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Saturday, March 21, 2015

The Time has Come for Rent Control

By any measure, the housing market in Auckland is overheated.  Thousands of Kiwi first home buyers are being forced out by Speculators looking for a way to trade printed  money for physical assets.  New Zealanders are witnessing the effects of the quantitative easing “tsunami” washing up on our shores.  Some see this as an opportunity, a rising tide.  But all tides must eventually turn, and when this one does, the Working Class will watch helplessly as all prospects of ever enjoying housing security will be washed out to sea.

Ordinary home owners have to work for their money, and they pay significantly more than the 0% interest rates offered to Wall Street insiders. New Zealand has one of the most open housing markets in the world.  Unlike Greece, Mexico, China and even Australia, where it is difficult for foreigners to buy houses without meeting stringent requirements, foreigners can buy New Zealand residential property over the phone, so long as they are prepared to do a little paperwork afterward. Additionally, there is no Capital Gains Tax, and no limitation on the number of properties that can be owned.  Because of this, New Zealand homes are bought and sold on the global market, exposed to the chill winds of international arbitrage.

Competition from overseas buyers has only served to stoke the enthusiasm of local speculators.  There is a seemingly inexhaustible supply of money for lending through our foreign-owned banks.  Unfortunately, money borrowed overseas for local property purchases must be repaid overseas, with interest, creating generational problems in our balance of payments. Rising house prices beggar the nation.  Our children will be forced to repay these loans by surrendering all the wealth built up by their parents, without ever getting the enjoyment of it.  Interest on loans based on inflated property valuations is “magic money”, created at the stroke of a pen, but it must be repaid in money earned by real work.  This is how International Banking works, or rather, how you work for International Banking.

This situation could be alleviated with legislation designed to cool off speculation, but no such legislation is even contemplated at this time.  The “Housing Accord” purports to have built thousands of houses, but there is little evidence of this; the median price for an Auckland home has just passed $700k.  Labor and National together have almost identical do-little policies, proving once again that New Zealand has had what amounts to a One Party political system since 1984. 

This forment of market activity over the last 30 years has been hailed as a resurgence of “capitalism” after the long years of the New Deal era.  However, collecting rental properties is not genuine capitalist investment, as no real surplus value is created in the form of new goods and services, except where new housing stock is built.  “Rents” collected are not production, they are transfers. The “Rentier Economy” simply churns property, while producing little economic growth. This is because houses are homes, not businesses or factories.  A residential property is not a “means of production”.  Even the Real Estate service sector actually produces nothing -  it and the banking sector with it are essentially economic “drag”.

Once we clear away the brain-fogging hype of property marketeers, what we have at the base of everything is the honest urge to live securely in a healthy, stable home.  Whether it is by renting or buying matters little, it is security that is at issue.  The dream is to live somewhere safe and secure for long enough to accomplish one's real life-goals; the raising of children, the creation of community and the actualisation of self.

Americans know all about this;  Americans once confronted property speculation in their cities with implacable collective action.  Unable to compete with speculators, many workers revolted, and won what is now known as “Rent Control”.  In San Francisco, and in New York, two famous Rent Control cities that could hardly be called “Bastions of Communism”, many tenants enjoy lifelong right of occupation in rented homes, with no rent increases.  Ever.  They are as secure in their homes as if they effectively owned them.  And while some of the controls have been eroded over time, many tenants in Rent Controlled properties have continued under these agreements for decades, paying the same rents they paid in the 1980s when they first moved in.

Despite the dire predictions of many, San Francisco did not fall into the ocean, the rich of the city were not strung up from lamp posts, and indeed the property market in San Francisco remains the picture of health.  If you have the money, mortgage free, you can buy whole apartment buildings, happily and securely tenanted, with predictable rental returns sufficient to pay property taxes and reasonable maintenance.  But what you can't do is buy buildings wholesale using mortgage debt;  the rents won't cover the loan repayments, and that is actually by design.

Why are even the rich of San Francisco happy with Rent Control?  Because the beast Speculation was stopped from devouring the people who made the city what it was.  Rent Control preserved the quality of life and the character of the city.  San Francisco is in many respects a much more liveable city than Auckland, and this is directly attributable to the longevity and stability of its residents.  San Franciscans looked at where they lived, on a narrow harbour peninsula not too different from Auckland, and realised that urban growth was something they did not want.  Today, San Francisco is a colourful, low-rise city, made up mostly of homes and apartments.  There are very few high-rise towers.  When you are in San Francisco, you know it, you are not confused by the globalist homogeneity that characterises most of the world's major city centres.  Rather, throughout San Francisco, vibrant communities thrive, producing culture, the arts, music, theatre, political engagement, generating a stable tax base for the city administration.  Even low-paid workers are able to spend and contribute to the economy, because of their improved purchasing power.  Only in areas where residential tenancy is short-term and unstable, as it is near the Tenderloin do San Franciscans see serious crime.

It is time to introduce Rent Control in Auckland.  Auckland needs to learn how to create urban community, similar to that found in San Francisco and New York.  This cannot be done while tenants are kept in a constant state of precarity and farmed for rent like battery hens.  If the city of Auckland does not correct itself, it risks becoming an urban desert or worse. Auckland is headed toward a sterile future, resembling inner London, where social policies which favour rich property speculators have created gleaming towers of empty apartments devoid of genuine cultural life and the diversity that goes with it.  The urban working poor who created the “Swinging London” that fostered the likes of David Bowie, the Rolling Stones and of course, the Beatles are gone now. The hoard of grasping Trust Babies, Sloan Rangers or Princeling-Brats are no replacement; they have cash, but create nothing.

As important as cultural arguments are, there are serious issues which make Rent Control especially urgent.  Workers need action now on housing security.  If gleaming sterility was the worst that could happen, we could bear it.  But those soul-less towers in London are surrounded by a growing-thing to be dreaded; “The Favela”. You will never see the “Favela” mentioned in any of Auckland Council's glossy brochures.  But it is definitely there, if you look beyond the sunny scenes of face-painted children and cardboard carnival attractions.  It is conspicuous by its absence to those who actually live in the city and know of its existence. “Favela” is the Portuguese word for the massive super-slums growing up around most of the super-cities around the world, like Rio, New Delhi and Mexico City.  Favela's are populated by workers surviving off of the refuse of the gleaming precincts at the centre of their sprawl.  Its inhabitants service the sprawl, and subsist on it.

In his outstanding book, “Planet of the Slums,” Mike Davis explains how “Landlordism” is the spine of the Favela, running from top to bottom, preventing anyone in its clutches from ever escaping.  A towering chain of property rights and sub-leases create a grubby aristocracy linking penthouses at the top to the local Patron collecting rag-bags for rent at the bottom.  The residents of the Favela must pay rent to sleep and eat, even if the space they rent is barely enough to lay down in.  Rents of more than half of all earnings are common.  And flowing upward, ever upward, billions of tributaries tinged with blood converge to make a mighty river running uninterrupted from leachate pond to presidential palace.

The most horrifying aspect of the Favela that Davis describes is the impossibility of escape or any hope of returning to one's former prosperity, once entered.  Without a safety net, even traditionally stable middle class public servants and well-educated professionals can trip and fall into the maw.  New residents are immediately and mercilessly exploited by landlords sub-leasing space in dangerous shacks perched on the smoking slopes of the toxic waste-dump where they will likely spend the rest of their short unhappy lives.  In this hell, there is no leisure, no saving for emergencies, no chance to get clean or relax, as each day leaves you with just enough money to begin the next day at zero again.
This process has already begun in New Zealand.  There are thousands of workers who live like this, unsuspected, in our city.  They sleep 5 to a room, and wash at work, making just enough money for bus fare to and from the mouldy rooms they rent from their exploiters.  We are barely cognisant of them when they serve us.

What was once unimaginable is now an alarming reality on the streets of Auckland. Uncontrolled residential property speculation and uncontrolled rents are the fuel for the fire in the Favela.  It is not the evidence of third-world conditions, but the precarity of the workers and the degree of their exploitation which is at issue.  The Favella exists all around us.  The accelerating mass-migration of workers to the outskirts, and their subsequent disproportionately high rents indicates the trend.
What drives people into the Favella?  It is the inability to pay rent which causes the inexorable slide, forcing people lower and lower into the depths.  As more workers slide into the Favela, the Favela becomes a self-sustaining vortex, pulling more and more people into it, as its edges blur, converge and intrude on us all.  Once the Favela takes hold, it becomes permanent – not even fire, or regular surging invasions by police can touch it. Auckland may be years away from seeing slums like Rio, but by that time, but that is more due to differences in scale and initial conditions – the tendency follows the same trajectory.  The Favela becomes a seething mass of population, trapped in what the French call “System-D”, without laws or regulations, but by no means free.  With no place else to go, without even the ability to escape in their dreams, till the garbage-generating civilisation which supports it collapses.

We can stop this.  The Workers of Auckland must combine to resist this tendency before it is so deeply established that it can never be reversed.  Nothing less than a united coalition of all workers, unions and social justice organisations can avert the crisis.  Rent Control has been the remedy used in some of America's largest cities, and it can work here. But stop it we must, before it is too late, and the Favela grows to consume us all.

Linda SA

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