The Capitalist City or the Self-Managed City?

This essay is from the recently published City Lights Press anthology, (www.globalizeliberation.org) Globalize Liberation: How to Uproot the System and Build a Better World, edited by David Solnit.


Patterns of capital flows have a visible effect on working class communities in the United States. Some communities see closed plants, abandoned stores, boarded-up dwellings, scarce jobs. Such are signs of disinvestment. Capital has moved to some other site in the global production line.


In other times and places an inflow of investment fuels gentrification. Upscale condos are erected, houses are rehabbed. Candle-lit restaurants and vintage furniture emporia displace bodegas and used appliance stores. Rents rise as landlords realize they can attract professionals and business people as tenants. An area of “valuable city real estate” is being cleansed of its working class residents.


Both phases in this process fuel conflict. Squatters occupy vacant buildings. Tenants threaten a rent strike in response to deferred maintenance. Tenant activists push for rent control ordinances in response to rising rents. Anti-gentrification activists jam planning commission hearings to stop upscale condo projects. At the extreme edge, some resort to the torching of condos under construction.


We can regard all of these as expressions of class struggle over the built environment.


Both gentrification and disinvestment are processes made up of the activities of certain kinds of social agents or institutions. Landlords, developers, and banks all play key roles.1


Buildings represent a major investment. For this reason, they are not replaced for many years after they are built. An older area in an American city may have been converted from agricultural land to urban uses in the 19th century or early 20th century. As the lots in a newly subdivided area get built upon, builders and subdividers move outward into more outlying areas in search of new building sites.


A building is like a piece of machinery or a motor vehicle — it depreciates in value over time. The roof may need to be replaced after years of beating back the rain. The building style may go out of fashion. Technological changes such as new standards in electrical or plumbing systems may erode the value of a building.


Some neighborhoods continue to retain their ability to attract professional and business people to live there. Landlords in such areas will have an incentive to upgrade their buildings because they can command rents high enough to generate a good return on that investment.


The housing market tends to sort the population by income into different areas. Racism may add another type of sorting. If an area is increasingly filled by lower income residents, landlords have an incentive to not maintain their properties. If they were to invest in upgrades, they’d need to charge a higher rent to make this a profitable investment. People who could pay the higher rents may not be willing to live in that neighborhood. So landlords simply “milk” the decaying buildings for rents. By putting off repairs, they can save money to buy other buildings elsewhere.


The process of inner-city disinvestment was particularly prolonged in the USA after World War II. Rising real wages, Federal Housing Administration loan policies, the homeowner interest deduction on income taxes, corporate decisions to relocate plants to outlying areas, massive freeway construction, white flight — all these things contributed to the outflow of investment into suburbanization and lack of investment in older city areas.


As the urban area grows, the terrain now occupied by deteriorated buildings and a low-income population may be close to areas of concentrated economic activity such as a downtown. Closeness to downtown jobs and interesting older architecture may give the area the potential to attract higher income residents or more well-endowed businesses.


A gap thus emerges between the rents that an area of deteriorated buildings and low-income residents can generate and the potential rents that the area could generate if it were rebuilt or renovated to its “highest and best use.” Neil Smith coined the phrase “rent gap” to refer to this phenomenon.2 When this rent gap becomes large enough, the area may be ripe for a new round of investment. Speculators may begin to buy properties in anticipation of increased market values of properties.


To make investment in new construction and rehab profitable, developers must be able to attract residents who can pay higher rents such as professionals and managers (the urban “gentry”). Once this process gets underway, “landlords will have an incentive to evict low-income residents in favor of more affluent tenants who can afford higher rent.”3 During this phase landlords may want to drive out the lower-income tenants. To do this they may avoid repairs, let the roof leak, and so on.


Banks and other financial institutions turn on the faucet for mortgage and construction loans. Construction of condos and office buildings raise real estate values as other landowners realize that more upscale uses of the land are now possible.



Gentrification in the Bay Area


Gentrification in the Bay Area illustrates how investment decisions by industrial employers can also have an impact on residential areas within commuting distance of job sites. Since the 1970s the high-tech sectors — microchips, Internet equipment, software and so on — have come to dominate the regional economy. For years the industry has pursued a strategy of locating most of its manufacturing facilities outside the Bay Area. For example, in the mid-’80s Atari moved its video game manufacturing plant to Malaysia in response to an effort by workers to unionize the plant.


This has created a skewed job structure, with a high proportion of high-salaried jobs — in “business development,” marketing, design and engineering, and so on. At the same time, closures of food processing plants and decline of maritime shipping and ship maintenance led to a loss of better-paying, unionized jobs. For example, in 1990 the Best Foods mayonnaise plant in San Francisco was closed; the operation moved to Guatemala.


Meanwhile, housing construction in Silicon Valley fell far behind the surging employment rolls. The shortage fueled gentrification of working class areas (with particular impact on communities of color) from East Palo Alto to Oakland to the eastside of San Francisco.


These changes illustrate the link between corporate globalization and gentrification.


San Francisco’s Mission District was on the front line of this process in the late ‘90s. The Mission District had gone through a period of prolonged disinvestment during the post-World War II boom years. The construction of the BART subway under the main commercial street of the neighborhood, Mission Street, had accelerated business flight in the ’60s. The disinvestment led to an urban renewal proposal which would have bulldozed the center of the neighborhood. This was successfully fought off, through massive community organizing, with the support of the unions.


By the 1980s neighborhoods to the west and east of the Mission were heavily gentrified. The neighborhood had become the heart of the Latino community in San Francisco. The concentration of many low-income people of color, together with media stories about the crime and gang activities that often afflict low-income areas, had discouraged white professional people moving into the neighborhood. Apartments were still relatively cheap.


Yet the area is centrally located, with easy access to the 46 million square feet of office space in downtown San Francisco. Freeway ramps lead to high tech job areas to the south of San Francisco. A “rent gap” thus existed between the current rental stream generated by the existing population and potential rents or real estate prices this inner-city real estate might generate if it could be redeveloped for the Bay Area’s burgeoning population of professionals and managers.


Several types of social agent pioneered the gentrification process in the Mission District. In the mid-’90s anti-union contractors of the Residential Builders Association began buying cheap land in an old factory district in the northeast Mission to build loft condos.


By 2000 they were selling at a half million dollars a pop. A real estate agent told me that such condos would typically be bought by a young couple, each making $90,000 a year.


The state Ellis Act, passed in 1996, permitted landlords to “go out of business” and empty their buildings of tenants. In the late ’90s a speculator could buy a fourplex in the Mission for $500,000, invoke the Ellis Act to empty it, and then sell the units for $250,000 each as a tenancy-in-common.


Ellis Act evictions in the Mission District mushroomed from 14 in 1995 to over 660 in 2000. About a third of the Ellis Act evictees in the city were elderly people.


The Mission Anti-Displacement Coalition (MAC) was formed in April, 2000, to fight the displacement of the Latino working class community. A series of defensive struggles unfolded in which gentrifying office or condo projects were resisted, through protests at city planning commission meetings, mass marches, initiative campaigns, illegal occupations of buildings, postering and agit-prop of all kinds.


This led to MAC’s campaign to popularize urban planning concepts, and demand community participation in a replan of the neighborhood — counterposing a “People’s Plan” to the developers’ plans. Demands for affordable housing and defense of blue-collar industrial jobs (threatened by the cannibalizing of industrial areas4 for offices and condos) have been priorities of the MAC effort.


However, 84 percent of the households in the Mission are renters. Without ownership of the land, the community remains at the mercy of landlords and developers.


Despite the post-2000 dot-com crash and recession, rents in San Francisco are still very high. A union janitor in San Francisco making $15 an hour can’t afford to pay $1,300 a month for a one-bedroom apartment in the Mission.


As each rent-controlled apartment becomes vacant, the rent rises to whatever the market will bear. State law prevents the city from requiring that a controlled rent be carried over to the next tenant.


Over time, the market-driven displacement of the working class from San Francisco will affect the political character of the city. Unions and renters will face a less friendly political climate in a city made up of lawyers, bosses, software engineers and the like.



A Self-management Approach to Housing


“The opposite of gentrification,” says Peter Marcuse, “should not be decay and abandonment but the democratization of housing.”5 Community land trusts may be a way of working towards this goal.


About 125 community land trusts (CLTs) have been formed in communities in the USA in response to either disinvestment or gentrification. The CLT acquires land to take it permanently off the market and make it available for the use of the community. As a democratic organization, the CLT is intended to empower the community in determining what is done with land in that area. The CLT may rehab existing buildings, build new houses or apartment buildings, or do other types of development work. The typical aims of the CLT approach are:


?         Resident control of housing


?         Community control over land use and development


?         Removal of land and housing from the speculative market


?         Making sure that housing remains permanently affordable to working class people.


The residents own the buildings but the CLT retains ownership of the land. This is how permanent affordability is enforced. The dwellings on the CLT land cannot be sold at whatever price the market will bear. Instead, there is a clause in the ground lease that enables the CLT to buy back the dwelling at a restricted price if the resident wants to sell it. The CLT enforces the community’s interest in preserving the affordability of housing.


In recent decades most non-profit housing development in the USA has been done by community development corporations (CDCs) that build rental housing. These vary considerably among themselves but many are lacking in democratic accountability to the tenants or the communities where they operate. Generally the tenants in their buildings have the same sort of relationship to the CDC landlord as tenants in private, for-profit rental buildings.


The problem is illustrated by a recent upheaval at Mission Housing Development Corporation (MHDC), a CDC in the Mission district. MHDC’s self-perpetuating board decided to re-orient away from low-income housing in the Mission, towards market-rate housing, including development outside the city. This led to an uprising of the staff who unionized and demanded resignations of board members and structural changes to make MHDC more accountable to the community and residents in MHDC buildings.


The community land trust model differs from the typical CDC in that it poses the possibility of a self-management approach to housing. We can take self-management to be encapsulated in the following principle:


Each person is to have a say over decisions that affect them and a degree of say in proportion as they are affected.


People who live in a dwelling are more impacted by the decisions about what goes on there than anyone else; so, they should have control over what goes on in their space. But the use of the land and the price of housing affect everyone in the community; so everyone should have a say over this.


The ground lease gives the community some say over what happens with the buildings on CLT land. The decisions that the CLT retains a say over are things that would have an impact on the surrounding community. The community can control the type of use or major changes to the building, and can specify minimum levels of maintenance. If the coop or homeowner association fails to meet their financial obligations, the CLT can step in.


Home ownership is really a bundle of rights, which provide a variety of advantages. You can control the space where you live, you can customize or remodel the interior to suit yourself. You’re freed of the whims or intrusions of a landlord. If you own a stand-alone house, you can build an addition or remodel the exterior, and yard space is available for play, for gardening.


On the other hand, the status of a house as a commodity means that the house can be used as a way to profit from appreciation in market value.


In the CLT model, these components of home ownership are separated. First, the land is permanently taken off the market. Second, the right to profit through speculative investment is removed by placing a permanent restriction on the resale price of the dwelling. Some of the components of ownership are retained — security of tenure and right of control over your own space.


“You’re on your own, Jack” is the traditional approach to housing in the USA. The assumption is that it is up to each household to find and hold onto shelter that is habitable and within their means. Not everyone has the income, skills and experience to do this with equal success.


If your parents owned the house you were raised in, or if you do financial management as part of your job, you may have bits of knowledge that are useful for success at managing a property. Given the huge inequalities in American society, not everyone has the same opportunity to acquire such knowledge.


Stand-alone co-ops can be preyed upon by unscrupulous contractors or property management firms. The community land trust addresses this issue by organizing guidance and sharing of knowledge for homeowner associations.7


Another weakness of stand-alone limited equity housing co-ops has been that the co-op members have a self-interest in breaking the restrictions on resale price when they want to sell. Such co-ops exist in the context of the capitalist real estate market, which permits speculative profit-taking. The broader working class community loses affordable housing when coop residents convert their building into a market-rate co-op.


CLTs are designed to be a solution to this problem. Community land trusts typically have two classes of membership. One group are the residents who own houses, condos or shares in co-ops that sit on CLT land. Through outreach and community organizing, the CLT recruits others in the community who are supportive of its goals as well as people who are looking for inexpensive housing.6


The owner and non-owner members elect the same number of representatives to the CLT board of directors. The San Francisco Community Land Trust bylaws also requires split votes at membership assemblies, requiring agreement of both groups. The idea is to balance the interests of the residents who own their buildings with the broader community interest. This structure makes removal of restrictions on resale price much more difficult than in a stand-alone coop. The presence of renters and those seeking affordable housing also drives the CLT to continually create new affordable housing.


SFCLT has developed a program for conversion of rental buildings to collective tenant ownership. We propose that renters be allowed to select a CLT to buy their building, do any needed rehab, and sell the apartments to the existing tenants at a price based on their ability to pay. Resale restrictions would ensure permanent affordability.7


The self-management potential of the CLT model could be developed in a number of ways.


In The Production of Houses, Christopher Alexander describes a project in Baja California in the 1970s in which a group of Mexican families were active participants in the design of the houses that were being built for them. Alexander developed a set of modular design elements that represented various design options, and a technique for integrating their design selections into the construction process. The upshot of the self-design process was that each of the houses was unique, reflecting the particular priorities of the family that was going to live in it.


Given the commitment t

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