Wouldn’t it be wonderful if the housing crisis could be solved without building any more homes? There would be no carbon emissions from construction sites, no green fields covered over, no householders upset at dwellings appearing in their view. Instead, rents would become affordable and decent homes available through changes in government policy. Such is the promise of Against Landlords by the author and barrister Nick Bano, a man who has been described as “Britain’s top Marxist housing lawyer”.
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Bano would like to return, with due allowance for the fact that public housing of the time was sometimes less than perfect, to the 1970s to complete the project of driving “landlords and house-price speculators from the face of the earth”. He wants to reinstate rent controls and end no-fault evictions. It’s not entirely clear how people currently privately renting would then be housed (though it seems likely that they would become tenants of the state), or how the transition would be effected. He acknowledges that it might be a brutal process, given the dependency of the national economy on property values, perhaps involving a monumental property crash.
Bano’s arguments have already taken a bit of a battering, both from more centrist commentators and, doubtless to his delight, from the rightwing thinktank the Institute of Economic Affairs (“an edgy Maoist rebel”, it called him). These critics question, with some reason, his basis for saying that there are enough homes, in light of the fact that studies tend to show that Britain has the smallest new-build homes in Europe.
Economic rent
Even the Tories’ political education department had no real objection to the further reduction of the tiny private rented sector that existed in the 1970s. It wrote: “The accelerating decline of the privately rented sector is quite irreversible. The private landlord, as he exists now and has existed, will, within a generation, be almost as extinct as the dinosaur. There is nothing that can be done about this.” Conservatives in the 1970s merely sought to retain a handful of petty landlords, who ought to be entitled to a “fair return” if they let out a spare room or two, but they recognised that private renting tends to be an expensive, poor-quality and economically wasteful way of accommodating the population. The near-death of landlordism was one of the good news stories of the last century.
But the task that Thatcher and her successors set themselves was to undo that progress. The present system was designed, as the supreme court noted in a tenant’s 2016 human rights challenge, to ensure that “the letting of private property will again become an economic proposition”. It should have been obvious to everyone that a market that had achieved such positive effects by its collapse would produce equal and opposite consequences as it was reinflated.
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The yimby argument has always seemed flimsy. Its strange logic is that speculative developers would build homes in order to devalue them: that they would somehow act against their own interests by producing enough surplus homes to bring down the average price of land and housing. That would be surprisingly philanthropic behaviour.
When we complain, rightly, that cities such as Vienna are so much more livable than anywhere in Britain, we must acknowledge that landlordism is holding us back. Our insistence on pursuing policies that ensure that letting private property is an “economic proposition” not only drives up prices for would-be homeowners, but it stands in direct opposition to a programme of municipalising and decommodifying the homes that already exist. It also inflates land values, making new state-led building projects unfeasible. If we want a Viennese-style existence we can only achieve this, as we did 50 years ago, by driving the landlords out. Which is only fair: we have given them a very good innings.
For capitalism’s philosophers, the rent/profit distinction was key. Rents bred complacency and stagnation. The feudal lord got the same rents no matter what. There was no incentive to re-invest those rents in better agriÂcultural tools or advanced training for serfs. If your serfs invented a better scythe that let them bring in the harvest in half the time, you, their lord, got no benefit from it. What’s more, the lord on the next estate over faced no threat from the competitive edge your serfs’ bold innovation conferred.
But profit was always subject to competition. For capitalism’s theoretiÂcians, competition undergirded capitalism’s virtues. The fear of a rival taking your business with a product that’s better and/or cheaper sets the capitalist on a continuous hunt for efficiencies and inÂnovations that deliver better products at lower prices. The fear of a rival luring away your best workers – who are not bound to you the way that serfs were bound to their lord’s land – forces you to find ways to keep your staff happy and thus loyal.
To understand this distinction, think of a capitalist who operates a coffee shop that is put out of business by a newer, better coffee shop down the road. That coffee shop tempts away the capitalist’s customers, poaches their best baristas, and eventually the capitalist is unÂable to pay rent and goes out of business. The capitalist is ruined.
But what about the landlord who owns the buildÂing that the coffee shop once occupied? They’re great. After all, they own a building on the same block as the hottest coffee shop in town. They didn’t have to do any work, but the value of their asset went up, and the next capitalist who comes along will have to part with even more of their profits in order to pay the rent on that asset.
The end product of today’s Western capitalism is a neo-rentier economy—precisely what
industrial capitalism and classical economists set out to replace during the Progressive Era
from the late 19th to early 20th century. A financial class has usurped the role that landlords
used to play—a class living off special privilege. Most economic rent is now paid out as
interest. This rake-off interrupts the circular flow between production and consumption,
causing economic shrinkage—a dynamic that is the opposite of industrial capitalism’s original
impulse. The “miracle of compound interest,” reinforced now by fiat credit creation, is
cannibalizing industrial capital as well as the returns to labor.The political thrust of industrial capitalism was toward democratic parliamentary reform to
break the stranglehold of landlords on national tax systems. But today’s finance capital is
inherently oligarchic. It seeks to capture the government—first and foremost the treasury,
central bank, and courts—to enrich (indeed, to bail out) and untax the banking and financial
sector and its major clients: real estate and monopolies. This is why financial “technocrats”
(proxies and factotums for high finance) were imposed in Greece, and why Germany opposed a
public referendum on the European Central Bank’s austerity program.