of Urban and Regional Research 32(3):719–729. Boltanski L and A Esquerre (2020) Enrichment: A Critique of Commodities. Cambridge: Polity Press. Christophers B (2015) The limits to financialization. Dialogues in Human Geography 5(2):183–200. Haila A (1988) Land as a financial asset: The theory of urban rent as a mirror of economic transformation. Antipode 20(2):79–101. Haila A (1991) Four types of investment in land and property. International Journal of Urban and Regional Research 15(3):343–365. Haila A (2000) Real estate in global cities: Singapore and Hong Kong as property states. Urban Studies 37(12):2241–2256. Haila A (2008) From Annankatu to Antinkatu: Contracts, development rights and partnerships in Kamppi, Helsinki. International Journal of Urban and Regional Research 32(4):804–814. Haila A (2016) Urban Land Rent: Singapore as a Property State. Chichester: John Wiley & Sons. Haila A (2017) Institutionalization of ‘the property mind’. International Journal of Urban and Regional Research 41(3):500–507. Haila A (2021) Financialization and real estate. In Orum A M, Ruiz-Tagle J, and Vicari Haddock S (eds.) Companion to Urban and Regional Studies. Hoboken: John Wiley & Sons Ltd. Harvey D (1982) Limits to Capital. Oxford: Basil Blackwell. Holston J (2007) Insurgent Citizenship. Princeton, NJ: Princeton University Press. Ito J, M Nishikori, M Toyoshi, and H N Feuer (2016) The contribution of land exchange institutions and markets in countering farmland abandonment in Japan. Land Use Policy 57:582–593. McCarthy N (2014) China Used More Concrete in 3 Years Than the U.S. Used in the Entire 20th Century, accessed on April 11, 2022, https://bit.ly/3vbJ6TC Madden D and P Marcuse (2016) In Defense of Housing. London: Verso. Mansfield B (2007) Privatization: Property and the remaking of nature–society relations. Antipode 39(3):393–405.

244  Mika Hyötyläinen Shih M (2021) The sanctuary of the collective – Contesting the fictions of state-led land commodification in peri-urban Guangzhou. In Ghertner D A and Lake R W (eds.) Land Fictions – The Commodification of Land in City and Country. London: Cornell University Press. Smith N (2008) Uneven Development – Nature, Capital and the Production of Space. Athens, GA: The University of Georgia Press. Virtanen P V (2000) Kunnan maapolitiikka. Helsinki: Rakennustieto Oy.

Index

Italicized pages refer to figures and those followed by “n” refer to notes. abandoned property 92–100, 103–105, 234 Abenomics 162 absolute rent 10, 22, 47 abstract space 223–225 access rights 173–174 accounting 45, 67, 68, 70, 102, 205 Adisson, Félix 14, 235 Agenzia del Demanio 122n3 agricultural landscape 165, 173, 238, 239 Agricultural Producers’ Cooperative Corporation 165, 166 alienation 161; landowners 174; political economy 194; rights 169–170, 176 Allen, Marcus 77 Alonso, William 15n3, 46 alternative assets 75–78, 80, 87, 89, 233 ambivalences 145, 151–153 American dream 154, 157n1 ancestral home 149–151 An’dou village 144, 153–155 anti-urban policy 92, 94, 99, 100 Apollo Global Management 87 Asian Planning School Association (APSA) 135n1 Asian Renaissance 125 asset: financial 23–25, 50–52, 230–232; housing 81–86; land 52–53; management 75–77, 78–81, 87, 89, 112, 115, 117, 118, 233, 242; manager 53, 57, 75–80, 87, 233, 242; market value 69; value 62–64 assetization 3, 13, 14, 40, 43, 51–53, 56–58, 69, 231, 232 auctioned property 95–97, 106n5 austerity 14, 108, 109–113, 115, 118–121, 122n2, 180, 235

Balakrishnan, Sai 14–15, 15, 239–241 Ball, Michael 22–23, 25 Bandyopadhyay, P. 22 bargaining 7, 116 Baross, P. 184, 186, 189 Baudrillard, J. 134 Bayview Asset Management 82, 85 Bear Stearns 5, 87 Beauregard, Robert 15, 135n1 beneficiaries 113, 120, 164, 170, 176n9 Bengaluru 15, 181, 182, 184, 190–192; depoliticizing 185–190; public-sector industries 184; slums 185–190; unauthorized neighborhoods 184 Benjamin, S. 181, 183, 184, 188, 189 Beswick, Joe 78 bidders 105n2 Blackstone 88, 89, 233, 238; alternative assets 78; clawback provision 85; corporate structure 79, 79; finance buyouts 80; financial crisis 75, 77; financial success 87; five features 78; housing investment 76, 77, 81–86; Limited Partners (LPs) 80, 81; managing director, 83; market value 84; money-making bodies 89; post-financial-crisis 75, 81; president 83; private-equity firms 78; private-equity investment 80–81; private real-estate owner 82; profits 14; real-estate bank loans 82; realestate competitors 87; rental properties 82; rentier capitalist 75; single-family homes 82; strategy 83 Boltanski, L. 109, 116, 119, 121 boom-and-bust cycles 5 Boren, Eero 135n3 Braun, Benjamin 90n1

246  Index budgets 12, 35, 65, 109, 110, 112, 117, 120, 164, 166, 176n6, 204, 235 Buffet, Warren 136n10 buildings 6, 8, 9, 11–14, 32, 35, 97, 112, 114–120, 144, 184, 205, 228, 232–234; assetizing real property 57–58; asset’s market value 69; commercial real estate 56; materials 64–66; old 66–67; owners 61–62; place 58–60, 59; public stock 56; size 64; taxes 67–68; urban planning 56; use 60–61; value 62–64; 550 West Adams in Chicago 58, 59 bundle of rights to farmland: access rights 173–174; alienation right 169–170; exclusion rights 170–171; management rights 171–172; withdrawal rights 172–173 The Business Times, newspaper 131 buyers 9, 10, 24, 30, 88, 92, 93, 96–99, 101, 103, 105, 129, 234 Caitang village 144, 151, 153–155 California Public Employees’ Retirement System (CalPERS) 76 capital accumulation 2, 7, 9, 12, 41, 45, 47–51, 109, 110, 113, 119–121, 145, 147, 213, 225 capitalism 1–7, 11, 13, 15n2, 22–25, 29, 40, 41, 43, 51–53; financialized 43, 109, 111, 116, 119, 120, 121; geographical political economy 50; global 50, 231; industrial 215; interest-bearing 24; political economy 50; present-day 125, 217; rentier 14, 15n2, 15n2, 52, 75, 76, 87, 89, 213, 216, 233; supply-chain 182 capitalization 43, 63, 133 capital logic 25 Card, Kenton 216 Carey, David 81 carried interest 77, 80 case study site 164–167 Cassa Depositi e Prestiti (CDP) 115 Castells, M. 35, 129, 182 Catalano, A. 23 Cayuela, Ruiz 216–217 central business district (CBD) 27 Chatterjee, P. 192n2 Chen, P. S. J. 127, 131 China 49, 128, 129, 135n5, 143, 146–157, 236–238; floating population 146; Fujian province 144; internal migration 14; land regime 143, 143; low-wage Asian country 4; urban revolution 145–146

Christophers, Brett 110, 111, 114, 230, 233, 234 church-based Community Development Corporation 93 cities: global 10, 14, 125–129, 133–134, 135n3, 236; shrinking 96, 97, 234 City Board’s Economic Development Sub-committee meetings 213 City of Helsinki Urban Environment Division 213 City of Muncie 93 coal 4, 8, 47 coalition 92, 100, 103, 105, 205 Cohan, William D. 77, 84 collateralized debt obligations (CDOs) 5 colonias proletarias 182 Colonies 118 Colony Capital 87 commercial real estate 5, 56, 58, 63, 64 commodities 12, 31, 35, 41–49; fictitious 194; land and building rights 29; political economists 6; property rights 11; real assets 230; sale and leasing 7; value of 41 common-property systems 161 commons 2, 15, 52, 211–220, 214–216, 229, 242; see also urban commons Community Agricultural Master Plan (CAMP) program 162 Conference of Regions and the National Association of Italian Municipalities 114 conflicts 7, 8, 10, 22, 41, 42, 44, 45, 50–53, 67, 108, 109, 184, 195, 201, 206, 207, 212, 237, 241 Container Square 222 contested commodification 112 Control Premises Bill (1968) 131 Cooperative Uemura 166 corporate taxes 4, 5 county auction 92–96 cultural governmentality 221 cultural heritage 14 debt-based house ownership 47 debt-to-equity ratios 4 decision-making process 6, 23, 168, 171, 172, 225n1 Delaware County 14, 92, 94–99, 101, 102, 104, 105n1, 234 Delfi Orchard 129 Denman, D. R. 23 depoliticizing 185–190 deregulation 1, 4, 5, 6, 33, 105, 133, 235

Index 247 De Soto, Hernando 215 differential rent 10, 16n9, 22, 47, 48, 60 diktats 45 Dimora brand 114 dispositifs 51 DIY skateparks 218, 222; see also Suvilahti DIY (do-it-yourself) Diyuan 149, 151, 156 Do It Together, film 213, 220, 222, 223, 225n2 Downs, Anthony 33 Draft Environmental Impact Statement (DEIS) 196, 200, 207, 208 Draghi, Mario 86 East River Park Action (ERPA) 202–203 East River Park Action Group (ERPAG) 202 East Side Coastal Resiliency (ESCR) project 195–197, 196 economic crises 2, 35, 135n2, 187 economic development 9, 61, 114, 115, 120, 128, 176n4, 213, 214, 220, 222 Economic Development Board (EDB) 128 economic globalization 111 economists 2, 6–8, 10, 12, 15n3, 23, 27, 32, 43, 44, 125, 126, 194, 204, 205, 228, 229, 233, 241 economy 37n7 Embassy of Finland and Finland Trade Centre 127 emotional vulnerability 148 enrichment economy 109, 110, 113, 119–121, 235 Esquerre, A. 109, 116, 119, 121 European Central Bank (ECB) 86 exchange-values 9, 35, 40–47, 50–53, 61, 157, 215, 221, 223, 231, 237, 243 exclusion rights 170–171 EXH Capital Partners 98 exorbitant privilege 86–89 ex post facto law 187 Fannie Mae 85 farm households 176n1 Farmland Banking (FB) 160–166, 163, 170–176, 239; adoption 14; budget 164; bundle of rights 169–174; system 162–164; tenancy (re)arrangements 167–169 farmland wealth index 176n2 farm management 161, 162, 166, 167, 168, 171, 172, 174, 175, 176n5

FDR Drive 196, 197, 202, 206 Federal Bureau of Investigations 106n7 fees 61, 76, 78, 80, 101, 104, 216, 218 Fei, X. T. 149, 150, 154 fetishization 13, 41, 44, 231 Fifield Companies 60–62, 65, 67 Final Environmental Impact Statement (FEIS) 200, 208n2 finance capitalism 1–3, 121, 194 financial actors 96, 99, 234 financial asset 23–25, 34, 194; building 58–69; firms 27–28; globalization of economies 21; investment and real estate markets 32–34; land as 50–52; landowners 25–27; new groups of agents 30–31; reformulations 21 financial crisis 5, 9, 50, 57, 75–77, 81, 84, 86, 87, 110, 111, 127, 230 financialized capitalism 13, 43, 45, 52, 53, 109, 111, 116, 119–121 financialization 2, 3, 14, 41, 44, 45, 111, 112, 203, 204, 230, 235; and assetization 69; financial asset 40; land 45; public real estate policy 120; rent, property rights 6–13 Fine, Ben 22 Finland 1, 5, 28, 29, 32, 34, 35, 37n8, 110, 111, 127, 133, 135n8, 215, 218, 229, 235 Finnish Skateboard Association 219, 226n6 firms 3, 5, 10, 26–31, 35, 57, 63, 68, 77, 80, 115, 118, 180, 183, 186, 189, 205 flexible-specialization 180, 181, 183, 185, 186 flippers 98, 234 Fondo Silver 117–119 Forbes, D. 136n10 Fordist–Keynesian regime 183 Fraser, N. 116, 121 Gardels, Nathan 135n5 Gates, Bill 136n10 Geithner, Timothy 89 General Partner (GP) 79, 80 George, Henry 24, 181, 240 Ghertner, D. A. 187 GLL Real Estate Partners 62, 63, 66, 69 global cities 10, 14, 125–129, 133–134, 135n3, 236; politics 125, 127–129, 134, 236 Global City Politics I, 127–129, 134 Global City Politics II, 127–129

248  Index global economy 2, 6, 31, 40, 180, 182, 186, 231, 238 global financial crisis 57, 75 global “gateways” 59–60 globalization 31 global property 130, 135n7, 236 global real estate investment flows 129–130 golden age 4 Goldman Sachs 87 Gordon, H. S. 215 governmental actors 99 Gray, Jonathan 83–84 Guo Ren Gong You Zhi Jia (GRGYZJ) 144, 151 Habitat for Humanity 106n3 Hackworth, Jason 94, 100, 106n4 Haila, Anne 10–14, 40, 41, 43, 44, 50–53, 110, 111, 135n1, 135n3, 146, 147, 161, 194, 195, 212, 214, 229–231, 233–236, 240–242 Häinninen, Elisa 135n3 Hänninen, Ilkka 135n3 Hardin, G. 215, 220, 224 Harré, Rom 26, 36n4, 36n5 Harvey, David 9, 12, 23–25, 36n2, 40, 43, 44, 50, 136n12, 147, 215, 216, 230, 231 Helsinki 15, 21, 27–32, 34, 35, 37n8, 37n9, 135n4, 211–214, 218, 220, 221, 223, 225, 225n1, 226n1, 226n10, 226n11, 241 high value-added tourism 114 Himanen, Juuso 135n3 Hindustan Aeronautics Limited (HAL) 185 holders 97, 99, 101, 234 Holstein, Pekka 135n3 Holston, J. 180, 182, 239 homeownership 148 Hong, K. C. 135n1 Hong Kong 11, 44, 135n5, 136n10, 181, 188, 229; global city 127–129; global real estate investment flows 129–130; investment in property 131–134; lower property prices 130–131; planning 126–127 housing 1–7, 9–15, 29, 31–33, 36n2, 56, 57, 66, 68, 75–78, 81–87, 89, 93, 95, 97–99, 103, 106n3, 106n5, 118, 129, 132, 135n4, 143, 147, 148, 154, 155, 157, 180–191, 203, 211, 229, 230, 234, 236–240, 242; Blackstone 75;

investment and home-making 154; prices 130; private 133, 156; public 3, 4, 9, 57, 117, 118, 132, 133, 148, 154, 188–191, 203, 204, 215, 236, 240, 242; reforms 143; rental 64 Housing and Urban Development (HUD) 82, 196 Housing Development Board (HDB) 133, 134 hukou system 144, 146–148 Hyötyläinen, Mika 15 hypothesis 25–26 import-substitution industrialization 180 India 14, 180–189, 191, 229, 239, 240 Indira Awas Yojana (IAY) 191 information technology (IT) 184, 185, 187, 189 “institutional-grade” properties 59–60 Institutional investors 57, 60, 64, 103, 109, 111, 112, 117, 120, 121, 122n1, 235 insurgent city 192 International Monetary Fund (IMF) 3 investment 7–12, 26, 31, 44, 46, 48–50, 60–64, 69, 75–81, 83–89, 115–120, 152, 171, 205, 212, 216, 225n3, 230–234, 236, 240; global real estate 129–130; market segmentation 131–134; in property 131–134; and real estate markets 32–34 investment funds 34, 44, 62, 69, 77–80, 112, 115–118 investors 3–5, 8, 10, 11, 13, 32, 35, 53, 56–69, 77, 80, 84–89, 90n2, 94, 97, 120, 122n1, 129, 130, 135n3, 212, 230, 242; Blackstone 80; financial markets 112; institutional 112, 117; para-public 115; perceptions 33, 57; in real estate 34 Invitation Homes 77, 81, 82, 85, 88, 89 Ishikawa Prefecture 162, 164 isojako 215 Istituto Nazionale per la Previdenza Sociale (INPS) 117, 118, 122n13, 122n14 Italian cultural heritage 114–117 Italy 6, 14, 109, 112, 113, 115, 118–120, 229, 235 Jacobs, Jane 126 Jaffe, Austin 135n1 Jakarta 127 James, Tony 81, 83, 86–88

Index 249 Japan 14, 133, 160, 162, 176n2, 229, 238, 239 Jurong Town Corporation (JTC) 132–134 Kabaker, Matt 89 Kalasatama 212, 213, 218, 221, 223, 225, 226n10, 226n12 Karnataka Slum Clearance Board 187, 188 Karvonen, Markku 135n3 Karvonen, Samu 220 Ka-shing, Li 136n10 Keynesian approach 125 Key Performance Indicator (KPI) 162 Kiiskilä, Joni 222 Kimmelman, M. 204 Kochan, D. 144, 149, 154 Koolhaas, Rem 135n5 Korhonen, Teemu 221, 222 Korkkula, Vesa 221 K.R. Market 186, 188 Krugman, P. 125 Kuala Lumpur 127 Laasanen, Olli 135n3 laissez-faire policies 126, 127, 129 land: acquisition 61; as asset 52–53; banking 92, 93, 103–105, 106n8, 131; and buildings 228; financial asset 50–52, 230–232; financialization 40; market 211; owners 3, 8, 9, 10, 22–35, 36n3, 37n8, 45–47, 49, 51, 112, 119, 160, 164, 168–176, 181, 186, 213, 214, 225n3, 229–232, 234, 239, 242; political economy 242–243; and property 208n1; and real estate 228; regime 145–146; relations 14, 15n1, 143–157, 205, 241; rent 2, 9, 22, 36, 40, 45–47, 113, 120, 169, 180, 182–192; repoliticizing 190–192; rights 12, 150, 161; social lives 236–242; tenure 176, 183, 184, 237; value 40–50 Land Acquisition Act (1966) 131 Land Acquisition Ordnance (1955) 131 Landed Organic Farmer 169, 170 Land Improvement Act 164 landowners 3, 8, 9, 10, 22–35, 36n3, 37n8, 45–47, 49, 51, 112, 119, 160, 164, 168–176, 181, 186, 213, 214, 225n3, 229–232, 234, 239, 242 landownership 24, 25, 47–50, 234 land relations 14, 15n1, 144, 157, 205, 241

land rent 2, 9, 22, 36, 40, 45–47, 113, 120, 169, 180, 182–192; coordination and extraction 213–214 land tenure 176, 183, 184, 237 land-use planning 28, 181, 182, 184, 191 laoxiang 151, 152 Laurila, Veli 135n3 Leadership in Energy and Environmental Design (LEED) 65 leases 9, 11, 41, 63, 65, 68, 98, 109, 115, 116, 122n7, 163, 165, 169, 171, 211, 219, 236 Lefebvre, H. 145 Lehman Brothers 5, 87 leverage 63, 68, 69, 78, 80, 86, 88, 186 leveraged-buyout firms 80 limited liability companies (LLCs) 14, 58, 62, 68 Limited Partners (LPs) 79–81 limited partnerships 58, 90n2 Liu, Ran 147 loan crisis 15n6 locational behavior 27 Locke, C. 149 Löfgren, O. 154 Logan, John 135n6 Loisaida 208n5 Mallach, A. 97–99 management rights 171–172 Mao-era 145, 147 markets: capital markets 33, 111, 235; investment 33; valuation 1 market-socialist reforms 143 Markowitz, Harry 76 Martínez, M. A. 216 Marxism 6, 7, 40, 45–48, 192n2, 195, 228 Marxist approaches 40, 231 Marx, Karl 36n3, 43–48, 183, 214 Massey, D. 23, 148 materiality 14, 15, 58, 64, 195, 203, 206, 207, 232, 233 McCarthy, Kathleen 84, 88 McSpaces 213 Mediterranean Banking Group 115 Mee, K. 148 mega-projects 45 metropolitan governments 146 mianzi 151 migrants 143–148, 156, 157, 237; material home 153–155; real-life and dreamed 153–155; trans-localism 148–149; Xiamen 149–153 milkers 98, 99, 234

250  Index Miller, Eli 89 Million Program 3 Ministry of Economy and Finance 115 Ministry of Industry (MTI) 131 Mnuchin, Steven 89 mobilization of land 42, 46, 52 Monetary Authority of Singapore (MAS) 128, 130 monopoly rent 10, 22, 28, 31, 36n2, 47 Morgan Stanley 87 Morris, John 81 mortgage-backed securities (MBSs) 5 mortgage-forfeited property 93 mortgages 1, 5–7, 13, 47, 56, 63, 68–70, 82, 85, 93, 96, 97, 101, 234 Muncie Land Bank 93, 94, 98, 104, 105n2 Naisbitt, J. 125 Nakamura 164–175, 165 Nakamura Hometown Development Association (NHDA) 166, 176n7 National Agency for Inward Investment and Economic Development 115 National Association of Italian Municipalities 115 National Environmental Policy Act 208 National Institute of Social Welfare and Assistance for Public Administration Employees (INAIL) 117, 122n13 National Slum Development Program (NSDP) 191 negotiation 28, 29, 108, 157, 169–174, 189 neoliberalism 6, 12, 13, 108–110, 119 new localisms 148 new theory of rent 21–23 New York City 3, 15, 27, 31, 45, 96, 135n7, 195, 196, 200, 205, 208n3, 208n8, 241 New York State Department of Transportation (NYSDOT) 200–201 Nguyen, M. T. N. 149 Nishi, Maiko 14 non-governmental public ownership 9 NYC Housing Authority 208 NY Power Authority 208 occupancy urbanism 181 office zones 32 oil prices 4 old theory of rent 22 Orchard Road area 129, 133 Ostrom, Elinor 161, 215 Palais Renaissance 129 parastatals 184, 185, 187, 188, 190, 191

Peck, J. 110 pell-mell urbanization 146 periferias 182, 182 Pesonen, Kari 135n3 petit rentiers 237, 242 Phalippou, L. 77 Piccinini, Fernando 29 Pierson, P. 109, 111, 118, 120 Pikkarainen, Tero 223 planning sequence 181, 184, 192 Polanyi, Karl 41, 194, 215 policy-makers 70, 108, 108, 109, 113, 114, 117, 119, 143 political economy 11, 13, 15, 15n2, 195, 203–207, 232, 234, 237, 241; approach 15; abandoned property 92–105; capitalism 41; Italian public real estate 108–121; of land 242–243; Marxist 6; perspective 2; public real estate privatization 110–113 political geography: county 102–103; state 100–102 politico-institutional processes 44, 44 politics of public land 108; privatization 108 post-industrial Helsinki 37n9 post-Mao 143–145, 147–150, 156 post-socialist transitions 108 private-equity funds 69, 75–78, 80, 86, 87, 89, 122n1 private property rights 11, 12, 52, 194, 203, 204, 207, 215, 228, 237 private real estate 2, 14, 82, 116 privatization 4, 5, 9, 14, 43, 49, 119, 120, 215–217, 228, 235, 241, 242; political economy 110–113; public real estate 110–113; real estate 108, 109 Prodano, S. 23 proletarianization 49, 49 property: abandoned 92–105, 234; globalization 133; markets 3, 9–11, 13, 14, 57, 125, 129, 130–133, 136n12, 236; ownership 10, 14, 43, 229; private 11, 12, 52, 194, 203, 204, 207, 215, 228, 237; public 5, 14, 93, 110, 112, 114, 116, 117, 120, 126–128, 216, 235; rights 6–13, 52, 58, 61, 100, 103, 161, 194, 203, 204, 207, 208n1, 214–216, 228, 237, 241; segmentation 134; tax 61, 67, 93, 95, 98–102, 106n7, 133, 134; UR A, JTC and HDB, 133; users 9, 13, 15, 33, 56, 160–176, 211, 212, 216, 220, 224, 241, 242; values 10, 96, 126, 205 property owners 94 Property Tax Order (1967) 131

Index 251 pro-poor agglomeration economies 188, 189 prosperity 2, 4, 11, 148 pseudo-commodity 41, 44, 45, 52, 53 public intervention 26–30 public land 1, 14, 31, 108–113, 119, 131, 203, 211, 212, 214, 220, 228, 234, 241, 242 public-private partnerships 126, 127, 135n4 quantitative easing (QE) 85–86 Raman, B. 189 real abstraction 51, 53 real estate: business 33; commercial 5, 56, 58, 63, 64; defined 33; entrepreneurs 225; investment 2, 32–34; markets 1, 2, 4, 5, 12, 14, 21, 23, 25, 30, 32–34, 56, 58, 108, 109, 111–113, 118–120, 194, 228, 230, 232, 234, 240; politicians 186, 187; private 2, 14, 82, 116; public 5, 14, 108–121, 122n3, 235, 242; rent-yielding 225 real estate investment trusts (REITs) 5, 58 real property 7, 8, 10, 31, 33, 34, 56–58, 95, 101, 105n1, 228 rehabbers 97, 234 rent 6–13; absolute rent 10, 22, 47; formation 31–32; land financialization 45; landowners and tenants 46; market valuation 1; monopoly rent 10, 22, 28, 31, 36n2, 47 property rights and financialization 6–13; theory 6, 13, 21, 22, 24, 25, 36n2, 40, 52, 229, 242, 243; valuing land 44–50 rent gap 221–223 rentier capitalism 15n2, 75, 76, 87, 89, 213, 216, 233 re-politicizing land 190–192 resident engagement with park 197–203; emotional attachment 199; public review process 198 resident-workers 180, 184, 188–191 Revenue Layouts 182, 186, 188 Ricardo’s classical theory 46 Richard Ellis International Property Consultants 130–131 Richmond Park 129 risk 5, 13, 14, 51, 60, 65, 75–78, 80, 81, 83–89, 97, 116, 181, 186, 187, 233, 236, 238; cost share 171; displacement 76, 78–81, 79; political 69, 127 risk-talk 76–78 Rose, Carol 220 Rural Contracting Law 145

rural migrants 14, 143, 144, 146–157, 237 rural-to-urban: Chinese migrants 144; labor migration 148 Sacher, Paul 136n10 Sa, Haoxuan 14 Samuels, Ian 89 Särkkä, Ines 213 Sassen, S. 135n7 savings and loan association (S&L) 1, 5 Schlager, E. 161 Schwarzman, Stephen 81–89 Scott, Allen 22 securitization 8, 9, 13, 58, 64, 117, 133 segmentation of the market 131–134 semi-structured interviews 165 shopping complex (Forum) 28, 30 Silicon Valley 48, 183–185, 187, 189, 191 Silver Economy 119, 121 Silver Fund 109, 110, 117, 118, 121 Singapore 11, 14, 44, 45, 64, 135n3, 135n5, 136n8, 188, 229, 236, 240; global city 127–129; global real estate investment flows 129–130; investment in property 131–134; lower property prices 130–131; planning 126–127 Singapore International Monetary Exchange (Simex) 128 single-family homes 5, 77, 81, 82, 86 Sinisalo, Sami 135n3 skateboarding 207, 212, 218–220, 222, 225n4, 226n5 skaters 213, 218–220, 222–224, 225n5 skyscrapers 66, 130, 221 slums 15, 47, 84, 132, 147, 180–184, 191, 192n1; clearance 187–190; depoliticizing 185–190; patronage 185–187; re-politicizing 190–192 social-equity 181 social relations 2, 7, 9–15, 22, 40, 41, 43, 52, 56, 97, 148, 155, 156, 176, 195, 203–205, 211, 214, 224, 228, 237–239, 241–243; property rights 194; rent 10, 194; sharing and reciprocity 214–216; socio-material entanglements 207; and struggles 47; types 194 social wage 182, 183 socio-institutional approaches 161 socio-legal embedding 51 socio-materiality 206 Solotar, Joan 83 Spain 6, 75, 81–87, 89, 229 spatial development 7, 8, 14, 229, 242 speculators 11, 14, 97, 99, 101, 103, 130, 234

252  Index stagflation 4, 5 state 2–3, 5–11, 13, 15, 24, 26, 29, 31, 33, 37n8, 37n9, 45, 50, 58, 66–68, 70, 85, 92–94, 96, 98–105, 109–118, 122n2, 127, 132, 146, 181, 184–189, 211, 212, 222, 228, 229, 235–237, 240, 242 storskiftet 215 The Straits Times, newspaper 129–132, 135n5 Streeck, W. 109, 111, 120 submarkets 60, 133 surplus value 7, 8, 24, 36n3, 41, 42, 46, 48–52, 213, 225n3, 231 Suvilahti DIY (do-it-yourself) 15, 212, 213, 218–225, 219, 241 Suvilahti Event Hub 220–221 Suzhou 135n5 Swyngedouw, Erik 13, 231 symbolic spaces 28, 30 Tapp, Renee 13, 232, 234 tax credits 66, 68 tax-delinquent property 105n1 taxes 4–6, 37n10, 66–69, 95, 98n3, 100–102, 104, 105n1, 133, 134, 204, 214 tax-foreclosed property 92, 94, 97, 104, 234 tax liens 92, 93, 101–103, 105n1 ‘Technology, Restructuring and UrbanRegional Development’ Conference 36n1 tenancy 69, 160–170, 176n6, 239; (re)arrangements 160, 167, 167–169; farmland aggregation 160; market 161 Thatcher, Margaret 4 Thomas, Landon 76–77 Tooze, Adam 85 trade-unions 33, 181, 186 transfers value 46, 231 trans-localism 148–149 Tribe, Keith 36n3 Tsutsumi, Yoshiaki 136n10 turmoil 52, 143 unauthorized neighborhoods 180–185, 188–191, 192n1, 239, 240; cheap labor power 182; and land rent 182–184; proliferation 180; working-class housing 183 upmarket tourist 114–117 Urban Age 49 urban commons 15, 211–214, 219–225, 242; land use and management 211;

private businesses 216; redevelopment of urban areas 212; revolutionary power 217; state or market authority 217; unorganized public 216 urban economists 126 urban planning 56, 114, 126, 127, 135n4, 135n6, 220 urban politics 127 Urban Redevelopment Authority (UR A) 128, 132–134 urban villages 144, 146, 149, 153–155, 157, 237 use-values 1, 11, 15, 35, 40–47, 111, 115, 211, 214, 222, 223, 237, 241–243; of land 27; land-use decisions 35; socio-material 50; socio-spatial 52 US Gypsum (USG) corporation 60, 61, 64 Valmiki Ambedkar Awas Yojana (VAMBAY) 191 Valo, Raimo 135n3 Valore Paese Dimore 110, 114–119, 121, 122n7 value grabbing 51, 53, 212–214, 225n3 valuing land 44–50 Vanderburgh County 103 Veblenian conspicuous consumption 114 Village Uemura 165 von Thünen, Johann Heinrich 46 vulnerable cities 96 Vuolteenaho, Jani 14 Ward, Callum 13, 231 Weber, Rachel 13, 232, 234 550 West Adams, Chicago 56, 58–67, 59, 69 West, John 14 withdrawal rights 172–173 working-class struggles 182–184; industrial capitalism 183; non-propertied 180; slums 180 Wright, S. 148 Xiamen 14, 144, 147, 149, 154–157; ambivalences 151–153; migrants 149–151 xiaoqu (commercial housing) 144, 153 Yan, H. 149, 155, 156 Yu, Tan 136n10 Zilliacus, Thomas 135n3 zoning 8, 28, 32, 37n9, 58, 70, 189, 191 zoning lottery 32