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Housing as a commodity

Research shows that in developed and poor nations alike, public housing has become an investment asset

“Evictions: an organized crime” reads a sign at a 2013 protest in Madrid. Some mortgage holders were left homeless but still in debt

Juan Carlos Rojas / Notimex“Evictions: an organized crime” reads a sign at a 2013 protest in Madrid. Some mortgage holders were left homeless but still in debtJuan Carlos Rojas / Notimex

For six years – from 2008 to 2014 – the architect and urban planner Raquel Rolnik served as Special Rapporteur on the right to adequate housing for the United Nations (UN), which led her to undertake two visits per year to countries with different housing contexts, policies, and circumstances.  Despite these differences, Rolnik, who is a professor at the School of Architecture and Urbanism of the University of São Paulo (FAU-USP), managed to identify pieces of a global process that she calls the financialization of cities – a process that does not exclude Brazil.  Rolnik presents her reflections on her experience at the UN in the newly released book Guerra dos lugares: A colonização da terra e da moradia na era das finanças (War between places: the colonization of land and housing in the age of finance), published by Boitempo Editorial.  Two chapters are devoted to the world scenario and one to Brazil.

One of Rolnik’s first visits was to the United States in 2009 at the height of the housing crisis that had begun two years earlier, now known as the subprime crisis, a reference to bank loans offered to low-income clientele.  Borrowers from this economic stratum previously had no access to home loans because they were deemed “high risk.”  The collapse of the mortgage system, or bursting of the real estate bubble – epicenter of a world economic crisis – pointed Rolnik down a trail.  “It was clear that the prevailing world paradigm for housing policies is the idea that housing is an individual commodity obtained through the market,” the urban planner says.  “More than a commodity, the production of housing became an investment asset, a new source of revenue for the capital market.”

In the case of the United States, the government allowed the offer of real estate credit to be accompanied by a process of securitization – that is, the launching of other mortgage-backed securities like titles and bonds that created a profitable secondary market for banks.  This phenomenon also increased the supply of funds for loans, pushed up demand for more expensive real estate, and boosted housing prices themselves, often triggering a need for further loans.  When prices could climb no higher – when the bubble burst – mortgage costs rose, debt accumulated, and foreclosures began.  Given the transnational nature of financial markets, the situation repeated itself the world over, even in such far-off countries with distinct historical backgrounds as Kazakhstan and Croatia, both members of the former communist bloc.  “People in the United States lost their homes to banks, while elsewhere, like Spain, they were evicted but were still left with debts to pay,” reports Rolnik.

My Home My Life housing project in Londrina, Paraná: public-funded project, private profits

Olga Leiria / Olhar Imagem My Home My Life housing project in Londrina, Paraná: public-funded project, private profitsOlga Leiria / Olhar Imagem

While the strongest, most immediate impact of this process falls on the right to land and housing for the poorest and most socially vulnerable – the target of popular housing initiatives – its repercussions affect the whole of society.  “The financialization model gradually replaces all other housing policies and ways of producing housing,” says Rolnik.  Even in places like Britain, where housing shortages had been only a minor issue thanks to post-World War II social welfare policies, finance capital is advancing.  Discarding a social housing system that kept rent affordable, the country embraced a process of transferring property to tenants.  Today Britain is one of the developed countries where the residential mortgage market accounts for more than 50% of gross domestic product.

Nowhere in the world have government initiatives been transferred into private hands for the sake of relieving the state of a burden.  Much as this might seem to be the case – and declarations by government officials reinforce this notion – these processes have instead been led and regulated by the state itself, using funds right out of public coffers or through income tax exemptions (an example of the latter was Britain’s transfer of homeownership to tenants at low prices).  “In the version of this model in countries like Mexico, Chile, South Africa, and Brazil, the government provides direct subsidies to families so they can buy products on the real estate market, which are mass produced on homogeneous peripheries that have become bedroom communities,” says Rolnik.

Although the globalized, expansionist nature of capital markets means housing policies around the world share common traits, the researcher warns against the danger of seeing financialization as a top-down process, like some kind of imperialist force.  “It’s important to stress that each country’s experience is unique,” Rolnik states.  “The logic of the model depends on locally constructed political hegemony.”  Each country tailors its procedures so it does not drive off the funds needed for its projects.  “This helps us understand how the financialization of housing and urban land is taking root in Brazil through the federal housing program Minha Casa Minha Vida (My Home My Life), under a coalition government led by the Workers Party (PT), which has an anti-neoliberal discourse and a developmentalist proposal,” adds Rolnik, who was national secretary of the Ministry of Cities’ Urban Programs from 2003 to 2007, during Luiz Inácio Lula da Silva’s first term as president.

Foreclosed home during subprime crisis in the United States in 2009, after the bubble burst

Justin Sullivan / AFPForeclosed home during subprime crisis in the United States in 2009, after the bubble burstJustin Sullivan / AFP

According to Rolnik, after the demise of Brazil’s military dictatorship, public housing policy still followed the basic model that underpinned the 1964 creation of the National Housing Bank (BNH).  Working with the construction industry, the federal government promised to “make every worker a homeowner.”  Since 1967, the system has been financed with public money through the Guarantee Fund for Length of Service (FGTS).  Rolnik observed the occurrence of coordinated actions between financial capital and leaders of the PT prior to the 2009 creation of the My Home My Life program, especially leaders with ties to the union movement and pension funds.  She also noted that links were forged between these groups and the corporate real estate sector, which builds office towers, shopping centers, and hotels and has the closest relations with international finance capital.  During this period, many Brazilian construction companies went public.

“The program was so successful that municipalities and states abandoned their own projects, and My Home My Life became Brazil’s only housing policy,” says Rolnik, who confirmed this finding in the field through both a FAPESP-supported study as well as her participation in an investigation funded by the National Council for Scientific and Technological Development (CNPq) and the Ministry of Cities.  The “few municipalities in São Paulo that had their own social housing system” did away with them.  Rolnik also sees a relation between the process of financialization and urban reforms based on displacement, like those connected with mega-sporting events in Brazil.  Under the pretext of expropriating land for what the government deems priority purposes, extremely valuable real estate that is occupied by informal settlements passes into the hands of private capital.  “We thought the political tendency as far as favelas in Rio de Janeiro, for example, was no longer to remove but improve,” laments Alex Ferreira Magalhães of the Federal University of Rio de Janeiro’s Institute for Research and Urban and Regional Planning (Ippur-UFRJ).

This is the meaning of “war between places,” the expression used to entitle Rolnik’s book. Vera Telles, professor with the Department of Sociology at USP’s School of Philosophy, Literature and Human Sciences (FFLCH/USP), compares this concept with the notion of “accumulation by dispossession” that was developed by British geographer David Harvey, who sees a “logic of expropriation” in prevailing public policies. Taking it a step further, Telles cites the Dutch sociologist Saskia Sassen, who argues that this is in fact a logic of expulsion: through war, environmental destruction, and situations that produce refugees – along with other phenomena – these policies free up real estate that creates powerful markets when rebuilt.

Territorial planning and financing of urban development in municipalities in the state of São Paulo: advances and setbacks (nº 2010/06580-6); Grant Mechanism Regular Research Grant; Principal Investigator Raquel Rolnik (FAU-USP); Investment R$55,197.

ROLNIK, R. Guerra dos lugares: A colonização da terra e da moradia na era das finanças. São Paulo: Boitempo, 2015, 424 pp.