Exploring property: Perspectives of ownership

In the last decades, ownership has become a key factor of our societies and economies. As Thomas Piketty demonstrated in his recent book Capital in the Twenty First Century, the late 20th and early 21st centuries witnessed the return of the primacy of wealth over work in economic benefits and ownership has become an increasingly important part of wealth production. Piketty’s conclusion means that after a few decades following the welfare reforms of the 1920s, when work had constituted the principal path towards emancipation and social mobility, the dismantling of the welfare state in Western societies in the last third of the 20th century has globally reduced the value of work and has degraded it into a secondary source of income, behind revenues from property. Among the ownership of other goods like financial products or intellectual properties, the ownership of spaces, that is, real estate, has become a defining element of today’s cities and rural land: this process corresponds to the increasing role of private and corporate owners in our cities and countryside and to a general withdrawal of public ownership across the globe.

By Levente Polyak for Autoportret Magazine

The ownership of spaces determines not only physical access to spaces but also structures how these spaces are developed, maintained, controlled and generate revenue. As Saskia Sassen suggests in her article “Who owns our cities?”, ownership patters of our cities are changing and this change should concern all of us. The corporate acquisition of buildings that Sassen describes as “a shift from mostly small private to large corporate modes of ownership, and from public to private”, thus reducing the social diversity of cities and limiting the choices of disadvantaged communities. This corporate takeover does not only occur in global cities: as the articles collected for this issue of Autoportret demonstrate, it also occurs in Warsaw, Berlin, Rome or Budapest, cities not necessarily in the focus of global investment firms and development companies, but undergoing large transformation in the past decades. The process of concentrating urban properties in a few hands described by Sassen is not an uncontested one: the interviews and case studies presented in this issue all highlight different strategies to counter corporate ownership, real estate speculation or privatisation through community ownership models, cooperative land use schemes, or new mechanisms for overviewing public property management. While these cases represent a variety of models and formats that help the establishment of non-speculative ownership patterns, their success is largely determined by the socio-economic contexts in which they unfold, as the coming pages demonstrate.

Private ownership, dominantly supported by public policies in most Western countries, is a historical construct. With the re-emergence of the discourse of the commons in the past decade, it becomes increasingly clear that when it comes to housing or other urban assets, private ownership is not an inevitable destiny but a conscious political choice with many different alternatives. In his analysis of the formation of the modern nation state and the liberal market economy, the economic historian Karl Polanyi saw the transition from economies of reciprocity and redistribution to rational profit-maximisation as modernity’s great transformation. (Polanyi 1944) A part of this transition is the shift from the commons to a private property-based society in which land became a commodity, thus creating the class of rentiers, who “create nothing, make nothing, do nothing; they just passively accept the rewards of ownership.” (Frase 2016: 73)

The commons discourse highlights that private property was historically created through the enclosure of the commons, a “commonly held resource which local residents could freely use for purposes such as mowing for hay or grazing livestock,” turning land into private property, a “social construction that must be delineated and enforced by the power of the state.” (Frase 2016: 75) In contrast with claims that commons arrangements have inevitably led to the tragedy of exploiting shared resources, thus legitimising the institution of private ownership, there are many historical and contemporary examples of well-functioning commons, that is, shared ownership and management schemes that do not overrun the available resources connected to land but use them without producing external profit. As Daniela Patti explains in her text for Autoportret, the commons idea, elaborated and implemented in various Italian cities with different emphases, has also created a significant echo abroad, prompting many cities and initiatives to create their own commons strategies or arrangements.

Public laws or policies supporting private ownership are not only responsible for the enclosure of the commons but also for a large part of urban transformation in the 20th century. American town planning promoting individual house ownership (and car ownership) created residential suburbs and gated communities, formats that became popular later in many parts of the world. The gradual demolition or privatisation of social housing stocks in the US and Western Europe after WWII, in line with Margaret Thatcher’s famous declaration that “there is no alternative” to neoliberalism, has contributed to the gradual disappearance of affordable housing in major cities, a process that has escalated in the past years. For many families or collectives that initially resisted the seduction of private ownership and remained loyal to the ethics of renting and remaining mobile, the growing pressure of the housing market left little space to manoeuvre in the coming decades. In countries like Spain and Ireland, real estate development became a leading industry: through direct subsidies to homeownership and the deregulation of development finance, governments actively pushed citizens to over-indebtedness. But private homeownership did not create the desired immunity to market changes: with the burst of the real estate bubble and the radical decline in real estate values, many families saw their assets evaporating and witnessed foreclosures and evictions, thus generating a new kind of housing emergency.

In the 1990s, with the Fall of the Berlin Wall, Eastern Central Europe followed the path of eliminating social housing. With different arrangements, cities from Warsaw via Prague through Budapest rapidly privatised their previously nationalised, publicly owned property stocks, resulting in the highest proportions of private ownership in Europe. The different mechanisms of privatisation created different landscapes after the transition. In Prague, properties were restituted to their original owners who generally sold them in stock to investors who renovated them and turned them into high-end housing or hotels in the city centre. In Budapest, tenants had the right to buy the apartments they rented for 10% of the estimated market price: this resulted in a highly fragmented ownership structure, with difficulties in coordinating the desires of many small owners in apartment buildings and at industrial sites alike. In Warsaw, as some of the articles of the Autoportret issue demonstrate, the privatisation process had a few hidden turns: investors buying and collecting pre-war ownership certificates have began to reclaim their ownership to parcels that ceased to exist in their previous form after the war: speculating with land under post-war buildings creates unprecedented tensions around ownership of land, buildings and tenancies, resulting in evacuations and protests against them.

This is a prime example of how the ownership of urban assets, as Saskia Sassen reminds us, has gradually moved from small private owners towards large corporate ones, assembling properties in stock and using them as a basis for new megaprojects. While the rising private ownership of housing reduces the residential choices and mobility of non-owners and makes their situation increasingly precarious, and the private ownership of non-residential spaces forces many urban services to became profitable and constantly adapt to market prices, the financialisation of real estate brought into play a different kind of private ownership, in the form of corporate owners. Corporate ownership gives the

“built environment and particularly housing a fundamentally new role. From a means to provide shelter, it becomes a means to generate financial returns. (…) The logic of a building no longer primarily reflects its intended use but instead serves mostly to promote a ‘generic’ desirability in economic terms. Judgement of architecture is deferred to the market. The ‘architectural style’ of buildings no longer conveys an ideological choice but a commercial one: architecture is worth whatever others are willing to pay for it. (…) Once discovered as a form of capital, there is no choice for buildings but to operate according to the logic of capital.” (de Graaf 2015)

Flexible regulatory environments attracted an unprecedented volume of financial capital into European cities. This process was facilitated by the global financial markets. The stock market crash of 2000 and the growing distrust in the previously favoured IT stocks pushed investors towards the supposedly safe real estate market. In the same time, interests rates were substantially reduced by the central banks who wanted to prevent a recession (Uffer 2013). The cheap capital that flooded international markets found an easy way into real estate.

In Rome, for instance, the decade between 1996-2006 witnessed an intense real estate cycle and a construction boom with residential developments of almost 10 million rooms or 1.25 billion cubic meters (Berdini and Nalbone 2011). This growth did not correspond to significant demographic growth: most of the new housing was built to “help international financial capital find places to materialise.” (Berdini and Nalbone 2011:12) In Berlin, international capital created a new situation: while in the 1990s, investment in Berlin properties was mainly coming from German investment firms, they were joined in the early 2000s by large international firms (Uffer 2013). The presence of cheap money prompted investors into real estate development projects that corresponded to no real demand. This speculative real estate boom had a strong impact on cities and their spaces. While international investment capital generated new development in the centre of Warsaw, in other Eastern Central European capitals, investment capital focused on the existing urban tissue, buying up apartments in historical buildings and benefiting from rising property values as well as growing tourism and the increasing demand for short term accommodation.

This shift of ownership from public via private to corporate has been accompanied by public regulation: national and local governments were complicit in these processes, actively preparing the ground for restructuring ownership. Furthermore, under pressure from financial actors, many public bodies also began venturing out in affairs often unrelated to their responsibilities and capacities. Besides deferring “important physical and social infrastructure investments to engage in riskier economic development projects,” (Donald et al. 2014:11) or creating “new opportunities for speculative investments in central-city real estate markets” and constructing “megaprojects intended to attract corporations have greatly affected housing affordability in cities,” (Rolnik 2013:1063) some municipal departments and companies began to perform as if they were financial actors themselves. Dutch housing associations began investing their capital at the stock exchange, Berlin’s Bankgesellschaft got involved in speculative real estate investments and the Hungarian National Bank began buying up properties from the market with significant deficit. The economic crisis was a result of spread but accumulated risk, the expansion of subprime and other risky mortgage loans encouraged by national legislations (Rossi 2013) and was in many ways connected to urban development: „the financial crash which found its origins in the property markets [demonstrated that] the built environment is not only incidental to global economic stability, it is instrumental.” (Self & Bose 2014:12) While the crisis was „originated in urban and suburban spaces”, later it became a „state crisis with consequences for cities and subnational scales.” (Donald et al. 2014)

International financial capital, investing in urban assets and speculating on the rise of property prices, was one of the many protagonists of the economic crisis. It was also the sector that came out of the crisis mostly unhurt, after governments bailed out the largest banks responsible for the crisis in the name of public interest. This exemplifies the grey zone between public, private and corporate interests, also translated into the intermediate zones between public and private disposal of land.

While spaces function differently according to their ownership, they are nevertheless positioned at different points in the coordinate system defined by public, private and corporate owners, as well as by regulating bodies and citizen groups. With other words, ownership is a complex relationship between a subject and an object, where public ownership does not mean unlimited access to anyone, and private ownership does not entail unrestricted disposition over land or buildings. Property is a bundle of rights and obligations and its use and access is defined by an interaction of many actors.
Public control over private property is an issue so important that it is featured in many national constitutions. In several Latin American countries, “the moment land becomes derelict or is owned purely for speculative purposes, ownership rights to the land are forfeit and it becomes available to anyone who will put it to greater use.” (Patel 2009) Similarly, Article 47 of the Spanish constitution states that “the State should prevent speculation”, while Article 33 establishes the “limits of private property to assure public interests.” (Puigjaner et al., 2014:15) In practice, however, these restrictions of private property are rarely reinforced, as the many evictions during the Spanish foreclosure crisis demonstrated.

At the municipal level, zoning regulations, by definition, have been created to control what private owners can do with their land. Although, planning regulations, like in the case of New York’s 1916 Zoning Law, were often motivated by private owners concerned by new developments overshadowing their properties, they became more or less efficient of the public interest, with all the biases and crises of definition of this latter. As my article for Autoportret describes, regulatory mechanisms like privately owned pubic spaces in New York have been ambiguous, much attacked and praised tools to assure the creation of public value within private development.

The last series of economic crises prompted an important toolkit of public interventions in the use of private properties: European and North American cities elaborated various instruments to help or force private owners reuse their vacant properties. The Leipzig Municipality, for instance, introduced in the 2000s its frameworks for the public use of private properties: through Authorisation Agreements drafted by the Office of City Renewal and Housing Development, owners grants public access to their properties. In exchange, they receive up to ten years of property tax relief. In return, the money saved on the taxes must be reinvested in the property, or must be repaid if the owner decides to develop the site before the contract’s expiration. (Blumner 2006) In 2007, the UK government amended the Local Government Finance Act by requesting full property tax also from owners of unoccupied spaces after an initial period of 3 or 6 months, offering tax exemption only for properties that accommodate charities or non-profit organisations. In a more punitive tone, Washington DC taxes vacant real estate at a rate nearly six times higher than the rate of residential property, and blighted properties 12 times higher. In the Netherlands, the 2010 Squatting and Vacancy Act allows municipalities to adopt the Vacant Property by-law that forces owners to register vacant properties and enter a consultation process with the municipal executive within 3 months after the property went empty; if the suitable property remains vacant for a minimum of 12 months, the municipal executive may nominate a user to the owner, who is obliged to offer an agreement to the nominated user. The French law gives the government various measures to fight vacancy, among which the most important is the right to requisition any property owned by a legal person and vacant for more than 12 months, in order to turn them into social and emergency housing facilities. However, in practice, the deployment of these measures encounters various obstacles, notably, the difficulty of identifying the vacant buildings, as well as various loopholes that property owners can use to delay procedures, including court actions from the side of owners.

On the other hand, in some unique cases, private agreements limit the uses of public properties. In the text published in this issue, accompanying their installation at the 2014 Venice Architecture Biennale, Simone Capra, Claudio Castaldo, Francesco Colangeli and Dario Scaravelli tell the story of the San Giacomo Hospital in Rome which was donated to the “Roman People” by Cardinal Antonio Maria Salvati in 1602. Salvati’s testament also includes the provision that “the building will remain public as long as it is a health structure, otherwise the property will revert to the heirs of Salviati’s family,” a clause discovered shortly before the planned sale of the complex, generating a legal battle around the building’s destiny.

This case demonstrates the extent to which transitions between private and public ownership are another intermediate zone defined by a variety of rules, forces and wills. Despite many movements to nationalise and municipalise urban assets, public ownership does not always guarantee the pursue of public interest. Similarly to Hungary, where public acquisition of assets is often used for speculative purposes and benefits private groups close to the government, the compensation mechanisms in Rome, explored by Mauro Baioni’s article in this magazine, are commonly designed to reward private owners whose properties are expropriated and who can realise disproportionate profits in the exchange process.

But how to guarantee the impact of the public interest in our cities if public assets are no longer depositories of public values, citizen activities and community access? Disappointed by the public sector’s complicity in prioritising private and corporate profit over public interest, many community groups and civic initiatives have began mobilisations to revive the idea of the commons in order to secure public and community use beyond the exploitative logics of the public and private domains. Emerging in various parts of Europe and beyond in the past decade, these initiatives began to explore alternatives to publicly offered spaces and services and establish new forms of property ownership and use, more resilient to the oscillations of the market and immune to impulses of speculation and private profit-seeking.

As Bea Varnai explains in her article, housing has been at the forefront of experiments with new formats of shared ownership, including organisational forms like cooperatives and community land trusts or financing forms like equity-based crowdfunding. However, the existence of public awareness and innovative organisational and legal forms does not automatically guarantee easier community access to spaces. In the United Kingdom, for example, in the course of the economic and financial crises, community access has become increasingly difficult to spaces under growing financial pressure. As our interview with Michael Simon, a protagonist of Liverpool’s Granby Four Streets Community Land Trust demonstrates, many community initiatives reached stability and long-term security through significant struggles to stop demolitions, fight gentrification and regenerate neighbourhoods without being removed from them. These struggles were helped by new instruments that were invented to mitigate the effects of the crisis, both from the side of public administrations and civic or private initiatives. National laws and programmes created various incentives for local administrations and private owners to work closer with civic actors. The Localism Act of 2011 introduced mechanisms that enabled the creation of Community Land Trusts, separating the ownership of land and the buildings upon it, thus securing community uses in the long-term and controlling the sale and purchase of the properties on community-owned land. Predominantly targeting rural areas, the CLT model allowing for the community ownership of land has proven very popular in urban areas as well, and cities like London or Liverpool have established many urban CLTs in the past years.

In other contexts, however, the lack of appropriate legal forms and the post-socialist suspicion related to collective ownership and shared assets make alternative models of ownership difficult to conceive. In Eastern Central Europe, for instance, the hegemony of private homeownership, realised at the expense of the rental market, created a norm that does not leave much space for experiments in shared and collective ownership. In their article, members of the Budapest-based Rákóczi Kollektíva explain the socio-economic circumstances that created obstacles for their co-housing initiative: the absence of public awareness, financial mechanisms and legal frameworks make the transfer of existing co-housing models to Eastern Central Europe very complicated.

Experiments in housing were highly inspiring for other segments of urban spaces. As space is a crucial component of community organising, social cohesion and cultural exchange, civic spaces accommodating gatherings and events of socialisation, activities of education, sport or work are key ingredients, “foundational institutions” (Rossi 2013) of the public city. The buildings reclaimed for community functions vary in their profiles from “free spaces” through “houses of culture” to “co-working spaces,” and differ from each other in their organisational and management principles, accessibility, financial sustainability and political dimension. What links these community-run civic spaces – incubators, theatres, school buildings, cinemas, gyms, social kitchens –together is that they all address the lack of existing facilities for social activities, welfare services, independent work and cultural exchange.

The self-organisation of new spaces of work, culture and social welfare was made possible by various socio-economic circumstances: unemployment, solidarity networks, changing real estate prices, and ownership patters created opportunities for stepping out of the regular dynamics of real estate development – as many cases in this book demonstrate. However, despite the growing institutional and public recognition of citizen-led urbanism and the values created by civic spaces in terms of social cohesion, welfare services and local employment, many community initiatives struggle to establish financial, economic and organisational models that would enable them to operate on a stable, sustainable, long-term basis. The many attempts across Europe to establish civic spaces through the occupation or the temporary use of vacant properties, for instance, face the challenges of eviction, instrumentalisation by institutional development processes, or exhausted resources and human capacities.

Among the strategies to consolidate civic spaces and secure long-term community access and use, shared and cooperative ownership has proved to be a valuable framework. The potential of precarious tenants becoming owners of the properties they use was first demonstrated in Berlin by the ExRotaprint initiative. As our interview with Daniela Brahm and Les Schliesser describes, when their building complex was put up for sale by the Berlin Municipality’s Real Estate Fund, tenants began to look into the possibility of buying the area. Teaming up with two anti-speculation foundations, the non-profit company established by the tenants became owner of the 10,000 m2 complex, setting a precedent in Berlin that inspired many experiments in cooperative ownership, and a campaign to change the city’s privatisation policy. One of the foundations that made this transaction possible, is Stiftung trias, established in 2002, to help community groups and co-housing projects access financing. In our interview, the foundation’s initiator Rolf Novy-Huy explains how trias works on taking land off the market by separating the ownership of land and buildings: supported initiatives lease the land from the foundation in the form of a long-term Heritable Building Right (Erbbaurecht) and their lease fee is collected in a mutual fund run by trias, where capital is accumulated for further property purchases in support of like-minded initiatives. In recent years, trias has also been working with public administrations, securing functions for properties that municipalities are obliged to sell under austerity laws.

ExRotaprint’s model of ownership shared with anti-speculation organisations offered responses to dilemmas of gentrification, speculation and precariousness and has since been replicated by many other organisations, becoming an inspiration for initiatives aiming at changing the general policies of privatisation. The strategy to turn privatisation into an advantage for a civic space has proven a feasible path for many initiatives in Berlin as they were facing similar threats from the side of the municipality’s real estate policy and large institutional investors and developers.

By the time the ExRotaprint model became internationally known and began inspiring citizen initiatives across Europe, the possibilities opened in the real estate market through the crisis began to close. With the end of the crisis, at least concerning the availability of financial capital, real estate markets began to return to their pre-crisis dynamics. While this recovery signalled the end of a missed opportunity in some cities to exploit weaker demand and lower prices to build a more accessible property system, the return of investment capital brought about a housing crisis in Berlin and a return to the classic, investor-driven development mechanisms in many other cities. With less need for city makers who invested their energies during the crisis when vacant buildings were mushrooming, the much hailed extended governance of the crisis-time that included citizen initiatives as legitimate players in planning and development processes was partially dropped.

Although the real estate market’s return to “normal” endangered many civic initiatives, many of them were equipped with tools and skills that enabled them to take the next step towards stability. The end of the crisis in Dutch cities and the Berlin real estate boom brought up the question of autonomy and ownership even stronger: how can initiatives without much capital move beyond the vulnerability of short-term tenancies and changing prices? In contrast with the ethos of urban living in Berlin or Dutch cities in the last decades of the 20th century, where renting enjoyed higher popularity, many initiatives found the answer in ownership or very long-term leasehold, but excluding private profit.

Although following the example of ExRotaprint, many civic initiatives across Europe began to contemplate cooperation with anti-speculation foundations and ethical finance organisations in order to buy their buildings, the model cannot simply be implemented anywhere: its adaptability depends on the ideal combination of low real estate prices, relatively transparent public real estate management, stable and suitable legal environment and high purchasing power. In addition, scaling up the work of ethical and community finance organisations, by extending solidarity fund networks to an international level might compromise the very principles of these organisations: personal connection with and overview of supported initiatives. Furthermore, the intervention of these foundations in privatisation processes at the invitation of various public administrations in Germany raises additional dilemmas: what are the accountability criteria for private organisations that act in defence of public values, services and non-marketable spaces but operate outside of democratic processes and public rules of transparency? What gives them legitimacy as safeguards of civic spaces against private and public pressure? What makes their properties civic spaces and how can they, in cooperation with other actors, ensure the long-term sustainability of public values and spaces?

These questions inevitably generated important discussions about the role of various sectors in the “public city,” that is, a disposition that offers similar opportunities to all social groups: can civic actors or communities better manage spaces and services that traditionally belonged to the public domain? Or is the involvement of civic actors in providing public services just another way of privatising services and dismantling the public domain and its welfare services according to the “Big Society” model of the UK Tory government? Are civic spaces a competition for public spaces or an extension to them?

For principles of accountability, the extension of the public realm towards speculation-free spaces provided by private-civic cooperation should be joined by, but not overwhelmed by public administrations and public funds. If regulations of public-civic cooperation in the context of traditionally strong public administrations have been limited to right of use and have not yet created applicable shared ownership models, shared administration, as a way to share public responsibilities and resources with community organisations, citizen groups and public-minded private developers may prove to be an important model in creating community co-ownership over local assets and keeping profits to benefit local residents and services to ensure more resilient neighbourhoods and more autonomous civic spaces.

References

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