Kerry Gold, a Vancouver BC-based real estate reporter, has a story in The Globe And Mail, "An Avalanche of Money," that's deeply relevant to the housing crisis in Seattle. But before I get into it, I want to point out that Heidi Groover is now the Stranger's housing reporter, and what will distinguish her contributions from mine is certainly my emphasis on the macroeconomic implications of the housing crisis. (The orthodox economics that's taught in colleges and printed/posted in mainstream newspapers/websites focuses on microeconomics.) My main influences in macroeconomics are, of course, Karl Marx and the post-Keyensian Joan Robinson.
Now, back to "An Avalanche of Money." It concerns an exhaustive study on long-run developments in Metro Vancouver neighborhoods by University of Toronto professor David Hulchanski. He found, of course, that the rich are more and more concentrated in the city, and the working-class and poor are being pushed into the suburbs and beyond. This trend is not an anomaly. It is happening in Seattle, Denver, Atlanta, and New York City. In fact, any city that is growing is undergoing this process. But what's interesting is that the forces at work in Vancouver BC's housing market seem unrelated to those at work in, say, Toronto's—a city that, like Seattle, has a real economy and lots of high-paying jobs. Vancouver, on the other hand, "relies largely on an inflow of foreign money to fuel its real estate industry." But why are two seemingly different market forces—foreign direct investment (FDI) and an abundance of high incomes—causing exactly the same spatial effects? Why isn't Seattle growing not like Vancouver? Because both factors are not disconnected from finance.
One might suppose that high incomes alone are the prime-mover in a city like ours. So, where does finance come in? What's it's connection to this factor? It will be this: The modern history of speculative booms and busts has been about borrowed capital that soars way above the ground of invested equity. The business of being loaned a lot with very little is found at the core of the Florida Land Boom in the 1920s, the housing bubble of the first half of the 00s, and the current weakly regulated derivatives market which, as Cédric Durand points out in the book Fictitious Capital, has cumulative leverage effects that reach "up to a factor of fifty." The problem with this? "When everything goes well, this generates outstanding returns. Conversely, a drop of just 2 per cent eliminates the entire underlying capital and leads to a collapse along the whole chain of transactions." This is the only game in town, in the age of oversupply/under-consumption/surplus capital. It's hard to believe that Seattle is somehow special. That even its honest-to-God wage-driven growth has managed to escape the satanic pull of transnational finance.
In these economic conditions (global surplus capital, highly leveraged real estate developments), it's almost impossible for programs like HALA to be at all meaningful in the short run ("...in the long run, we are all dead"). Their solutions are, true, addressing an economy that has this appearance, which is described by professor Hulchanski:
"Because every time redevelopment occurs you get a substantial increase in the socio-economic status of occupants … [market-rate] supply is only for high-income people. So, whenever redevelopment occurs, it means higher income people are occupying the space," says Dr. Ley. "Two things are happening: there is gentrification in the inner city, but then there's what I call 'capital deepening,' which is an area that is becoming richer."
But this is a market that's dominated not by the forces of supply and demand, but by finance, which sets into motion a growth that's dependent on an increasing supply of debt. This is why its valoration processes cannot expunge crashes. This is why, during a boom, capital must deepen. It can't do otherwise, let alone be directed to affordable housing or even sunk into long-term developments. Who is going to pay the huge and pressing debts on these investments that are anticipating high yields? No one in Seattle is monitoring, in a meaningful way, the manner by which much of the new constructions are financed. But what is known for sure is the scheme of borrowing, buying, and flipping is endemic to markets with sharply rising prices.
Vancouver has just made public its "bold" strategy to solve the housing crisis. It's called "Housing Vancouver Strategy (2018 - 2027) and 3-Year Action Plan (2018 - 2020)." It looks very much like what HALA proposes. About 90 percent of the new developments in the plan will be, of course, sold and rented at market-rate. I asked Kerry Gold for an opinion on Vancouver's developer-friendly effort for the production of affordable housing, and she wrote:
"It's impressive that city hall has finally acknowledged that we have a huge problem with speculative buying and offshore money pouring into our housing market these last 10 years. They have also acknowledged that their policy to build tons of market condos backfired, because they became the perfect speculative commodity. So that's all fine and good. But their strategy, which calls for greater numbers of rental buildings and incentives for developers to build more affordable housing, largely depends on addressing demand at the same time. If they just build, build, build, which has been our way, the hyper-commodification of housing will just continue. They need to address the demand side—as in, closing the floodgates with a speculator tax, or bigger foreign buyer tax, or even banning foreign buying of existing properties, the way New Zealand just did. On that last point, our government shows no indication of ever going there. But for this city plan to work, city hall needs the provincial government's collaboration, and that's a big question mark right now. Without it, it's just a lot more supply coming onto the market, and no guarantee that a lot of it will continue to be unaffordable. We've basically lost control of our own housing market, and returning it to anything resembling normalcy is, frankly, impossible. Everyone I have spoken with concurs. All we can hope for now is to find a way to subsidize housing for taxpaying citizens, like they do in Vienna or Singapore."
My feeling is that we have lost Seattle to finance at this point. There will be no normalcy, even with a big crash. The only workable democratic institution available at this point is public transportation. We fast need spatial fixes to the capital-deepening housing crisis.