Plan Cities for the Working Class not for Real Estate Tycoons, Sam Stein Urges in ‘Capital City’

Samuel Stein’s new book Capital City: Gentrification and the Real Estate State aims to challenge urban planning orthodoxy. Writing from a socialist perspective with New York City as his case study, Stein recounts how urban planning arose to meet the needs of capitalists, industrialists, and colonizers. Today, urban planning is firmly within the grips of the real estate state–an unholy alliance of global finance and megadevelopers–which is more powerful than ever, Stein argues.

After all, the president is a landlord and real estate tycoon, he points out, and his signature tax cut helped real estate developers most of all, furthering a pattern of preferential treatment for rich developers (and their bankers) while the working class continues to languish.

In fact, the conventional policy prescription for cities often amounts to stoking gentrification in Stein’s estimation. Hand out upzones and developer tax breaks and the ensuing supply boom will lower rents for all, the logic goes. Stein isn’t buying it.

In place of “gentrification planning,” Stein offers a radical alternative based on building renter power, threatening mass rent strikes, enacting rent control, building public housing in spades, and transforming urban planning to center historically marginalized voices. He admits that road is less certain and some radical solutions are still being formulated and fought for against the tremendous power of the real estate state. But Stein would rather be in the fight rather than reproducing the same inequalities of the past.

If you’re interested in hearing more from Sam Stein, you have two chances this weekend as part of Red May. At 7:30pm Friday May 17th, Stein will be on a panel titled Neoliberal Seattle: The City as Investment along with Mimi Sheller (Mobility Justice), Cedric Johnson (The Neoliberal Deluge: Hurricane Katrina and the Remaking of New Orleans), and filmmaker-Seattle City Council candidate Shaun Scott at The Summit. On Saturday May 18th, Stein will be doing a talk and book launch at Elliott Bay Book Company starting at 7pm.

Do homes filter to the working class?

As part of his argument, Stein seeks to knock down the justifications and defenses proponents of business as usual have put forward. One big defense is that building more housing automatically helps the working poor through lowering prices. The theory of filtering (or sorting) would suggest as wealthier people leave older housing and move into new housing, that older housing will become more affordable for everybody else. Stein holds that filtering or sorting rarely happens in practice. One reason why, Stein wrote, is the phenomenon of rich people buying homes for investments purposes and not even living in them.

[M]ost of what is constructed post-upzoning is aimed toward the very top of the real estate market, and does nothing to alleviate costs for most residents. In human terms that kind of luxury construction does not even guarantee greater numbers of people living in a given area; in fact, in some scenarios it can reduce, rather than expand, urban densities. While upscale developments may contain more “units” than older, more affordable precursors, they are often “filled” with shell investors. single-person households and large footprinted retail, thus reducing the number of people within an area and belying the supposed environmental, economic, and social benefits of density for density’s sake. those arguments, then, hold little appeal to urban residents seeking to prevent their own displacement.

Stein didn’t point to any studies suggesting the phenomenon of density decreasing following redevelopment is widespread, whether due to speculators not living in the homes they buy or household size decreasing. However, it’s hard to argue people being displaced would see density’s appeal for their block. Thus Stein contends centering the urban struggle on density is not the way to go. “The density thing has become a proxy for price, because we don’t have enough means to go after price,” Stein said. “I think that’s going to be trap in the long term.”

Due to the widening wealth gap, homes would have to filter a long way to reach someone making $15 an hour. While Stein may be too dismissive of the downward price pressure that increasing housing supply can create, he’s correct in his assessment that the working poor in gentrifying neighborhoods generally are generally last in line to get the benefits. And there can be other people jumping into the line; latent demand for urban housing means upper-middle class people will move into vacated housing stock before it can filter down to the working class.

The Power of Real Estate State

Nonetheless, the market-based supply paradigm is strong, and Stein sees that as a reflection of real estate state power. To those who doubt the power of real estate industry, Stein lays out some staggering facts.

“Global real estate is now worth $217 trillion, thirty-six times the value of all the gold ever mined. It makes up 60 percent of the world’s assets, and the vast majority of that wealth–roughly 75 percent–is in housing.”

That’s a staggering amount of wealth. The prevalence of wealth being tied to housing suggests the spike in real estate values is driving wealth inequality and exacerbating the racial wealth gap. And existing policy interventions may be geared toward making it worse. Stein highlights the “nearly $2.75 billion New York gives away in landlord and developer tax breaks every year” as evidence of this.

Trump: Developer President

One masterful exploiter of developer tax breaks is in the White House. In Chapter 4, Stein recounts how Donald Trump and his father and grandfather before him exploited opportunities created by the urban planning schemes of the day. Friedrich Trump fleeced miners with brothels in Seattle during the Klondike gold rush. Friedrich’s son Fred made a good chunk of his fortune during World War II as a war profiteer, overcharging the military for large workforce housing projects and subsequently systematically excluding Blacks from them. Donald switched the focus of the Trump empire to “glaringly gauche” luxury housing, hotels, and casinos following the neoliberal turn of his time, and he made sure to exploit every tax break imaginable along the way.

So is Trump indicative of other real estate tycoons? Stein would largely answer yes.

“[The Trumps] are a particularly vulgar version of the real estate capitalists in America,” Stein said. “I think they’re exceptionally ugly and proud of what they do, but they’re not exceptional in the way they’ve played off the state to make a profit in real estate.”

The rest of the real estate industry doesn’t love Trump, Stein said, in part because his brashness draws attention to their practices.

“He was never a major member of the New York Real Estate Board of New York or anything like that,” Stein said. They [real estate capitalists] disliked him because we was so brash about all the stuff they were also doing that it didn’t make them look good.”

Gentrification Planning

What Stein is proposing is not freezing neighborhoods in amber–although he is interested in attacking real estate capital’s right to exploit neighborhoods. “Healthy cities exist in a state of flux,” Stein wrote. “Change is necessary and good: people come and go, are born and die; industries are carefully harnessed, but almost never become permanent fixtures. A city that never changes is probably not a city at all.”

Gentrification, he sees, as a different animal.

“But a particular kind of change is taking hold in many cities and towns around the world–one that presents itself as neighborhood revitalization but results in physical displacement and social disruption for the urban working class,” Stein continues. “In geographer Ipsita Chatterjee’s terms, it represents ‘the theft of space from labor and its conversion into spaces for profit.’ This change is generally known as gentrification, the process by which capital is reinvested in urban neighborhoods, and poorer residents and their cultural products are displaced and replaced by richer people and their preferred aesthetics and amenities.”

Nonetheless, the pull of gentrification is strong and cities that embrace it can be rewarded by real estate capital. On the flip side, turning away from gentrification can risk a city’s credit score and bond rating. “The city that rejects gentrification planning is therefore taking a significant financial risk,” Stein wrote.

Inclusionary Zoning

While inclusionary zoning is presented as a moderating force (including by us at The Urbanist), Stein is skeptical.

“It doesn’t create enough affordable housing and the affordable housing it creates isn’t affordable enough,” Stein said in an interview. “[It’s] a program premised on gentrification while trying to correct gentrification. Some neighborhoods it could create a net loss in affordable housing.”

With other solutions blocked at the state or federal level, inclusionary zoning can one of the few tools readily available to policymakers and Stein recognizes its attractiveness in that light. But the way he would implement inclusionary zoning is just about the opposite of how New York City has gone about it. New York has targeted poorer areas for upzonings while downzoning wealthy White enclaves, particularly under Mayor Michael Bloomberg. Mayor Bill de Blasio continued the pattern, introducing mandatory inclusionary zoning to lessen the sting some by creating some affordable homes–but still not enough since the affordability level is often too high for many, especially Blacks and Latinos whose incomes tend to be lower that area median incomes that rents are pegged at.

Upzoning wealthy White areas would be a better approach, Stein contends, instead of funneling growth to working class neighborhoods and intensifying gentrification and displacement.

“[I]f inclusionary zoning were only used in rich White enclaves and never in neighborhoods at risk of gentrification, its results would be notably different: forcing the wealthy to integrate at least a bit, rather gentrifying the city and calling it progress.”

New York has generally done the exact opposite.

“Though results varied by neighborhood and block, in its totality Bloomberg rezonings reflected a particular racial capitalist spacial agenda: White upper-income homeowners tended to see their blocks downzoned or contextually zoned, while working class tenants of color tended to see their blocks upzoned,” Stein wrote. “The pattern could not be explained away by any other obvious consideration. For example, transit access–the standard urban planning rationale for upzoning–did not seem to be a factor here, as 59% of downzoned lots were within half a mile of a subway entrance.”

Radical Solutions

Chapter 5 is Stein’s tentative road map to unmake the real estate state and find housing solutions that will combat gentrification and shelter the working class.

One part of the road map is universal rent control–in New York’s case this would mean closing loopholes. While we discussed rent control on the phone, Stein acknowledges that rent control won’t be effective in the absence for a mechanism to ensure housing growth. Exempting new development is one route cities have used, perhaps with an opt-in option linked to property tax breaks. Oregon recently enacted statewide rent control–albeit in a weak form–showing an expansion of rent control isn’t so far-fetched. Still Washington state would need to repeal its state ban before Seattle could try this. Strengthening tenant protections is another no-brainer in the interim.

Cities should be seizing more public land, Stein argues. He gives a nod to Paris to “right of first refusal” law that gives the City first pass on any land sale in certain parts of the city. The city can pay market value and convert the building to social housing. Another option to shift land ownership trends is reforming foreclosure law to give the City first right to buy properties to keep them in public use rather than falling to the likes of Steve Mnuchin, who (in a related development) has been elevated to U.S. Treasury Secretary under Trump. Stein also proposes a foreclosure fee on banks to add a disincentive to dispossession. In short, Stein desires to turn land “from commodity to commons” by shifting land to public ownership and kicking off a social housing building spree.

Finally, Stein wants to see reindustrialization to offer an alternative to gentrification as an economic development model. “This would mean using zoning, tax policy, rent regulation, and subsidies to keep existing industrial projects going, and invest heavily in the kinds of infrastructure–ports, energy, rails and more–industrial firms would need.” An industrial resurgence could challenge “real estate capital’s monopoly on city planning priorities.” Before late 20th century deindustrialization, industry offered a counterbalance to the real estate state because industrial capitalists had a desire for cheap labor (and cheap land for their factories) and thus promoted policies furthering cheaper land and housing. When factories left the country or moved the suburbs, the real estate state filled the power vacuum in urban politics, and gentrification planning took over.

All in all, Stein wants solutions to come from marginalized communities and tenant movements, rather than continuing the status quo planning structures that favor the entrenched power of the real estate state. Rent strikes and blocking new luxury developments are options that could disrupt real estate capital, he suggests, and the incredible amount of real estate debt could make them vulnerable to such tactics.

What Does Community Control Mean?

Some urbanist may bristle at more community control in development, but Stein is aware of the risks of obstruction and doesn’t intend for a blanket veto of land use decisions by any old neighborhood group.

“If we believe in community control, for example, that doesn’t mean that every community gets control,” Stein said “It means that communities that have been denied control of their spatial amenities get more control, while it undos some of the community control that’s been afforded to exclusionary neighborhoods in the past.”

Although not a focus of the book, Stein acknowledges homeowner power and wealth hoarding is another side of the real estate state.

“Urban planners are above all land use managers,” Stein wrote. “Yet their power is subordinate to landowners–not just individuals who own land and houses, but the organized power of real estate capital, in both its concentrated (billionaire developers) and diffuse (exclusionary homeowner associations) forms.”

Stein is ready to imagine and build a better system.