The growth of real estate investment trusts (REITs) is one measure of the financialization of housing. In the United States, REITs were created by Congressional law in 1960. They spent their early years as mere tax shelters. But another act of Congress in 1986 gave them the ability to take a more active role in operating and exploiting the buildings in their portfolios. Since then their numbers and their reach have grown exponentially. REITs comprise the largest property owners in New York, including firms like Vornado and SL Green.
Finally, commodification is reinforced by the globalization of housing. Residential real estate may be fixed in place, but it is increasingly dominated by economic networks that are global in scope. Daniel Rose, a New York real estate insider, told an industry conference in 2002,
Only a few years ago, New York structures were built, financed, owned, managed and occupied by New Yorkers, just as those in Chicago or London, San Francisco or Paris were controlled locally. In today’s globalized world, capital, ideas, and people flow freely across state and national borders … Many of the people in this very room have no idea that the net cash flow from the apartment or office rent they pay in New York finds its way to investors in Germany or in England.43
Real estate has become a worldwide colossus. Starting in the late 1990s, direct investment abroad by US real estate companies increased sharply.44 Foreign direct investment in US real estate has also grown, increasing from $2 billion in 1973 to more than $50 billion in 2002.45
The involvement of foreigners in housing is not a problem on its own. But the ways in which housing is undergoing globalization are symptomatic of the decoupling of housing from residential needs. Some housing markets are starting to become more responsive to global economic signals than to local ones. In London, New York, and elsewhere, units in new apartment buildings are regularly advertised to foreign buyers, sometimes before being offered to locals. Governments sell their housing stock to international investors at property fairs such as Le marché international des professionnels de l’immobilier, known as MIPIM.46 In these cases, housing is directly connected to global circuits as an investment. At that distance, its use as living space barely registers.
Dwelling in the Commodity Form
Together, these interlocking processes of deregulation, financialization, and globalization have meant that housing functions as a commodity to a greater extent than ever before. This is what lies at the heart of the present crisis.
What does it mean to dwell in a hyper-commodified world? The consequences of the transformation of housing can be felt throughout the housing system, but they are extremely uneven.
In the most expensive districts of the world, luxury buildings proliferate out of all proportion to actual housing need. The super-rich own huge amounts of real estate, much of which is used purely for investment. The head of a New York real estate brokerage gleefully described “luxury real estate as the world’s new currency.”47 Exclusive addresses in cities like London, New York, Tokyo, Miami, Paris, Shanghai, Moscow, Hong Kong, and Vancouver have become favorable places to park a fortune. “The global elite,” the developer Michael Stern remarked to a reporter, “is basically looking for a safe-deposit box.”48
So-called super-prime real estate is cloaked in secrecy. Cash-only purchases and layer upon layer of holding companies can disguise dubious fortunes. Numerous observers have tied the rise of luxury housing to money laundering, tax evasion, and other illegal transactions.49 Property owners in prestige locations—Ostozhenka in Moscow; the blocks surrounding Central Park in Manhattan; the Bishops Avenue in Hampstead, London—have been linked to criminal activity.50 The “starchitect” designs and posh addresses seem calculated to hide the fact that, according to one sociologist, in some of these landed exclaves of the offshore world, forms of corporate, personal, and criminal capital are becoming “progressively undifferentiated.”51
Plenty of super-prime real estate should barely be considered housing at all. Many luxury buildings are not built primarily to provide housing but to make profits upon resale. The value of super-prime real estate is secure because of the ease with which it can be converted into money through loans, debentures, mortgages, and other complex financial transactions. Whether anyone will ever make a home in such buildings is irrelevant. New York City’s Independent Budget Office estimates that only about half of the units in expensive newer buildings are primary residences,52 and the true figure may be far lower. The few people who do reside in many newer high-end buildings report neighborless empty hallways.53 In London, areas with heavy concentrations of super-prime housing lack foot traffic or other signs of life. Local businesses can have trouble staying open.54
In brief, luxury housing is antisocial. The people who own these properties may have no connection to the places where they park their money. Lefebvre had already recognized this dynamic in the 1960s: “the Olympians of the new bourgeois aristocracy no longer inhabit. They go from grand hotel to grand hotel, or from castle to castle, commanding a fleet or a country from a yacht. They are everywhere and nowhere.”55 Research has demonstrated that the super-wealthy use their resources to avoid encounters with poverty, conflict, difference, and other elements of what they see as the downside of urban life.56
The trickle-down benefits of such high-priced housing have been greatly exaggerated. Due to the vagaries of local development policies, owners of these buildings frequently pay little or no tax, and many enjoy huge public subsidies. One57 received more than $65 million in public subsidies and tax breaks.57 The idea with such subsidies is that developers of luxury buildings can be incentivized to construct less-exclusive units as well. But among other problems, this system produces glaring inefficiencies.58 New York’s recently rebranded Billionaire’s Row, the stretch of ultra-expensive condominiums on West 57th Street, has so far contributed a grand total of eighty-nine affordable apartments to the city.59 One57’s developers contributed sixty-six homes at a cost of $905,000 per unit. The Independent Budget Office calculated that a grant of that size in the hands of a nonprofit housing organization could have built 370 apartments at a cost of only $179,000 per unit.60 More homes owned by billionaires contribute little to the communities in which they stand. But they still take up space, force up costs, and push others farther out.
While it facilitates the over-accumulation of luxury for the wealthy, the hyper-commodification of housing leads to new forms of risk, unaffordability, and instability for everyone else.
The current phase of housing commodification has not translated into the affordable paradise that its promoters predicted. Instead, it has allowed powerful elites to monopolize more housing. Cities like New York that have seen extensive deregulation and huge building booms in recent decades have not seen corresponding drops in housing costs. One international study found that “demand pressures stemming from financial deregulation may have translated into increases in house prices by some 30 percent.”61 Globalized, deregulated markets are unstable and subject to wild price swings, first contributing to bubbles and later to crashes.62
Increasingly, there are no alternatives to commodified housing. Public housing and rent regulation, the spaces of partial decommodification in New York, are disappearing. Between 1981 and 2011, the regulated share of the rental market fell from more than 62 percent to 47 percent of all units.63 As a result, the rental market is more precarious for tenants. Between 2001 and 2014, real rents in the United States rose by 7 percent, while in the same period real household income fell by 9 percent.64 More households are forced to compete with one another in a less regulated market controlled by bigger corporate firms. Many of the new