by J.Blumenfeld, Brooklyn Rail, Summer 2019
It’s an unusually warm Saturday in Berlin—if it even makes sense to refer to the weather as “unusual” anymore. I wake up early, read a bit, write some emails, change some diapers, and then head out to meet some friends at the café before the big demo. The Mietwahnsinn or “rent insanity” protest is an annual gathering of tens of thousands of people at Alexanderplatz who come together to loudly and colorfully decry the seemingly unstoppable rise of rents in the German capital. Like most big protests here, it feels like a party. Strolling down Karl-Marx-Allee, a massive boulevard built in Stalinist style for East Berlin, 40,000 human beings throb to the bass—young, old, parents, roommates, co-workers, students, tenants, and activists all drifting together in common disarray, like a roving concert, shouting about rent-sharks, high costs of living, and, most of all, expropriation. The word is on everyone’s lips, not least the city senate, the big property owners and real estate companies, the struggling tenants and just about anyone else who’s read the paper, watched the news, or walked the streets where posters, banners and graffiti calling for the expropriation of Deutsche Wohnen & Co are ubiquitous. In most cities, such radical slogans would be ignored or dismissed as the infantile fantasies of an ultra-left fringe. But not here. The demand to expropriate the largest profit-oriented property owners in Berlin—in other words, to socialize over 200,000 private apartments—is a serious proposal, one that may, in fact, take place. How did this happen?
Real Estate State
Cities across the world are choking on an influx of surplus capital tied to a decline in productive investments. The super-profits of speculative finance captured by the 0.000001% cannot remain idle in zero-interest banks or else they die an inflated death. Like a cancer, capital must circulate, reproduce, and expand to continue existing. It does this through finding new lines of investment, specifically by buying, trading, and selling commodities, labor-power, and means of production, transforming its skin along the way into money, shares, goods, titles, wages, interest, rent, and profit. But with the global drying up of profit rates in manufacturing, new dumping grounds are needed to wash the petabytes of capital squeezed from the skin of the global working class. Here, the value of private property reappears in all its glory. “Global real estate is now worth $217 trillion,” writes urban geographer Samuel Stein, “36 times the value of all the gold ever mined. It makes up 60 percent of the world’s assets, and the vast majority of that wealth—roughly 75 percent—is in housing.”1 The return on investment in real estate is safe, stable, and a steal. So when hedge funds, capital firms, investment banks, and other sadistic associations of our earth-melting bourgeoisie need a sink to defecate their surplus wealth into, they can always find one in homes, apartments, offices, buildings, and land—in general, the living and working habitats of human beings. In turn, those who cannot keep up with the spiraling costs of buying or renting a stable space on earth for the simple pleasure of existing in three dimensions, those people are disregarded, evicted, abandoned, left to join the floating surplus population, moving here or there, wherever the price of property allows them to breathe.
In Capital City (2019), Samuel Stein’s essential new book on gentrification, real estate, and urban planning, the logic of this dynamic is laid bare:
The force behind these trends is the growing centrality of urban real estate to capital’s global growth strategy. Through this process, the price of land becomes a central economic determinate and a dominant political issue. The clunky term ‘gentrification’ becomes a household word and displacement an everyday fact of life. Housing becomes a globally traded financial asset, creating the conditions for synchronized bubbles and crashes. Government, particularly at the municipal level, becomes increasingly obsessed with raising property values and redistributing wealth upward through land and rents. Real estate developer Donald Trump becomes first a celebrity and ultimately a president. Taken together, we witness the rise of the real estate state, a political formation in which real estate capital has inordinate influence over the shape of our cities, the parameters of our politics and the lives we lead.2
The reasons for the rise of the real estate state are complex, but mostly have to do with deindustrialization (or better put, industrial restructuring)—which weakens the grip of industrial capital on cities (and their interest in keeping land and housing cheap for their workers and buildings), and strengthens the power of real estate capital on urban planning (and their interest in raising property values at all costs).3 Furthermore, the falling rate of profit in productive industries leads to more and more capitalists seeking higher rates of return in safer assets, like real estate. The financialized deregulation of private property plays another role, allowing homes to be traded as shares, bundled up in investment packages, sold and resold to the highest bidder. Homes become first and foremost a source of wealth and only secondarily a form of housing. On top of that, quantitative easing creates massive liquidity for banks, and that money does not go into “creating jobs” but directly into hard assets, like land and property. Real estate values are exploding, with bubbles on top of bubbles still waiting to pop. In other words, it is not simply a lack of supply causing a massive overvaluation of property prices, but a hyper-inflated demand for housing, coming from a global store of surplus capital, legally buttressed by class interests working directly against you.4
Real estate is the preeminent form of wealth today, it is our gold. Whoever owns the property title, reaps an exclusive return from the labor, value and speculation on that land. Since property rights are inherited, that wealth is inherited too. But property wealth is not just passed on to the next generation, it is used as the basis for more accumulation, more expansion, more wealth. As everyone knows but no one is supposed to say, the best way to own property is to be born into a family that owns property. In a capitalist economy, the purpose of owning a home, house, building, apartment, or land is neither the need it serves nor the use it has but the value it represents. “Until land is socially controlled,” Stein proclaims, “those who possess property, capital and access to power will shape planning priorities.”5 The task is clear: to be able to lead a life of dignity in our cities without fear of displacement or destitution, the power of property must be confronted head on.
Gentrification and Anti-Gentrification in Berlin
“The forces of property present two options for cities: gentrification or disinvestment.”6 What is gentrification? Gentrification simply means the improvement of urban space—for capital. It is, as Ipsita Chatterjee says, “the theft of space from labor and its conversion into spaces of profit.”7 In other words, gentrification names the relentless assault on working-class neighborhoods by a combination of real estate capital, municipal government, and city planners, all of whom consider raising property values to be the sine qua non of urban policy. It is not simply a product of tourists, artists, hipsters, or whatever group one deems responsible at the moment. Of course, the production of the commodity of housing would be worthless without its consumption. Without a sale, the value of a commodity is not realized. But a consumption approach to gentrification is woefully one-sided, mistaking the effect for the cause. The logic of investment, disinvestment and reinvestment in cities is not driven primarily by hip consumers but by the potential value that developers, politicians, and landowners can obtain by transforming urban space into territory amenable to “people of wealth”. In other words:
By choice or by force, planners use gentrification to create the physical environments for capital to thrive. It is the process by which cities seek capital, and capital seeks land. Its endgame is a city controlled by bankers and developers, run like a corporation, designed as a luxury product and planned by the finance sector. What was public becomes private; what was common becomes enclosed; what was cheap becomes expensive; what was shared becomes traded. Through the real estate state, the city becomes gentrified. Through gentrification, the city becomes neoliberal.8
In Berlin, a variety of tactics have been deployed to stop this onslaught: building frenzies, rent brakes, public buyouts, housing occupations, graffiti actions, window smashing, yuppie frightening, political lobbying, city planning—but none of this has slowed the exploding rents and real estate speculation.9 Why were the rents recently so low, and why did they finally accelerate? The simple explanation is that 15 years ago, when the population was stagnant or declining, and hundreds of thousands of apartments sat empty, the municipal government decided to sell off vast swaths of public housing to private companies, so as to help relieve its deficit. And now, Berlin is “cool”, attracting new residents and new jobs at a pace too fast for the city to keep up with.10 In short, demand outstrips supply. To solve the problem, it is claimed, just build more houses.
Now it is true that the population has been increasing rapidly, but so has construction. “In the 12 months prior to March 2019,” writes journalist Feargus O’Sullivan, “the number of new construction contracts rose by 11.3 percent.” Furthermore, population increases and rising demand does not automatically entail gentrification, luxury condos, real estate mega-mergers, displacements, evictions, and so on. The question is, why is Berlin attractive now? To understand that, one needs to take into account the planned transition from a period of disinvestment to one of reinvestment. The “demand” for housing does not just come from workers who need homes to live in, as a use-value, but from shareholders who need homes to invest in, as an exchange-value.11 Real estate is the laundromat of surplus capital, not only for local and foreign investors, but also for banks and firms sitting on billions of quantitatively eased dollars and euros. So what is to be done?
Last year, Google bought part of an old industrial building in the middle of the rapidly gentrifying Kreuzberg district in Berlin, and planned to turn it into a “campus” for start-ups. This was a smart move. Venture capitalists have been circling Berlin like vultures of late, seeking lean start-up meat to devour. (If you hear or see the words “innovate”, “coworking”, “accelerator”, “unicorn”, “pivoting”, “sharing”, “gig”, “incubate,” “pop-up”, or “disrupt” around your city, then the end is nigh.) For many locals, however, the prospect of wealthy tech bros segueing along the canal with their designer tote-bags and fair trade AirPods did not seem like a good idea. They know what happens to cities that prostrate themselves before the altar of venture capital: increased inequality, rapid displacement, higher rents, informal jobs, homogenized culture, and a rising surplus population. So people fought back—with neighborhood assemblies, working groups, street demos, media interviews, political pressure campaigns, and all sorts of direct actions, culminating in a rowdy occupation of the building itself, which was forcefully evicted by the police.12 After that, Google decided to pull out of the project, leaving the space to community organizations. The people won…and yet, the trend continues.13
More recently, local activists successfully blocked the construction of a planned hostel on Skalitzer Straße in Kreuzberg, forcing the owner and city to compromise on a more “social” use of the space. In another case, members of a collectively run, left-wing office space on Lausitzer Straße have been trying to stop their property owner (the Taekker Group) from selling the building off for millions to another investor. Some residents went to the owner’s offices in Berlin, and some even went to Denmark to confront the company. They also connected with residents of other buildings owned by the same company in order to create a network of solidarity in defense of such spaces. And in May of this year, an anonymous group of urban vandals staged a creative action to highlight the harmful role of AirBnB and vacation rentals on affordability in the city. They “opened” up an AirBnB rental as a temporary art gallery with exhibits of housing maps, stories of displaced individuals, and bathtub and bedside graffiti full of slogans taken from the streets.14
When an owner of a building wants to sell off housing stock to another company or person, the city of Berlin has the “right of first refusal”, to buy the property first and keep it in the hands of the public as affordable housing or for other social uses. This does not happen nearly enough to keep up with the pace of rising rents, but it is also not uncommon, and lately increasing.15The right of first refusal is a tool that can be used to decommodify housing, but since it requires buying the property first at market value, it presupposes a growing municipal economy. This is the dilemma: to redistribute wealth, there must first be enough wealth to redistribute, and for there to be enough wealth, the economy must grow, which means more privatization of public goods, more exploitation of living labor, more disinvestment in social welfare, and more tax breaks for the private sector. In short, it means more gentrification. Stopping gentrification by means of gentrification is probably not going to work. But there is another option. As Engels already knew in 1872, “the housing shortage can be remedied immediately by expropriating a part of the luxury dwellings belonging to the propertied classes and by compulsory quartering in the remaining part.”16 Why not expropriate?
The present call for expropriation goes after the biggest profit-oriented property owners in Berlin, mega-landlords, those who own over 3,000 apartments. The public target is Deutsche Wohnen & Co, which owns about 111,500 apartments in Berlin, but there are others (like Vonovia, Akelius, Pears) with potentially 294,000 apartments at stake.17 According to the German Basic Law (articles 14 and 15), the government would have to compensate the companies for expropriating their property at a rate that balances the public interest and private cost. Estimates range between 7 and 36 billion euros (Berlin is currently 58 billion euros in debt). So, is it worth it? Who would own the apartments then—the city, the state, the residents? And how would it even work?18
The proposal to expropriate large landlords has to first get on the ballot. This takes a few steps: activists need to collect 20,000 signatures to start the process (which they have almost done), then gather another 170,000 signatures in a four-month period; next, with the referendum on the ballot, they would have to win by a simple majority, with 25% of eligible voters actually voting. After that, the city senate is obliged to do something, but even then, it is not guaranteed that they will follow through. They could make some kind of compromise, watering down the demand to expropriate with a promise to build more affordable housing or enjoin a temporary rent freeze. Even if the city does pull the trigger and expropriate mega-landlords, it will most likely get challenged in court. Yet there does exist a legal basis in Germany to expropriate property for the public good, right there in the Basic Law (Grundgesetz). Article 14 states:
1) Property and the right of inheritance shall be guaranteed. Their content and limits shall be defined by the laws.
2) Property entails obligations. Its use shall also serve the public good.
3) Expropriation shall only be permissible for the public good. It may only be ordered by or pursuant to a law that determines the nature and extent of compensation. Such compensation shall be determined by establishing an equitable balance between the public interest and the interests of those affected. In case of dispute respecting the amount of compensation, recourse may be had to the ordinary courts.
“Property entails obligations”—which obligations, and to whom? And what if those obligations are not met? “Its use shall also serve the public good”—does private property in land, natural resources, and means of production actually serve the public good, does it satisfy the needs of actual living individuals? If not, then what shall we do about it? “Expropriation shall only be permissible for the public good”—if it is in the public good for everyone to lead a life of dignity, with basic needs like food, clothing and housing met, then expropriation for that purpose seems not only fitting, but necessary. Article 15 says:
Land, natural resources, and means of production may for the purpose of socialization [Vergesellschaftung] be transferred to public ownership or other forms of public enterprise by a law that determines the nature and extent of compensation. With respect to such compensation the third and fourth sentences of paragraph (3) of Article 14 shall apply mutatis mutandis.
“For the purpose of socialization”—this is the key phrase that the Deutsche Wohnen & Co Enteignen campaign has seized upon, a phrase that has never before been put into effect in Germany. Everything depends on how one interprets the key term Vergesellschaftung. Does it mean nationalization or socialization? If it means nationalization, then the state takes over the property and runs it like social housing, public transport, national health insurance, the army, and so on; if it means socialization, then the tenants, local community, non-profit organization, land trust, or some other body would own it, and run it themselves. In short, should the expropriated houses belong to those who live in them, use them, and need them—or should it belong to the state as a whole, which buys the properties in the first place? Or maybe it means that land, natural resources and means of production can rightfully be expropriated and decommodified when society itself needs socializing. If that is the case, then it should be done soon.
The campaign to expropriate mega-landlords is a positive development for the city, and it is already scaring off some investors (although not nearly enough). But the results of such a move are unknown. Critics argue that expropriation in itself will not create any new apartments—it will “only” change the ownership title of around 12 percent of housing stock from private to public. In addition, the rents for large landlords are not above average for the rest of the city; the city of Berlin will have to pay out billions of euros to these landlords, money that could otherwise be spent on building new social housing; and there is no guarantee that expropriations will stabilize rents in private or public housing. Against this, however, one can counter that the privatization of social housing did not create any new apartments either, and yet that policy is praised by the same market apologists who denounce expropriation. Those who call for expropriation want to help tenants who are struggling right now, who are threatened with displacement, and need support.19 And they want to signal to other investors, real estate companies, politicians and landlords that this city is not for sale.
If housing is truly a human right, as so many universal declarations and conventions proclaim, then it cannot also be a commodity. For housing to actually satisfy public needs and not private wealth, then it cannot be produced or distributed according to the contingency of price signals. To stop the expropriation of our daily lives, property must be expropriated, and now. But as Article 15 makes clear, why stop at housing? Why not go all the way, including “land, natural resources and means of production”? Why not expropriate everything? Capitalists know all about expropriation. Capitalist development is based on the expropriation of small farmers from the land—a violent, protracted process across generations and continents which rendered individuals propertyless, dependent on selling their labor capacity to others in order to meet their needs. Without the expropriation of land, no one would need to chase rents, jobs and money just to survive. If the beginning of capitalist accumulation lies in the expropriation of the masses by the few, then the end of our present misery lies in the expropriation of the few by the masses. This is what Marx calls the “transformation of capitalist private property, already practically resting on socialized production, into socialized property.”20 Capitalism itself prepares the way for socializing property by already socializing production. For Marx, this is the imminent way out of our current predicament:
The centralization of the means of production and socialization of labour reach a point at which they become incompatible with their capitalist integument. This integument is burst asunder. The knell of capitalist private property sounds. The expropriators are expropriated.21
But who will expropriate the expropriators? And how? As Oliver Nachtwey documents in his sobering book Germany’s Hidden Crisis (2018), we are living through a period of regressive modernization, a change from fixed employment to informal labor conditions, a period of downward mobility masked through rising employment in unstable, part-time, badly paid jobs. The crisis of social reproduction, of the inability to meet one’s needs, is not going to go away on its own. Social struggles pop up here and there, but there is no organized class strong enough to force the expropriation of private wealth “for the purposes of socialization.” Nevertheless, to slow the slide into barbarism, the property question must be confronted. “The goal,” writes Samuel Stein, “is not abolishing property per se, but unmaking the social relations that produce capitalist private property.”22 One way to unmake the specific property relations that dominate our lives is to expropriate those relations for ourselves, and not just in housing, but in transit, food, energy, education, child rearing, labor—all spheres of life in which ownership of our future has been taken away and given over to the sovereignty of the “market”. Or, as Daniel Loick argues in The Abuse of Property (2016), maybe the problem with private property today is not its maldistribution, but the very form of making things like housing appropriable at all. What would it mean to move beyond a world where things always appear as belonging to someone or another and instead can just exist for the sake of use, for satisfying needs, for creating pleasure, for anything except excluding others from being human?
The Mietwahnsinn march ends across the bridge in Kreuzberg, where a small occupation is taking place nearby, not uncoincidentally. A vacant apartment is taken over, a call to defend it goes out, hundreds arrive, a wave of crunched bodies pushes back and forth into rows of inflated riot cops blocking access to the door. It only lasts a few hours. A couple bloody protesters, a few injured cops, and some arrested individuals—the usual. The rent insanity is over, time to go home and prepare for the next housing demo, which more or less occurs every week now. As I wander back through the streets, past the people collecting signatures for the expropriation campaign, I think about a scene from the beginning of the financial crisis 10 years ago in New York City, when bandits hung banners from the rooftops of buildings saying “occupy everything”, calling for generalized occupations of private and public space. A few years later, that call was taken up across the country. But occupying space was always just a temporary solution to a deeper problem. To truly reclaim our cities and lives in ways that cannot be foreclosed by police evictions or personal burnouts, political action must shift from occupying to expropriating everything. Otherwise, we might as well wait for the weather to change back to normal.
- Stein, Samuel, Capital City (Verso, 2019), p. 2.
- Stein, Capital City, p. 5.
- See also Stein, pp. 2-3: “There are a number of reasons why capital is converging on land and buildings: a long period of financial deregulation, low federal interest rates and ‘quantitative easing’ in the United States; massive urbanization programs in China, the United Arab Emirates and several other countries; a proliferation of predatory equity funds scouring the globe for ‘undervalued’ investment opportunities and finding them in housing; economic polarization around the world, with extremely wealthy and somewhat nervous individuals viewing property as the safest place to hide their money; and more. When capital gains rise while rates of profit plummet across many once-dynamic sectors of the economy, real estate becomes the latest stop on what geographer Cindi Katz calls ‘vagabond’ capitalism’s eternal search for profitability.”
- For a more economic analysis of the “Housing-Finance Feedback Cycle”, see Josh Ryan-Collins, Why Can’t You Afford a Home? (Polity, 2019). For instance, p. 123-4: “The demand for landed property has become excessive and speculative. Banking systems in modern capitalist economies no longer engage in the activity our textbooks say they do. They have become primarily real estate lenders, creating credit and money that flows into an existing and fixed supply of land. This pushes up house prices, creating ever more demand for mortgage credit and higher profits for banks. Through these profits, the banking system–and other financial institutions which buy mortgage-backed securities issued by banks–capitalizes the land rents from rising prices that their own lending helps to generate. This housing–finance feedback cycle has come to dominate late capitalist economies, squeezing consumer demand and productive investment, just as the classical economists feared when most land was used for agriculture.”
- Stein, p. 10.
- Stein, p. 48.
- Cited in Samuel Stein, Capital City, p. 49. See also p. 58: “By definition, gentrification cannot happen everywhere. It is the third stage in a long-term process of capital flow in and out of space: first comes investment in a built environment; second, neighborhood disinvestment and property abandonment; and third, reinvestment in that same space for greater profits. The key to understanding why some places gentrify is the amount of money that a landowner—who effectively holds a monopoly on all rents from a particular geographic location—can expect to generate from a given lot and the building atop it. Real estate speculators choose to invest in a particular location because they identify a gap between the rents that land currently offers and the potential future rents it might command if some action were taken, such as evicting long-term tenants, renovating neglected or unstylish properties, or demolishing and reconstructing buildings.”
- Stein, p. 91.
- See “Berlin Builds an Arsenal of Ideas to Stage a Housing Revolution”, Feargus O’Sullivan, Feb 21, 2019. As I was writing this, a proposal for a five-year rent freeze was announced by the Berlin city government, to take effect in 2020. German property stocks immediately fell—to the delight of housing activists. See, “German Property Stocks Fall on Berlin Rent-Freeze Proposal”, Bloomberg, June 6, 2019.
- Feargus O’Sullivan writes in 2018: “Berlin’s need for new homes is undeniable. Last year, 41,000 people moved to the city, pushing its population up beyond 3.7 million residents. By 2030, that number is expected to reach 4 million. Powered in part by property speculation, average rents in the city rose last year by 6 percent, still lagging behind the purchase cost of land, which rose by 13.6 percent. To manage this growth without pushing rents up far beyond inflation, this city will need 114,000 new homes by 2030. It will also need a further 77,000 (bringing the total to 194,000 new homes) to make up for a backlog in housing completions in recent years.”
- One should not forget, however, the new waves of accumulation in urban centers in Germany since 2009, which in turn draws in new workers with the (expected) capacity to pay higher rents. The rise in rents and housing prices thus does not just come from a tighter housing market, but from landlords and investors banking on higher returns from a growing local economy. Whether or not wages actually rise to meet the higher costs, however, is secondary, as tenants and buyers end up paying a higher share of their income anyways—i.e., they are squeezed.
- As Stein puts it (p.76), “urban police forces act as the armed wing of the real estate state: what planners and policy makers enact, police enforce.”
- Although the Kreuzberg campus project failed, Google has remained in Berlin, buying up new office spaces in Mitte.
- These are only a few of the many examples of solidarity shown by people against rising rents, displacements and gentrification in Berlin—whether concerning a collective bar, local bakery, social center, family apartment or public park.
- Using the right of first refusal, the city of Berlin bought 32 properties in the last four years (with 11 in 2017, and 18 in 2018), costing around 154 million euros. Most properties were in Friedrichshain-Kreuzberg (18) and Neukölln. See: Berlin kauft immer mehr Häuser.
- Engels, The Housing Question (1872) in: Marx & Engels Collected Works, Vol. 23, p. 348 (Lawrence & Wishart, 2010), emphasis mine.
- For a breakdown of all the large profit-oriented landlords in Berlin who own over 3,000 apartments, see this detailed study by the Rosa-Luxemburg-Stiftung, Profitmaximierer oder verantwortungsvolle Vermieter? See also the report on just how hard it is to figure out who owns what, Wem zahle ich eigentlich miete?
- How many profit-oriented mega-landlords are there in New York City (or in your city, wherever you may be)? How are such landlords organized, and what are their profiles? Can they too be expropriated? What would it take? I leave these questions up to the reader.
- See also the interview with Nina Scholz in this issue of Brooklyn Rail.
- Marx, Capital Vol. 1, pp 929-930 (Penguin, 1990).
- Marx, Capital Vol. 1, p. 929.
- Stein, p. 196.