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Last February, urban geographer Tom Slater took to Twitter to indict the conventional wisdom on the high cost of housing: “Here is one of the most damaging myths of our age: the housing crisis can be explained by an imbalance between supply and demand.” Testifying before the New York City Council and the Department of City Planning last winter, Mayor Bill de Blasio’s officials took turns insisting on that same conventional wisdom. Carl Weisbrod, director of the city planning department, stated that “because our population continues to grow and exert upward pressure on rents citywide [70 percent of the city’s households live in rentals], we need to sustain higher levels of overall housing production to support housing affordability.” In arguing this, Weisbrod ignored the statistics summed up in a 2013 report by analysts from the nonprofit Association for Neighborhood Housing and Development: From 2000 to 2010, the population of New York increased by 2.1 percent while the US Census reported that the number of occupied housing units increased by more than twice that amount, 5.3 percent. . . . If we could build our way out of our affordability crisis, the ratio of housing costs to income should have gone down during this period. However, average rents and the share of income spent on rent both increased well above inflation over the same period. The mayor and his lieutenants occasionally concede that there are other contributors to the crisis: the nearly three hundred thousand rent-regulated apartments lost due to deregulation, the withdrawal of state and federal housing funds, and the gulf between soaring housing costs and the stagnant incomes of most residents. But they never acknowledge one crucial impetus to rising housing costs: real estate speculation. Until the city comes to grips with real estate speculation, affordable housing will remain out of reach for too many New Yorkers.

A Neoliberal Solution The theory that an imbalance between supply and demand has created a housing crisis makes some intuitive sense. People flock to cities, the story goes, naturally driving up rents in a competitive market. But this simplistic account overlooks the role of speculators and other producers, who play a major role in creating this demand and the rising prices that go with it, along with the inevitable gentrification and displacement of poorer residents that follows. The geographer Neil Smith puts this forcefully in his classic 1979 article on gentrification, subtitled “A Back to the City Movement by Capital, Not People.” He writes that, when we take into account the role of builders, developers, landlords, mortgage lenders, government agencies, real estate agents, and tenants, it appears that the needs of production — in particular the need to earn profit — are a more decisive initiative behind gentrification than consumer preference. . . . The relationship between production and consumption is symbiotic, but it is a symbiosis in which production dominates. Consumer preference and demand for gentrified housing can be created after all. Today we’d want to add a significantly expanded, global class of speculators to Smith’s list of producers. At the time he was writing, however, real estate investment was still primarily a local affair. It took the deregulation and the financial services boom of the 1980s, which integrated real estate into the financial markets, to send speculation soaring to new heights. Innovative financial products like mortgage-backed securities made real estate more liquid, turning it into a readily tradable asset. Before long, investors seeking higher returns were moving their money from industrial production to the built environment Real estate speculation in New York takes myriad forms. But whether at the upper or lower end of the market, speculators are united in the view that housing is a financial asset to be built or purchased for maximum profit — not a home to satisfy the fundamental human need for shelter. While detailed research is still needed to figure out exactly how much damage the hyper-commodification of housing has done, it’s clear that the explosion of real estate speculation has contributed substantially to rising prices and to the tidal wave of gentrification pushing all but the most affluent toward the margins of the city. So how could de Blasio and his officials fail to acknowledge such an obvious driver of the city’s housing crisis? Here the language they employ to describe the mayor’s housing plan, to sell it to the public and to respond to its critics, is revelatory. In line with the assumptions about supply and demand that are a staple of mainstream economics, they attribute gentrification and rising rents not to speculation but to “market pressures” — a term they use so often it almost constitutes a mantra. They portray the market as a natural force, like gravity, rather than the product of human action. For example, in an interview on the Brian Lehrer Show last March, de Blasio invoked “the inexorable impact of market forces displacing people constantly” in the gentrifying Brooklyn neighborhoods of Bushwick and Bedford-Stuyvesant. (He concluded, “My answer is, create a huge amount of affordable housing.”) The naturalization of the market, of course, is a central feature of neoliberal ideology. Bill de Blasio has presented himself as the pioneer of a new era in progressive politics, but he hasn’t broken completely with a neoliberal paradigm of urban government that has shifted the focus of policy from mitigating material hardship to spurring economic development.

Housing New York De Blasio has — following through on his campaign pledge to combat inequality — shown himself far more concerned with alleviating economic distress than Ed Koch or Rudy Giuliani or Michael Bloomberg. But like his predecessors, de Blasio has wholeheartedly embraced economic development in the form of real estate development, going so far as to install real estate insiders in top housing and city planning positions. To be sure, in his 2015 state of the city speech, de Blasio asserted that “nothing more clearly expresses the inequality gap . . . than the soaring cost of housing,” and he has tried to close that gap through strengthened rent regulation. Such initiatives — unthinkable to previous mayors — could play an important role in curbing speculation. But what the mayor gives tenants with one hand, he takes away with the other. In his overall approach to the crisis, de Blasio aims not so much to cool down the speculative market as to operate within it, allying his administration with the real estate industry’s imperatives. De Blasio’s deputy mayor for housing and economic development, Alicia Glen, made this abundantly clear in 2014 when she told a real estate magazine, the Real Deal: We want markets to stay hot. That’s good for us. The more people want to build, the more there is to talk about the percentage of affordable housing, and the more the industry is happy to engage in these conversations. Right now, what appears to be the insatiable appetite for New York real estate is something we completely embrace. What this means is that the centerpiece of the mayor’s affordable housing plan — “a ten-year, five-borough” program — tries to “harness” rather than oppose the hyperactive market. Under de Blasio’s plan, Housing New York, the city entices developers to include “affordable” units (their actual affordability to low-income New Yorkers has been hotly disputed) in the mostly market-rate buildings they want to construct. The incentives take one of two forms. First, the city will rezone fifteen neighborhoods to allow developers to put up high-density buildings — thus reaping greater profits — on the condition that they provide some lower-rent apartments in their buildings. This program is called mandatory inclusionary housing (MIH), and the twelve thousand lower-rent units it creates will be permanently affordable. Second, City Hall will subsidize lower-rent apartments in buildings scattered around the city; these 68,000 units’ affordable rents will sunset in as little as thirty years. Although it will account for 85 percent of the low-cost units created under the auspices of Housing New York, this second option seldom comes up in City Hall’s public statements. As a result, the news media has almost entirely ignored it, giving the impression that MIH constitutes the whole of the city’s plan. The omission allows de Blasio to play up the idea that MIH extracts the maximum from developers — permanently lower rents at no cost to the city, something not required under the extensive Bloomberg rezonings — while obscuring the fact that MIH comprises just 15 percent of the units in his plan, a reality that makes this accomplishment seem somewhat less impressive. Ironically, the mayor’s plan has a preservation component to address sunsetting affordability in housing programs from earlier eras. In return for new subsidies, landlords will extend the affordability of some 120,000 apartments. Future mayors will have to do the same for most de Blasio units; the mayor’s scheme, like previous ones, offers a temporary fix to an enduring problem. Finally, it doesn’t take much statistical sophistication to see that for every new unit of affordable housing constructed under the de Blasio plan, two market-rate units will be built: 160,000 market-rate apartments by the administration’s own estimate. Critics have protested that in the fifteen areas to be rezoned for MIH — neighborhoods from East New York to the South Bronx — construction of market-rate housing will almost certainly spur gentrification that will displace many of the mostly black and Latino low-income residents. In response to such criticism, the administration has fallen back on “there is no alternative” rejoinders. They say that even without rezoning and MIH, gentrification will still come to these areas; like the market, it’s an inexorable, uncontrollable force. Here’s Vicki Been, commissioner of housing preservation and development, at one of last winter’s hearings on rezoning: “As long as there is demand, people will build. . . . Not passing mandatory housing will not stop those forces.” In a speech the previous month, she had already underlined the administration’s conviction that it is powerless in the face of “those forces”: “Too much of the discourse is about stopping development. You don’t stop development in a city like New York.”