Housing is Devouring Our Homes: Lessons From Abroad
In his 16th century book “Utopia,” Sir Thomas More wrote that sheep were devouring people, fields, houses, and cities in England. He was describing the enclosure movement: driven by the high profits of wool, landlords were converting open farmlands into enclosed sheep pastures and driving out the small peasants and communities that lived in, worked, and depended on the lands. Today, all over the world, housing is devouring our homes. More specifically, the real estate market is converting homes into housing to be sold and speculated at a profit, pricing out tenants, driving out residents, and stripping people of access to dignified and adequate shelter.
This is also happening in South Korea. Moon Jae-in came into office promising to curb booming housing prices and rents. Yet, rather than decreasing, according to CCEJ, compared to before his administration, they increased by 52% in 2019 and 81% in 2021. His administration’s 25+ measures were not only ineffective but also contradictory: his surgical approach targeting real estate districts with the fastest rising prices simply displaced the effect to other areas; his promises to provide accessible housing are contradicted by even the government’s LH company which is selling its housing at market prices. In fact, both conservatives and progressives alike have criticized Moon’s housing policies as ineffective and directionless. This is thrown into sharp relief when contrasted to Gyeonggi Province Governor Lee Jae-Myung’s “basic housing” policy, which will provide thousands of below market price, public housing units for long term rental. Unlike Moon, Lee’s “basic housing” policy has a clear message and direction: housing is above all for living in. In contrast, the housing policy failure of Moon and his Democratic Party, with its majority in the National Assembly, is from an inability to distinguish between housing as a home to live in and as real estate to profit from.
The book “In Defense of Housing” presents us with simple concepts to better understand and navigate the housing issue.
Politics Determines Housing Prices
What happens when you decrease taxation on profits from the sale of a home? or decrease taxation on real estate property? Both these policy decisions encourage the buying and selling of housing at a profit and create a greater demand for housing, thus driving up prices. Yet, this is exactly what Moon’s 더불어 민주당 did on June 18 when, as it set as its party policy greater exemptions to real estate based taxes on households with one housing unit: more profits from real estate transactions would be exempted as such taxes would be levied on housing units sold at the selling prices of not 900 million won but at 1.2 billion won; furthermore, the comprehensive real estate tax would be levied on only the top 2% of homeowners, thus raising the exemption from homes with officially listed prices of 900 million won to 1.1 billion won. The relaxing of the comprehensive real estate tax would exempt 89,000 households (48.6% of the expected 183,000 a single-housing owner listed at 900 million won this year). Despite property taxes already being low relative to other OECD countries, the Democratic Party made a political choice to placate the backlash from homeowners and in the process eroded their real estate tax policy regulating the increasing prices and profits from the real estate market. This example illustrates the book’s central thesis that housing policy is not simply an economic issue but a politico-economic one.
What happens, if on the other hand, you provide public housing for rent below market prices? or put a price ceiling on newly produced housing? It not only directly provides affordable housing for rent and purchase, it also creates a downward pressure on overall housing prices. This is what Lee Jae-myung did with his basic housing initiative that would provide 16,000 public housing units with 30+ year rental contracts at below market rates in transportation hubs and key locations by 2028. Or when the Roh Tae Woo presidency immediately brought down housing prices by building 2 million housing units and selling them at half of the market price.
These policy decisions reveal the mechanisms by how political decisions impact supply and demand, and thus housing prices. Looked at another way, Moon Jae-in and his Democratic Party’s ineffective and half hearted attempts at controlling housing prices might be interpreted as a lack of political will: we need only watch the headlines dominating the evening news about high members of Moon’s Administration and the Democratic Party being involved in real estate scandals to wonder how putting speculators in charge could have ever regulated the housing market. Kim Heon-dong’s Real Estate Expose makes clear how many of the public “servants” in charge of housing policy not only push for 친재벌 housing policy but even oppose (passively and actively) policies centered around providing people with affordable homes. Ultimately, reining in the housing market is a political decision that involves political will.
Commodification: A Litmus Test for Homes
“In Defense of Housing” introduces a key concept that can serve as a litmus test for determining whether housing policy helps those profiting from speculation or those seeking homes: commodification. In market based societies, housing has value both as a home one lives in and as a real estate asset speculated or rented at a profit. Applied to housing, commodification results when housing’s profit-bearing element dominates its use as a home. When housing is commodified, the lives of people that live in those homes become more difficult.
In this regard, commodification can serve as a litmus test for evaluating housing policy: if policies on the commodifying end make housing more profitable and exchangeable, policies on the decommodifying end allow housing to serve as stable and dignified homes. Governor Lee Jae-Myung’s basic housing, or policies such as parcel price ceilings, or providing public housing at below-market rents advocated by organizations such as CCEJ are all examples of decommodification policies.
Let us apply this litmus test to Together Democratic Party’s recent policy of increasing the housing supply as well as deregulating loans for those that don’t own their homes. We can see that the policy would open a path towards home ownership for those without it. Yet, it does so while also opening up the future to the possibility of increasing the “house poor” saddled with heavy mortgages (much like the subprime mortgages that created the 2008 financial crisis). Money comes into the hands of the “house poor” and goes into the hands of those building and selling the homes who can now meet the higher demand and greater debt based wealth to command higher prices. While the policy’s intent is to make housing available to people with no home ownership, this is achieved not by limiting its commodity aspect (i.e. decommodification) but by increasing homeowner debt. Thus, such policies, while on the surface might appear to help those without homes to own them, ultimately increase the profits of speculators and developers on the backs of household debt.
What might an alternative policy based on decommodification look like? As Kim Seong-dal of the Citizens’ Coalition for Economic Justice (CCEJ) explains: if the goal is to provide people homes, the Moon Administration can easily start by selling public housing based on a parcel price ceiling or provide public housing with long-term leases and below market rents.
No one can deny that crafting housing policy involves expert knowledge. However, it’s a fool’s errand to believe that experts can navigate policy when Moon hasn’t yet charted a clear direction. A clear vision becomes even more crucial when many of the bureaucratic experts have conflicts of interest: their own personal real-estate wealth and post-retirement careers in said corporations. If the Moon Administration wants to make housing more accessible and stable for people, then rather than simply blindly increasing the housing supply, it needs to take measures to decommodify housing such as rent control, tenant stabilization, public housing, and price ceilings. As CCEJ’s Kim explains: the government could start this process by simply putting its own public corporations in order. Instead of proceeding with its plans to sell their lands in Seoul so that private developers can reap handsome profits, the government can develop high rise buildings with apartments sold at below-market prices. Or even better, it can rent them out as public housing with 30 year long-term leases. Many such sites exist not only near Seoul but inside it as well such as the public plot in front of Yongsan station, or the plot in the Seoul Medical Center in Samsung District.
Yongsan Railroad Repair Lot(Source: Enteretoday)
Seoul Public Medical Center in Samseong(Source: ajunews)
Markets Generate Anxiety
Market proponents such as Kim Hyun-ah former National Assemblymember and currently nominated for the position of President of the public Seoul City Housing Construction Company (SH) extol the virtues of the market and criticize Moon for not letting the markets do their job, for politicizing housing, for infusing it with ethical and moral values. Yet, we are all familiar with letting market forces rule our lives: who hasn’t faced, with great dread, the approaching end of a 2 year housing contract (fortunately now 4 with the choice to renew) fearing that the landlord will increase the rent? or heard stories of people having to move every two years? or a store-owner that upon renovating her store space and establishing a customer base is soon faced with the choice between paying higher rent or being evicted.
When market forces wrest out of our hands control over fundamental aspects of our life such as housing, anxiety and powerlessness is an inevitable and natural consequence. The book refers to the condition when an essential element of our life is taken out of our control as alienation from it. When policies and regulations commodify housing, then ever-increasing control falls into the hands of landlords and speculators and out of the hands of those living in it. As a result, we become alienated not only from our homes but also from our surrounding communities. This is evident in Seoul through its long history of struggles against redevelopment as represented in the 2009 Yonsan fire and tragedy.
Alienating residents from their homes is not a mistake of the market. Alienation (and its accompanying anxiety) is an essential element of the market: to make profits, you need to alienate the housing from the occupant so that it can be more easily sold and rented at a profit.
Paying Rent to a Hundred Strangers
As housing becomes more financialized, the book notes how you might end up paying rent to not one landlord but to hundreds or even thousands of shareholders of the company that owns and manages your home. Rapidly expanding in Korea and already taking over the rest of the world, real estate investment trusts (REITs) are real estate owning and managing companies owned by at least 100 people (shareholders if publicly traded). Why does this matter? Well, as much as we might dislike our landlords, at least they are specific people that we have relationships with and can appeal to. Anonymity and transience in ownership enables greater mechanical ruthlessness in the pursuit of short term profits: it is easier for a shareholder temporarily holding a small share of a company to stomach (if they are even aware of it), rationalize, and condone the eviction of a disabled low-income senior than for an individual landlord to do so.
In Korea, REITs have been possible since 2001 and are becoming an increasingly dominant force shaping housing. Not only have the number of REITs grown from 50 REITs with 7.6 trillion won in assets in 2010 to 274 REITs with 61 trillion won in Sept. 2020, since 2019 with the lowering of government standards for listing REITs (thus allowing REITs to increase their investment capital by drawing investments from the public), the number of REITs listed is expected to continue rising.
Housing Prices Determined by Global Markets
In short, as housing becomes hyper commodified through financialization it sheds off its human elements. The book explains how as this financialization is globalized, rents and real estate prices become detached from local supply and need and become set by larger global financial markets determined by the ebbs and flows of international capital “basically looking for a safe deposit box” in housing commodities. For example, after the 2008 subprime crisis, capital flowed out of the collapsed subprime mortgage market and into the commodities market contributing to the skyrocketing food prices, which led to riots in places such as India. Thus, the investment decision had less to do with the food market itself, and more to do with the overinflation and burst of the subprime mortgage market. More and more as the housing market becomes another sector of global finance, housing prices will be determined not by local supply and demand but by the larger flows of financial capital.
Within this new framework of globalized financialization, Moon's approach of simply increasing the housing supply to lower prices is over-simplistic. It fails to recognize that prices are increasingly detached from local needs and demands. As detailed in the documentary “The Push” featuring the former UN Rapporteur on the right to adequate housing, financial firm Blackstone Group has been buying houses in cash way above market prices. At times, these housing is left empty in the hopes of rising housing prices. If left to the markets, individual would-be homeowners would have to compete against such global institutional investors that at times harness funds from the public. In a scene from the movie, a man fearing that he is being driven out realizes that the pension fund he is paying into might also be a pension fund investing in Blackstone. In short, the financialization of housing makes it possible for hot money to come in and to quickly inflate prices. The 1997 IMF Crisis has taught us plenty about the pain that financial capital can inflict upon society in its reckless pursuit of profits.
Don’t Hate the Player, Hate the Game
In Korea, the hyper-commodification of housing might be exemplified by the high risk speculative phenomenon of “gap investments” popular among young people: the jeonsae (a lease based on a large deposit that is returned upon end of the contract) of a tenant, comprising 90 to 95% of the price of the apartment, is leveraged to purchase the apartment, with 10 to 5% of the price covered by the investor, who sells their ownership title to the apartment at a high rate of profit when housing prices increase. It’s hard to criticize such petty speculators when many of them are young people in their 20s and 30s living in a society plagued with high rates of youth unemployment and precarious labor. Likewise, we might understand the tenant that rents out a room in their apartment as an airbnb. Society makes demands upon us (e.g. to get married you need to secure an apartment) and we play the game to survive and thrive. Thus, the book makes the point that rather than placing the burden on speculators to curb their behavior, it is the government that must fix a system that incentivizes such practice.
Let’s Liberate Our Homes
The 1969 movie Burn! starring Marlon Brandon is about a slave led revolt in a fictional Caribbean Island. When the Black leader of the slave revolt, Jose Dolores, is captured, one of his captors, a naive young Black soldier, appeals to him to cooperate, “But then after a while maybe they will free you.” Dolores responds, “No little soldier. It doesn't work that way, friend. If a man gives you freedom it is not freedom. Freedom is something you, you alone must take.” Likewise, reclaiming one's home was never simply given to people. They were given and won as concessions by the government against people that had risen up in protest.
More specifically, policies of decommodification like rent control or public housing didn’t simply emerge out of the goodwill of the government. One need only see all the high level bureaucrats in Moon’s Administration and National Assemblymembers that have a vested interest in pumping the real estate bubble and promoting pro-corporate policies at the expense of people’s homes. Thus, policies of decommodification emerged after the end of a long struggle by those fed up. Yet, if we are to create cumulative and transformative social change, it must go beyond short term gains and into long term social change. Reforms that leave the system intact and the propertied classes just as powerful do nothing to tip the scales of power between exploiter and exploited. Without greater power transferred to people, rent control and public housing, for instance, can be deregulated and privatized when faced with the great burden of economic recessions or pressure from landlords. If the candlelight uprising has taught us one thing, it is that we can’t just stop fighting after winning a few battles. We must not only continue fighting but also organize to swell our ranks and grow stronger.
When the people take over government, as the Social Democratic Party did in Vienna’s municipal government, public housing can be created that integrates people into their communities: between 1919 and 1934, the Social Democratic municipal government created 60,000 public housing units with integrated parks and schools. A better world where we can live in security and dignity in our homes and communities is possible, but we must fight for it.
After explaining the nature of freedom, Dolores asks the young soldier, “Do you understand?” The soldier innocently shakes his head. Dolores responds, “Well, you will one day because you’ve already started to think about it.” Hopefully, "In Defense of Housing" can have the same impact. It can start the process of liberating our minds and allowing us to examine the possibilities of building homes and communities.