The following is a blog post we were invited to write for the Barcelona Metropolitan Observatory, and appeared on their blog in October 2012. Here we present the English translation.
The Right to the City and Financial Enclosure
Every stone in the city, every window we look through, every roof we shelter under, the buildings in which we live, play, work and come together to make and remake the city every day, function, from the narrow economic perspective which has come to dominate the political landscape, as a kind of leverage which supports and sustains the financial system. Real estate has been at the centre of the expansion of financialization; the homes and buildings which make up our city underpin, via ever more abstract financial mechanisms, great chains of credit through which enormous profits are captured. And so the possibilities of the city have been enclosed by the logic of debt and financial rent.
Ireland and Spain, two ‘bailed out’ countries of Europe’s crisis ridden periphery, both experienced enormous property booms over the last two decades; in both countries house prices saw an increase of 300%. These booms have been made possible by a number of dynamics which have developed over recent decades.
The first of these dynamics is the privatization of housing. In Ireland, as explained by Conor McCabe in The Sins of the Father, the Housing Act of 1966 allowed those in social housing to buy their home from the local authority. In 1984 the Surrender Grant was introduced. This provided £5,000 for local authority tenants to surrender their public housing and purchase private homes, which at the time represented a major incentive. By the 1990s, of the 330,000 homes built by local authorities in the previous 100 years, 220,000 had been sold to tenants (McCabe, 2011). In Spain, “From 1993 cut backs in the construction of social housing added to the already dramatic decrease in the construction of social housing which had taken place between 1984 and 1989” (Rodríguez and López, 2011: 47). The Boyer Decree (1985) sanctioned the liquidation of social housing stock as well as tax incentives for house purchasing.
The second, and strongly related dynamic, is the deregulation and expansion of mortgages as a means of housing provision. In Ireland this included the withdrawal of local authorities from mortgage provision and numerous changes to mortgages including 40 and 50 year mortgages, 100% and even 110% mortgages and the now infamous subprime lending. As McCabe notes, these factors mean that “the need for a house was now replaced by the need for a mortgage” (McCabe, 2011: 32).
These factors, as well as the low interest rates set by the ECB following monetary union, were directly related to an explosion of property related credit. In Spain, 70% of the lending of the so-called ‘cajas de ahorro’ (savings banks) during the boom was related to construction (López and Rodríguez, 2010) while in Ireland 75% of all lending between 1995 and 2007 was linked to real estate.
At the heart of this dynamic is a process through which a resource or right previously provided for by the state (i.e. in a collective fashion), is privatised allowing lending institutions to monopolize access to housing. Similarly, the marketisation of pensions, education and health, all fundamental social rights achieved by workers struggle in the 19th and 20th centuries, has created fertile ground for expansion of financial rent:
“It is necessary [for financialization]…that pensions or real estate are no longer…relatively socialized forms of basic social welfare and social services and become investment markets based on “assets” (housing/pensions) which nobody can live without.” (López and Rodriguez, 2010: 220)
As financialization proceeds exploitation extends far beyond the exploitation of the worker at the point of production (the work place) via a “set of highly abstract mechanisms designed to capture a growing part of socially produced wealth” (López and Rodríguez, 2010: 220). As such, financialization should be conceptualised in terms of a “spatial and temporal extension of the dynamics of exploitation” (López and Rodríguez, 2010: 220). Debt emerges here as a principal force of control and domination:
“Debt is the horizon of the conflict between financial capitalism and social life, a conflict which can not be sutured. This horizon of debt proposes no solution, no vision of society other than the unlimited retrenchment of the mechanisms of coercion and repression of anything that stands in its way.” (Pablo Bustinduy, 2012)
However, the property and financial crises of the present moment have introduced further complexities in this unfolding story. Most importantly, the intervention of the state, in Ireland, Spain and elsewhere, has been characterised by unconditional support for the financial system. For instance, the National Assets Management Agency, Ireland’s ‘bad bank’, has socialized much of the toxic debt which has threatened the financial system since the fall in property prices. Moreover, NAMA must be understood as a state agency which takes responsibility for the management of property and property related debt in order to defend and maintain the dynamic of financialization. Likewise in Spain, successive governments have injected public funds in the banking system, supported the construction industry through public infrastructure programmes, and bailed out real estate companies since the beginning of the crisis.
Today, the simple desire for a home and for a city in which we can live, play and work free from the chains of debt, clashes against financialization and its supporters in the national and European political elites. The right to housing and the right to city, as such, express an antagonism ever more visible in the contemporary city. An antagonism between urban life and the web of financial exploitation and control which ensnares it.
In Dublin, one of the most visible expressions of this conflict is the Unlock NAMA campaign. Unlock NAMA aims to make buildings held by the National Assets Management Agency (NAMA) available to the public for social, political and cultural uses. In January 2012 Unlock NAMA launched their campaign and occupied 66-67 Great Strand Street in Dublin’s city centre. Activities on the day involved talks and workshops on property speculation, financialization, bank bailouts and possible alternatives. In other words, a disused building, the value of which NAMA could only grasp in terms of its asset price, became a space of civic engagement about the allocation of resources and decision making in Dublin. This was an example of collective direct action implementing the right to the city in practice, by politicizing the use of urban resources, by creating democratic discussion and engagement and by re-appropriating a resource which had been sequestered by the logic of financialization.
Similarly, in several cities across the Spanish state, the Plataforma de Afectados por la Hipoteca (PAH) has been struggling for the right to housing. Their campaigns for dación en pago, to stop evictions and around the occupation of houses held by banks, all involve putting in practice the right to housing and challenging the power and legitimacy of the financial agents who stand in the way of that right. Moreover, the PAH have expressed their politics both in opposition to the financial sector and to the state. Introducing their Obra Social campaign, they denounce “a public administration which lacks the political will to respond to a genuine housing emergency…a failed state incapable of guaranteeing fundamental rights…and a public power which prioritizes the profits of banks over the solvency and the survival of people.”
Projects like the PAH and Unlock NAMA point towards the struggle to reclaim our cities from financialization, to break the chains of debt and to set free the immense possibilities of the city.
Bustinduy, P. 2012. ‘Romper la deuda’. Available here: http://www.madrilonia.org/2012/05/romper-la-deuda/
López, I. and Rodríguez, E. 2011. ‘The Spanish model’, in New Left Review, 69. Available here http://www.newleftreview.org/II/69/isidro-lopez-emmanuel-rodriguez-the-spanish-model#_edn15
O’Toole, F. 2009. Ship of Fools: how stupidity and corruption sank the Celtic Tiger. London: Faber and Faber Ltd.
McCabe, C. 2011. Sins of the Father: tracing the decisions that shaped the Irish economy. Dublin: The History Press Ireland
Rodríguez, E and López, I. 2011. ‘Del auge al colapso: el modelo financiero-inmboliliario de la economía española (1995-2010)’, in Revista de Economía Crítica, 12. Available here http://revistaeconomiacritica.org/sites/default/files/revistas/n12/REC12_Articulo_3_emmanuel.pdf
Rodríguez, E and López, I. 2010. Fin de ciclo: financiarización, territorio y sociedad de propietarios en la onda larga del capitalismo hispano (1959-2010), Madrid: Traficantes de Sueños. Available here: http://www.traficantes.net/index.php/editorial/catalogo/utiles/fin_de_ciclo_financiarizacion_territorio_y_sociedad_de_propietarios_en_la_onda_larga_del_capitalismo_hispano_1959_2010