Raquel Rolnik, global specialist in housing financialisation: “I am totally convinced that urban planning is 100% in the grip of the financial real estate complex”

The Brazilian urbanist explains how popular housing has become a business for powerful global investment funds and why debt is now “our new form of slavery”. She also declares the “total failure” of urban planning to curb the excesses of markets and make cities for all. “It will be quite difficult for today’s generation of 20-25-year-olds to own property” foresees the professor.

Translated by Emilia Guzmán / Proofreading: Mark Biram

Aquí, la versión en español. Here, the Spanish version

“It is necessary to take the money from where it is: the poorest. Granted, they do not have much, but they are so many!” A good joke often captures the essence of social problems which are otherwise difficult to explain. That is why Raquel Rolnik used this quotation (from Alphonse Allais, 1854-1905) to open one of the pithier chapters of her book Urban Warfare, a social science classic that is about to turn 10 years old. It is a pioneering work in understanding what we know today as the financialisation of housing, that is, the transformation of the basic need to have a place to ‘crash’ or if literally translated ‘to drop dead’ (donde caerse muerto) as we say in Latin America [1] into a business for the real-state financial complex. As in Allais’ joke, Rolnik shows that these real estate funds have mainly benefited at the expense of families with fewer options and resources.

Like many of today’s problems, the financialisation of housing is inextricably linked to the belief that markets are rational and that the less state control, the better. Rolnik explains that during the 2000s, US banks led poorer families to believe that they would be property owners and handed out mortgages en masse to a whole range of people who could not afford them. The business was not to collect the debt, but to package and sell it over and over again, thereby polluting the entire financial system with the expectation of ever elusive returns. That bubble burst in 2008 in the so-called subprime crisis. From then on, finance capital began to organise another one, which continues to this day: the rental housing game. Investment funds bought up thousands of houses from desperate homeowners and indebted public companies. By controlling large portions what is on offer, these funds are largely responsible for the uncontrolled rise in rental prices. This problem is making families around the world increasingly desperate and has led to the emergence of tenants’ organisations in several countries.

In this regard, Rolnik is one of the most resonant and influential voices in the global debate on public housing policy. She was the United Nations Special rapporteur on adequate housing between 2008 and 2014 and is currently a professor and researcher at the Faculty of Architecture and Urbanism at the University of São Paulo. In this interview she explains how financialisation has expanded in the popular sectors («financialisation from below», she calls it); and offer a trenchant critique of the state and academia which believed for decades that urban planning could put limits on the real estate market and could produce both good business and better cities. That idea was a trap, she now thinks, because urban planning » has become 100% controlled by the financial real estate complex». When you enter the logic of the market in the hope of changing the system from within, you inevitably end up playing the game of speculation, she explains.

-How has the financialisation of housing changed since you published Urban Warfare?

-I’ve been asking myself that question lately: how I would write about these issues today. My book focused on financialisation in a context where private home ownership was a paradigm in public policy around the world. However, these processes evolved so quickly, and in the English and Spanish translations I included an epilogue explaining a model that was just emerging and has now taken hold: the financialisation of rental housing. It is like a ‘financialisation 2.0’. In recent years this phenomenon has also deepened and has also become much more complex.

-What variations have emerged?

-One very interesting aspect is that today the financialisation of renting is supported through a raft of public policies. This is the new wave in Latin America. In all countries they say, «we have to promote social rental policies», that is, to make the state subsidise both the rents offered by the market and the construction of social rental housing. But research done in São Paulo shows that under this concept, what is actually being promoted is false social housing: they are, in reality, studios for renting out like AirBnB. The Inter-American Development Bank (IDB) has held workshops on these policies and we know that when the IDB organises workshops on something it is because capital is moving there. In my opinion, this indicates that in the short and medium term, financialisation is going to be developed largely through public subsidies.

“The public resources have benefited the real estate-financial complex, a perverse industry which does not concern itself with building housing but rather real estate assets”

“Another very interesting variation that we are investigating in our lab LabCidade is what I call ‘financialisation from below’, emerging in the shantytowns, the camps and favelas. In my book I examined how financialisation appeared at the border of popular territories, without actually entering them, and transformed that border through a series of evictions. What we are seeing now is a more perverse phase, as it has caused the space of self-construction, which is very important in Latin America and which for decades allowed the emergence of many popular settlements, to be organised on the basis of an extractivist matrix that allows people to make their homes profitable by renting and selling them. Thus, in precarious settlements we now see the appearance of buildings which are constructed exclusively to be rented.”

-Who are the investors in this «financialisation from below»?

-People living in the popular territories who have done well and have accumulated surplus capital over several generations. In this financialisation from below we see that there are families who have some savings and many small investors who have prospered from trade and who enter into these real estate projects to obtain one, two or three flats to rent. Of course, there is also investment which comes from the laundering of illegal markets.

“What fuels this business are the large swathes of people who have no alternative but to rent in these slums, because their salary is not enough for the corporate market. In the past, these families would organise themselves, take a plot of land and build little by little. But that can no longer be done because the seizures have also been transformed into extractivist operations”.

-What’s that like?

-I have just attended a marvellous workshop in Peru on the 100 years of “barriadas”, which are the settlements which grew out of land occupations. And there it was shown that those who produce the «tomas» (occupations) today are «pirate land-grabbers» and not the mobilised people. In other words, they are a financial-commercial operation. So, for the large number of people who do not earn enough, the only possibility of accessing housing is to buy or rent something in this circuit.

“One factor that gives a huge movement to this market, at least in Brazil, is the public subsidy, the vouchers for rent. This is the big trend in Brazil and elsewhere: when a family is evicted because they live in a place where infrastructure is going to be expanded, or in a ‘risky’ area, the state gives them a voucher and what do people do? They rent in the same settlement. Thus, public resources end up helping to consolidate financialisation from below, which is a very perverse process.

“I think that today we are witnessing a radical transformations in the relationship between capital and housing which is taking place not only in the sphere of corporate capital, but also «from below», in the very production of the popular city. In the popular city today you see that whoever has a car uses Uber; whoever has a bike uses Rappi; and if you have a house, you rent it out. It is as if financial capital has finally overcome the historical barrier it had in order to enter popular settlements, which was the imperfect ownership of land. For renting, that problem doesn’t matter.

“This is the agenda we are working on now. I have told you about the ‘kitchen’ of the research we are doing. We have already published some articles, but I think it is an agenda that has potential. It seems to me that there is a whole transformation to look at, and that it can change the way we develop theories about the Latin American cities.”

– Is this “financialisation from below“ linked to the financialisation of rental housing? Have they the same actors operating?

-That’s the big question. There is no doubt that there are links and we are looking for them. But there are also different actors who collude or whose actions are, at least, interlinked. For example, one actor that is absolutely present in both types of financialisation is the state. It has a central role here and there, but it operates in totally different ways in both spaces. Perhaps the same is also true for capital. For example, Fintechs – these technological finance companies that have proliferated and supplanted traditional banks – are absolutely capillarised in popular territories, and one question is whether the money with which they operate comes from the powerful actors of the rented financial market. My hypothesis is that it does: perhaps people’s pensions, which are controlled by the big investment funds, circulate and mix in the «financialisation from below» in which Fintechs participate. We would have to do some research and follow the money to see if what Fintechs move comes from the leasing business.

“Another element that is repeated in both of these types of financialisation is the key role played by people’s debt. In the case of Brazil, in recent years many people have been able to take out loans because a lot of public aid is delivered through bank cards, in other words, they have been integrated into the financial system. And the thing about debt is that it is always unpayable. I get into debt to pay the debt, I make a profit on what I have to pay the debt and in the end I work for the debt, which is nothing more than the profits of capital. In short, debt is the modern form of slavery.”

CHILE AND ITS MODEL

– In your book you argue that the housing policy deployed by the Chilean dictatorship played a central role in the process that gave rise to financialisation. Tell us about that.

– My research identifies that at the root of financialisation is a key paradigm: the idea that basic needs can be transformed into a business. I think the work of Brazilian sociologist Lena Lavina (The Takeover of Social Policy by Financialization, 2017), which shows how every right became a financial asset and a source of business, is very illustrative on this issue. What I argue is that this neoliberal paradigm had three epicentres: the governments of Ronald Reagan in the United States, Margaret Thatcher in the United Kingdom and the Pinochet dictatorship in Chile. The contribution made by the Chicago School economists in Chile was to put these ideas into practice, massively and for a long time, because democracy did not change the foundations of this model. From Chile, and thanks to the recommendations of the IDB, the model expanded to the entire periphery of capitalism. That is why for a long time we have seen in Latin American and African countries the same problems that the housing policy in Chile provoked.

-What problems?

-That policy pushed the poorest people to the margins; it left them without a city, without opportunities, without heterogeneity. Nowadays, quality has improved a lot, but for years they built very poor quality housing. And today, moreover, the camps are once again appearing in Chile. The model implemented by Pinochet was built up as an example of the first Latin American country to eradicate slums. «There are no more slums in Chile, this is a successful housing policy», it was said. But now there are even camps. I am aware, of course, that Chile has experienced a strong immigration process and this has increased the number of homeless people. We cannot ignore this, but I think that, as the book Los con techo edited by Alfredo Rodríguez and Ana Sugranyes points out, what this policy has produced is another very complex social problem.

“Generally speaking, the Chilean model never solved the problem of homelessness, it only postponed it; and what it really created was a business. That’s why, when this model exploded, millions marched in Chile. Today we see that the «magnificent» idea of transforming needs into products, and products into business, generates debts that citizens are unable to pay and thus end up not paying”.

-What do you think will happen to this ambition in a context of increasing difficulty in buying a house and a significant and constant increase in rental housing?

-This is a big issue. Rented housing, especially for the popular sectors, is a very hard experience because it implies enormous precarity. There is a «permanent transience». The insecurity of tenure, either because they are in an informal, irregular or illegal occupation of the land, makes families feel that they are not going to be in one place for long, that they have to move to another place and then to another. The dream of one’s own home, then, should not be seen as an illusion: it is a response to a situation of absolute lack of security and it seems to me that this idea will continue to be important. However, I think that unfortunately this idea will be used, as it has always been, to feed housing policies that offer nothing to the people who really need housing. Because most social housing policies are focused on people who can access credit with a little subsidy. They are not products for those who are almost on the street. These policies have popular support because they promise to produce social housing through public-private initiatives. But they don’t produce that effect, they produce housing that is a little below market price, affordable as they say in English, affordable, payable. But affordable does not mean «social». In the end, these are policies that feed the market and make housing even more inaccessible to those who need it most. So we are in the paradox that policies that nominally promote property ownership mean that fewer and fewer people actually have access to housing. The example of São Paulo in recent years is a scandal. We have had the largest number of housing units produced in a short space of time in the history of the city: 400,000 new units, an absurdly large number. And at the same time we have the highest record of people living on the streets: 80,000 people[1], in addition to the multiplication of new slums. We have never had a situation like the one we have now. And these 400,000 homes were subsidised with public resources in the name of producing housing so that those who need it could become homeowners. But in reality they are being bought by investors of different stripes. In other words, these public resources have benefited the real estate-financial complex, a perverse industry which does not concern itself with building housing but rather real estate assets.

-Why are these policies maintained by governments that seem to be or are left-wing?

-I wish I had an answer, but I don’t understand it. The only thing I can put on the table is that perhaps the financial real estate lobby has too much power and can dictate housing policy. That power derives from the fact that the appreciation of housing, in two or three years, is much higher than the appreciation of any other capital investment. And because they are «social housing», they have a lower price, so «give me two, better give me ten».

-What is the role of urban planning in this problem? Some say that planning can set standards for a better city. Others think that these are siren songs and that planners don’t have much to do.

-Today I am totally convinced that urban planning is 100% controlled by the financial real estate complex. Its language, its products, its way of thinking about the city, its paradigms, its epistemology! there is nothing in planning that is not controlled by that financial complex. I make my own self-criticism: after more than 30 years of trying to transform planning into an inclusive regulation, I declare here the abject failure and submission of urban planning to real estate products and to the prevailing financial logics.

“I also think that there is a deeper issue which needs to be addressed. Because it seems that from its inception, planning has had more to do with the real estate market than with people’s lives. In other words, we all enter the game of the real estate market imagining that from within we can create a city for everyone; but once you get there, you end up following the rules of the real estate market, which is nothing more than the game of speculation. I think that urban planning needs to be revised very, very thoroughly. And in this review we must also incorporate the challenges posed by climate change and the relationship between built up urban space and nature.”

TENANT MOVEMENTS

-Finally, think about the generation that is now 20-25 years old. What kind of housing will they have access to? Is it likely to be a generation of chronic tenants?

It is quite difficult for today’s generation of 20-25-year-olds to own property. But having said that, perhaps the idea of renting will also begin to transform and other possibilities of linking up with the territory will open up.

-What do you mean?

-We are living through a profound crisis. It is a political crisis, an environmental crisis, a crisis of forms of representation, of city models. These moments are very difficult, but also very interesting because they allow us to ‘think outside the box’, outside of prevailing paradigms and imagine other possible futures, other models.

“This crisis is different from others that humanity has faced, where utopias preceded practice. Before, people thought of an ideal society and then tried to gain power, either by revolutionary or reformist means, and once they were there, they tried to implement the utopia. And we have seen that this did not work. So, I think that today the way forward is to transform practices, concrete projects and produce another city, another relationship with the land and with other forms of organisation. In this sense, the experiences of cooperative housing and sustainable housing seems to me to be very important. I think that although today we don’t have a utopia, if we try to rethink from practice, perhaps we can, at a certain moment, connect everything within new planning utopias, which will have the advantage that they have been built with the people. It is no small thing to try that, eh; to get out of this position of the planner who thinks he knows everything, who controls the city, and to start thinking about futures and neighbourhood developments from the people. I think it’s difficult what’s coming for young people, but this generation also has an incredible opportunity to re-think the future.”

-Thinking outside the box» is extremely difficult for families because the system makes them feel guilty for their trouble finding a house. It is difficult to see that the problems are structural.

-That is true. But you have to understand that the response has to be collective because the problems are collective. When you meet someone with the same issue and then another and another and another, you understand. That is the origin of the new housing movements that are emerging in the world. They are movements of tenants that are initiating a recomposition of the political debate on housing, introducing, for instance rent regulations into the debate. In Spain, Argentina and in certain parts of the United States, what is gaining strength today is not only the problem of homelessness, but also the demands of tenants who realise that they are losing their lives in the renting trap.