by J.A. Myerson
Some people somewhere own a real estate firm, which owns my apartment building. These people, whose identity I don’t know, receive a sizable portion of my monthly paycheck, in return for which, whoever these people are let me live in my apartment.
My anonymous landlords keep raising the rent. Every year or two, I get a notice to the effect that my lease is about to be up, and, should I choose to renew it, I will need to sign here on the linefor the right to start paying the mystery people an even more joy-vaporizing amount of money each month. One of these documents sits unsigned before me now, just as its been doing day after day, silently bullying me.
I want to sign it and stay in my apartment. I grew up in the neighborhood I live in and have intense personal fondness for it. What’s more, the parks are out-of control beautiful, I’m near two useful subways, and there’s excellent Dominican food everywhere I turn. My rent is a steal for the area. These are the reasons I live in this apartment, I remind myself. Are they enough to make it worth this amount of money? They are worth it! No, really: they are…I think.
But why the hell do my landlords get to make more and more money off of me each year? None of these things that imbue my apartment with such value are attributable to the people who actually collect the value. New York City is responsible for the subways and parks; the Dominican food is thanks to the community that lives here. I would sign the lease before me much less reluctantly if my money were benefiting the city and the local community. But it’s really hard to fork over payments in return for all that value to some mysterious, impersonal, remote landlords.
The word itself feels anachronistic, seems to conjure a feudal, agrarian legacy. A “lord” in the age of open source software? “Land” in the age of the digital food delivery service? Indeed, that is just what’s up: some people own some land and some boxes that were built on and above it. They let me live in one of the boxes, for a really hefty recurring fee. Perhaps it is the imposition of so outdated a social architecture on the lives of today’s urban denizens that I find so disquieting. Why should I respect the right of these mystery landlords to extract rent from me any more than I respect the right of Sir Whateveryouwanttocallhim to knock on the huts of the peasants, demanding tribute? The landlords and the knights assert their right to the property the same way: the threat of violence. Those are the people I root against in movies.
Capitalism, which is supposed to have permanently replaced feudalism, allegedly favors profits as the basis for the incomes of owners—an enterprise invests in plant, equipment and labor to produce goods and services consumers purchase with their wages, and the surplus is captured by the owners. Notice how different profit is from rent: income that requires no ongoing cost of production, revenue that is simply a recurring toll on some property that already exists—income that is “unearned.” We lump rent-collection in with profits, but only the latter is capitalistic, liberal, and productive.
In other words, when my rent goes up, it isn’t because the plumbing, the woodwork, the brick, and the electrical infrastructure of my apartment building are improving. That would be the exchange of goods and services for money and therefore easier to understand as the basis for a rent hike than what is really driving up my rent: the appreciation over time of the land commodity. Roughly 60 percent of the American economy is in real estate, most of which is land value. Land is by far our national economy’s most valuable asset: the purple mountain majesties, the fruited plane, and the rectangular plot of dirt beneath my apartment building.
As everyone knows, the three most important considerations in real estate are all “location.” Lots of people want to live here badly enough to pay landlords an arm and a leg for the privilege. That is why the urban plot of dirt beats out the equivalent size plot of mountain majesty or fruited plane as the most “valuable” land. It is necessarily much scarcer. Economist Michael Hudson has assessed that the land value of New York City is greater than the combined value of every bit of industrial plant and equipment in the entire United States.
In New York City, the extracted value of the land is shared by rent-collecting real estate investors and the banks that lend them money. All the proof anyone should need that these are the two interests that run the town is available at any newsstand. Real estate interests have their own section in the paper. Wall Street has its own paper.
Here’s the play they run: The Flip. Big time landlords don’t keep the rent; they ship it to banks. In bidding against one another to buy a property, investors obtain financing by promising to pay the future rental value of the property to the bank, as interest. Letting the rents carry the loan, the real estate company keeps the property for a few years, while the land value appreciates, before “flipping” it to some new investor. Rather than the rental value, the real estate firm collects the increased value of the land, called a “capital gain.” It’s all unearned income: the rent, the banker’s interest, and the investor’s capital gain.
A good capitalist should want unearned income taxed. In The Flip, the interest payments (a cost of business) are deductable, and so is the capital gain, but only if the gain is shoved back into investing in more real estate. Instead of taxing the sixty percent of the economy that real estate constitutes, the United States dumps its tax burden onto industry and, chiefly, labor. This places incentives on continually accumulating real estate fortunes, rather than producing goods and services. In other words, this produces feudalism, not capitalism.
A socialist alternative isn’t too difficult to imagine. If all the land were owned by the municipality, the government could conceivably conduct a need-based policy, perhaps even with a specifically racially integrationist orientation—ending the scourges of homelessness and gentrification. Such new construction as were needed to avoid the many and grievous negative externalities of suburban sprawl could be undertaken through tax- or inflation-supported investment in direct hiring. In the ideal, 3D-printing-housing-from-recycled-materials future, people wouldn’t even have to work hazardous and strenuous construction jobs.
With each new oil spill, and each new horrifying flashpoint in the global slouch toward total climate collapse, I am increasingly tempted by the contention of Henry George, the influential Nineteenth Century proponent of a land value tax, that “as chattel slavery, the owning of people, is unjust—so private ownership of land is unjust.” But even public ownership of land doesn’t quite sit right with me; after all, public employment of slave labor is hardly abolition. Perhaps what makes me not want to sign my lease renewal isn’t merely an objection to those to whom the money flows, but reluctance, as a first principle, to imagine land as owned by anyone, at all.
Not everything has to be owned. Elinor Ostrom’s Nobel Prize-winning political-economic research offers a useful model for considering different broad types of property relations to goods. A two-by-two grid she proposed indexes goods by high or low subtractability of use (the extent to which my ability to use a thing precludes your ability to use it) and high or low difficulty of excluding potential beneficiaries from access to it. The resulting matrix includes four types of goods: private goods (like phones), toll goods (like theaters), public goods (like fire protection), and lastly, common-pool resources.
This last category includes groundwater basins, lakes, irrigation systems, fisheries, forests, and so forth: subtractable, and difficult to exclude potential beneficiaries. Here is a category beyond private and public ownership: non-ownership. I am seduced by the temptation to consider land in this light. Thus, if the capitalist impulse is to tax the land, and the socialist alternative is to seize the land, there might also be a third approach: to free the land.
The problems treating urban land as having similar properties to fisheries or grazing pastures are, needless to say, legion. For one thing, a pasture in Japan or a fishery in Maine will, at an equilibrium appropriately worked out by the Japanese villagers or Maine fishers, self-replenish. An urban neighborhood, on the other hand, decays when abandoned by capital and politicians. Just look at pictures of the South Bronx thirty years ago.
Still, there is hope that city life can include a greater engagement in common tasks and resources. Ostrom’s work makes clear that managing the commons is a task best accomplished by people, meeting face to face, building trust in one another, and establishing cultural norms that reflect their shared long-term goals. How are cities superior to rural society if not at putting people face to face with one another, in the position to produce community? The trust and norms can be tackled with enough imagination and guts, as community and labor organizers will tell you.
The existence of community land trusts (CLTs) suggests possibilities in committing urban land as a common pool resource. CLTs have proven useful in helping to maintain affordable housing, community gardens, and other community assets. In several important ways, a CLT produces many of the key ingredients Ostrom’s research promotes for the management of the commons. Chief among these is the smallness of the polity, enabling the members of the CLT to establish and uphold their own system of graduated sanctions for abuse of the common pool.
The model of a CLT is at present inadequate to the task of liberating urban land from ownership, but its successful applications can at least help stimulate us to imagine more attractive methods of general conversion of land from a toll good to a common pool resource.
So far, no one is proposing even the capitalist approach. The liberal mayoral candidates are all firmly “pro-development” and propose no more fundamental tax shift than slightly raising marginal rates on high-income earners. For the time being, therefore, I’m stuck with my anonymous landlords, their real estate firm, about which very little can be learned on the internet, and this unsigned lease which pesters me, day after day after anxiety-filled day…