The views about urban housing developed in this book are underpinned by specific premises about contemporary conditions affecting urban policies and processes. Fifty years ago conditions were different. The issue of affordability that related to monetary demand was less determinant in urban housing problems across the world, in part simply because there was far more provision of non-market housing for the poor. A fundamental reason was that there were different modes of production operating in different regions. The ways in which people got access to urban housing varied accordingly. In China, the USSR, eastern European countries and Cuba, communist modes of production and ideologies meant that housing was assured for most workers and provided by the state. It was generally affordable since the costs were not determined by market forces but set by the government in line with typical incomes. Furthermore, in wealthy capitalist societies in the Global North (or ‘the West’, as these were then labelled), there was usually some provision of social housing for urban low-income workers and their families. The rents in such housing were deliberately set at rates affordable for those on typical pay levels. This meant that they were usually well below market prices. Private rental sectors were also regulated in ways that helped control rent rises. When hundreds of millions of urban residents whose incomes were in the lower deciles of national income distributions were housed in these ways, the role of affordability in understanding housing crises was evidently far less dominant. But these conditions no longer pertain.
Based on current circumstances, there are five key premises that shape the arguments of this book. These are taken to underpin contemporary low-income housing problems in cities across the world. The premises are introduced below. They will be referred to frequently and developed further in later chapters, and it is helpful to set out at the start why they are felt to be of fundamental relevance to understanding these problems.
1. The global reach of capitalism
The first premise is the current hegemony of the capitalist mode of production across all global societies. This is not to say that there are not important variations in the way this is practised in different countries – this is absolutely accepted and is indeed a key reason why urban housing outcomes vary. But the fundamental elements of capitalism – the operation of market forces via the factors of supply and demand to determine incomes and prices, the protection of private property, the quest for profit and the related essential requirement for continuous geometric expansion of production and accumulation of surplus value – are broadly speaking now in place across the world. The ending of communism in the USSR and eastern Europe has brought those societies into the capitalist fold. South-East Asian countries such as Vietnam and Cambodia that also had non-market philosophies and economies have likewise become market-oriented. The most important outlier remains China, but there have been remarkable shifts here also. It has adopted many of the main principles of capitalism, including private property, and market forces increasingly influence the allocation of resources and patterns of production and incomes. However, China’s mode of production is still best described as state capitalism, rather than free-market capitalism, and its cities and housing patterns remain unusual and exhibit some features in housing provision that flout the ‘laws’ of market forces and profit-driven decision-making.
Notwithstanding some exceptionalism in China, the hegemony of capitalist principles is now sufficiently global for these to be understood as the underlying forces determining urban housing outcomes. This does make comparative analysis easier. This precept may seem obvious but the basic requirements of capitalism are often ‘forgotten’ by policymakers devising housing programmes. For example, tremendous efforts have been made in Global South urban housing programmes to involve ‘big’ capital – banks, building societies and large construction companies – in the mass provision of planned and legal (formal) low-income housing. But it rarely works. Sometimes the governments involved berate the private-sector actors for the failures; sometimes analysis is directed towards the idea that there must be some market imperfection. The inability of poorer groups in cities in the Global South to obtain housing finance from formal lenders is usually seen as ‘a problem’ that needs to be solved. But analyses of this sort ignore the basic precepts and these presumed solutions can never achieve their goals. The essential problem is more obvious: capitalist banks and building societies have to operate profitably – it is their raison d’être. And they have responsibilities to shareholders and savers. They can lend money only for houses that are formally built in planned locations with permanent, approved materials and full services, and with tenurial rights recognised by capitalist institutions. These are the conditions that allow the lender to foreclose if the loan is not repaid, resell the property and thus get all or some of their money back. But these are some of the very conditions that make housing expensive and unaffordable for the poor. The gap between the income needed to live in ‘decent’ legal housing and the typical incomes of the poorer groups governments and development agencies are so keen to see properly housed is very obvious to private financial institutions in many cities in Africa, Asia and Latin America. So they do not lend to them because it would be exceedingly risky or very clearly would not be profitable. It is pointless to expect the large-scale private sector to lend money for housing to groups that it knows cannot pay that money back and/or whose tenure does not conform to the norms of capitalist private property. This is a circle that cannot be squared unless the iron rules of the market are set aside and the state intervenes with subsidies that make the processes profitable for the private-sector actors involved. This does work. However, it simultaneously proves the point: poor urban families cannot afford to be ‘formally’ housed under market conditions, and now that market conditions are globally hegemonic, this must be the starting point for all analyses of housing problems.
An objection may be raised to the argument that the capitalist private sector cannot deliver ‘affordable’ housing for low-income groups on the grounds that this is not so obviously the case in the wealthier societies of the Global North, and that the lending practices of financial institutions in the USA and Europe during the early years of the twenty-first century disprove the point that such capitalist institutions will not lend to poorer groups for urban housing. To the contrary, however, the absolute disaster that followed in 2007–08 with the global financial crash proves the point entirely. First, the iron rules of the market did eventually assert themselves and demonstrated in the most destructive fashion that lower-income groups even in the Global North could not afford private-sector housing. And second, the housing circle was, as usual, squared by massive intervention, at almost unimaginable levels, into the markets by the state sector in these societies. Trillions