The provision of housing these days, in large part, no longer fulfils a social function to provide people with homes within their budget, observes Anil Netto.
What is causing so much dissatisfaction with the housing market? Well, the provision of housing these days in large part, no longer fulfils a social function to provide people with homes within their budget. Instead, it has become a tool of wealth creation – for ‘investors’, financial institutions, speculators, and of course the developers.
In the meantime, people are evicted or displaced from their homes for meagre compensation and they are unable to afford housing nearer to city centres.
Investors and speculators buy the finished luxury houses and condominiums in the hope of long-term wealth accumulation. Speculators count on rising land prices. The banks earn loads of interest. The developers earn their profits and run.
This wealth accumulation from property has contributed to high income and wealth inequality. It didn’t matter if these luxury homes were left vacant or unoccupied by their wealthy buyers; in the past, rising prices more than made up for any lack of rental income – even as many ordinary Malaysians could only dream of buying their own homes.
This problem of property-based wealth accumulation is hitting cities around the world. It was only yesterday that I saw an ad in a local newspaper advertising real estate as an investment in the Kensington area of London. Coincidentally, the Guardian carried an article about a UN report on housing a couple of days ago, pointing out that the number of vacant units in the Kensington area had risen by 40 per cent.
The (UN) report warns about a rise in “dehumanised housing”: housing built as a high-yield commodity rather than for social use. A significant portion of investor-owned homes are simply left empty. In Melbourne, Australia, for example, 82,000 (or one fifth) of investor-owned units are unoccupied. In prime locations for wealthy foreign investors, such as the affluent boroughs of Chelsea and Kensington in the city of London, the number of vacant units increased by 40% between 2013 and 2014.
In such markets, the value of housing is no longer based on its social use. Properties are equally valuable regardless of whether they are vacant or occupied, so there is no pressure to ensure properties are lived in. They are built with the intention of lying empty and accumulating value, while at the same time, homelessness remains a persistent problem.
The average income of local residents or kinds of housing they would like to inhabit is of little concern to financial investors, who cater to the desires of speculative markets. These are likely to replace affordable housing that is needed locally with luxury housing that sits vacant because that is how best to turn a profit quickly.
Today, the UN special rapporteur on housing Leilani Farha is due to present a damning report on the commodification of housing at the UN Human Rights Council in Geneva:
Farha told the Human Rights Council in Geneva that: “Housing has lost its social function and is seen instead as a vehicle for wealth and asset growth. It has become a financial commodity, robbed of its connection to community, dignity and the idea of home.”
Her report examines how housing, representing almost half of all global assets and more than twice global GDP, has become a repository for global capital, and the impact of the commodification of housing on affordability and homelessness.
It traces the current crisis to widespread deregulation of markets and capital flows, and highlights the effect of new financial instruments allowing housing to be traded as a commodity on global credit markets.
“The financial world has essentially operated without any consideration of housing as a human right and States are complicit: they have supported financial markets in a way that has made housing unaffordable for most residents.”
“This is an issue of accountability,” she says. “Government accountability to international human rights obligations has been replaced with accountability to markets and investors.”
Very little of this is likely to be reported in the corporate mainstream media, which earn a lot of ad revenue from developers and are loathe to say anything negative about the property market.
Even today, property gurus are still talking up the market, despite the visible evidence of so many unoccupied high-end homes and commercial or retail lots pointing to a slump. Hardly anyone in the property sector will use the S-word (Slump) or the G-word (Glut).
Check out the last line of the excerpt: “Government accountability to international human rights obligations has been replaced with accountability to markets and investors.”
We can see that happening here in the way our governments have loosened the property market and are pandering to developers who are building high-end homes – but for whom? They are even allowing them to reclaim land, creating artificial islands, Dubai-style, to build such high-end homes – again, for whose benefit?