Capitalism and the Housing Question: Wishful Thinking vs. Real Solutions

Derek Ford and Curry Malotthttps://liberationschool.org/wp-content/uploads/2020/03/Taber-Andrew-Bain-640x419.jpgPhoto: “Foreclosure,” Taber Andrew Bain. Creative Commons. Source: https://www.flickr.com/photos/andrewbain

Frederick Engels is best known for his theoretical and political work he undertook alongside his lifelong comrade, Karl Marx. Yet Engels made other important contributions to the workers’ movement of his time and ever since. During a moment in which millions of workers in the U.S. have been thrown out of work as a result of the intersection of the Covid-19 pandemic and an overdue capitalist economic crisis, Engels’ 1872 pamphlet, “The Housing Question,” bears particular import. While there have been important developments in capitalist housing markets, like Collateralized Debt Obligations and subprime mortgages, that Engels couldn’t predict, the pamphlet is still crucial to understanding struggles over housing today.

Originally written as a series of articles for Der Volksstaat (The People’s State)—the newspaper of the German Social Democratic Workers Party—to intervene in debates about how to address housing shortages and the terrible living conditions of workers. It was penned just after Germany’s victory in the Franco-Prussian war ushered in a brief period of economic expansion followed by an economic crash.

In the preface to the 1887 German edition, Engels linked the housing crisis with industrialization and urbanization. While industrialization pushed rural peasants into the cities in search for work, the housing stock of those cities was torn down in order to accommodate the railways and large streets necessary for transporting raw materials, commodities, and other forms of capital necessary for industrialization. At the same time, industrial growth drove up land values and, with them, rents on the housing that remained.

Engels had studied the housing, working, and general conditions of the working class previously. When he was 21, Engels went to Manchester, England, to work at a mill that was partially owned by his father. Engels was supposed to learn how to manage a factory, but instead he immersed himself in the lives and struggles of Manchester’s working class. In a biography of Engels, Lenin highlights the importance of this experience as well as the book Engels wrote as a result of it, The Condition of the Working Class in England:

“Engels was the first to say that the proletariat is not only a suffering class; that it is, in fact, the disgraceful economic condition of the proletariat that drives it irresistibly forward and compels it to fight for its ultimate emancipation. And the fighting proletariat will help itself. The political movement of the working class will inevitably lead the workers to realise that their only salvation lies in socialism. On the other hand, socialism will become a force only when it becomes the aim of the political struggle of the working class.

Not only did Engels first meet Marx on his way to Manchester, but it was there that he became a socialist.

Engels and Proudhon on “The housing question”

“The Housing Question” is a polemic against the anarchist theories of Pierre-Joseph Proudhon and his German follower, Mülberger, and the liberal theories of Emil Sax. The particulars of Engels’ critiques are important, as they shed light on distinctions between the tenant-landlord and worker-capitalist relationship, the nature of the state, the distinctions between interest, rent, and profit, and other key matters. The new Liberation School study guide will help readers draw out these lessons.

The broad strokes of Engels’ critique are as follows: The Proudhonist argument was based on a moral appeal to “eternal justice,” and the proposal for solving the housing question was for each worker to own their own house through what was essentially an annual “fair payment” to the landlord for the actual cost of the house. Sax’s argument was based on a commitment to capitalism, and his proposal was that each worker should own their own house and that, by doing so, they would themselves become capitalists. Sax called on factory owners to give workers land and resources necessary to build their own dwellings, but acknowledged that building housing in cities was unfeasible, so he suggested that workers would move to the countryside or the outskirts of cities.

What both Proudhon and Sax’s theories have in common is a fundamental misunderstanding of capitalism and rent. Both assume that the exploitation intrinsic to capitalism can be solved without overthrowing capitalism and transforming individual ownership into collective ownership. Mülberger, the Proudhonist, argued that the relationship between the tenant and landlord was exactly like the relationship between the worker and the capitalist. Yet the relationship is different in crucial ways, particularly insofar as rent doesn’t involve the exploitation of labor-power and the creation of new value. Because of this misconception, Proudhonist solutions don’t address the core motor of capitalism. Housing, Engels says, is one of the “secondary evils that result from the present capitalist mode of production.”

Moreover, turning workers into homeowners isn’t a socialist solution but one pursued by some sections of the bourgeoisie. Homeownership means that “workers must shoulder heavy mortgage debts,” tying them down to one place and forcing them to accept existing working conditions, rather than, say, strike or move elsewhere.

The bourgeoisie’s “solution”

Engels shows that capitalism “solves” the housing question in the same way it “solves” the other problems it causes: “in such a way that the solution continually reproduces the question anew.” He terms this method as it applies to housing, “Haussman.”

Haussmann, who Bonaparte appointed to head the Paris region’s in 1853 to redesign the city, was known as the “butcher of Paris.” He hacked Paris up wholesale, tearing through housing to create wide streets and luxury apartments, sending workers packing to the suburbs. This is the same method Robert Moses used to reshape and “develop” New York City in the mid-20th century, as entire neighborhoods were torn apart and destroyed to make way for new highways and expressways.

What Engels articulates here is a major dynamic in what we today know as gentrification. Poor and working-class people are driven out of their neighborhoods to make way for capital. Engels even pinpoints some of the justifications that we see today for gentrification, like “public health” and “beautifying the town.”

Yet none of this actually solves the housing question:

“The result is everywhere the same: the scandalous alleys and lanes disappear to the accompaniment of lavish self-praise from the bourgeoisie on account of this tremendous success, but they appear again immediately somewhere else and often in the immediate neighborhood.”

Capitalism thus can’t actually solve the housing question or address poor living conditions. These problems, Engels notes, “are merely shifted elsewhere!” The reason is foundational: “The same economic necessity which produced them in the first place, produces them in the next place also.” This applies as well to the over-development of cities. Because capital flows to wherever the rate of profit is highest, when capital becomes so concentrated in some cities—or certain areas of some cities—it flees and goes elsewhere.

Investment in one geographic area is accompanied by disinvestment in another. This occurs in cyclical fashion: investment brings development, which brings over-development, which brings decline, which brings revitalization. This happens at all scales, from individual neighborhoods to the entirety of the globe. It’s a manifestation of capital’s “boom-bust” cycle.

Sometimes it happens with the entire housing industry, like it did in the 2007-2008 economic crisis. This was a complex financial crisis, but the role housing played was key.

The run-up to the recession–the boom phase–was driven by a frenzy in housing production that was bolstered by sub-prime mortgages (for people with lower credit scores) and adjustable mortgages, which have interest rates that start off incredibly small but quickly balloon up. Banks and real estate companies made a fortune by pushing these because they were more profitable than standard mortgages, validating Engels’ claim that widespread home ownership can be enormously profitable for capital. They specifically preyed on poor and working-class people, especially those in the Black community. Those who already had mortgages were encouraged–even pressured through illegal means–to refinance and borrow against the value of their home.

Eventually, as it always does, the bubble burst. People couldn’t afford the higher interest payments, delinquencies and defaults skyrocketed, and banks and other financial institutions started collapsing. This, in turn, sent shock waves throughout the entire economy. Millions of workers were thrown out of their homes and out of their jobs (while the banks were made whole with trillions in tax dollars).

The massive devaluation of some housing stock, in turn, meant that it could again be an extremely profitable source of development just years later.

Engels’ solution: Collective action and collective ownership

If capitalism can only move the housing problem around, then “the solution lies in the abolition of the capitalist mode of production and the appropriation of all the means of life and labor by the working class itself.” In other words, the response shouldn’t be to turn individual workers into individual owners, but the totality of society into collective owners.

This was entirely feasible at that time. As Engels writes: “One thing is certain: there are already in existence sufficient buildings for dwellings in the big towns to remedy immediately any real ‘housing shortage,’ given rational utilization of them.”

These words, again, were penned in 1872. How much has changed? ATTOM Data Solutions, a data warehouse for property records, found that in 2019 there were 1.5 million vacant single-family homes in the U.S. That same year there were just over 500,000 homeless people in the country. The same irrational situation exists today as it did back then. Under capitalism, this is considered progress!

It’s important to emphasize that Engels is intervening in a particular debate in a particular historical movement. He isn’t proposing a comprehensive or dogmatic program in which reforms are a hindrance to revolution. Instead, he was insisting that the fundamental contradiction in the housing question is between the exchange value and its use value of housing. The core issue is that housing is a commodity rather than a right, and that this struggle must be part of a revolutionary program. “Each social revolution,” he says, “will have to take things as it finds them and do its best to get rid of the most crying evils with the means at its disposal.”

Whatever form housing struggles take, whether it be rent freezes and strikes, community land trusts, or taking over abandoned buildings, they have the potential not only to improve people’s lives but to demonstrate the power of collective action, empower communities, and agitate against the inhumanity of capitalism—a system that produces homelessness within a landscape of excess housing, that keeps the ownership of housing and other fundamental necessities in the private hands of the few rather than the common hands of the many.

The Housing Question.: A Study Guide

Liberation School

Public housing tenants in NYC protest on Aug. 23, 2019 against De Blasio’s plans to demolish two apartment buildings and replace them with “market rate” apartments. Photo: Joyce Chediac, Liberation News.

Frederick Engels published “The Housing Question” first in 1872. It is a collection of three articles originally published in Der Volksstaat (The People’s State), which was the main newspaper of the German Social Democratic Workers Party. Engels was responding to a series of articles on the housing question that appeared in the newspaper. One set was informed by Proudhon’s theories and the other was informed by liberal bourgeois theories.

The following study guide will assist readers in discerning and keeping track of the ideas Engels’ critiques and the responses that he offers, as well as in identifying the key overall arguments and insights of the pamphlet.

For more background, context, and explanation of the text, see this Liberation School article.

Preface to the 1887 German edition

  1. How does Engels describe Germany’s housing crisis in the late 19th century? What factors were at play?
  2. Why did Engels choose to republish his three essays in the form of a pamphlet?
  3. What contemporary resonances can you find in his last justification for publishing the pamphlet?
  4. Engels writes that, in Germany, workers’ home ownership provided “the basis for an unexampled depression of wages.” What’s the reason for this?

Part 1: How Proudhon solves the housing question

  1. What problem does Engels have with the idea that the transaction between tenants and landlords is the same as that between workers and capitalists? What’s the difference between the two relationships? Why does this matter?
  2. Engels says that Proudhon romanticizes the individual owner/producer. What are some problems that stem from this? How might Engels’ critique here apply to our era of robotics, automation, and digitalization?
  3. Describe the essence of Marx’s critique of “eternal justice.”
  4. What is the Proudhonist solution to the housing question?
  5. Why does Engels refer to Proudhon’s solution to the housing question as a counter-revolution?
  6. In what ways does Proudhon’s solution omit a challenge to capitalism?
  7. Why is the idea that capital itself has productivity a bourgeois “absurdity”?
  8. Why would the abolition of interest not abolish profit or surplus value?
  9. What does Engels say about reform and revolution in this chapter?

Part 2: How the bourgeoisie solves the housing question

Section I

  1. What connections does Engels draw between housing conditions, epidemics, and capitalist “concerns”?
  2. What relevance does this have for us today amidst the Covid-19 pandemic?
  3. What is the point of the second paragraph of the text? What does it say about reform and revolution?
  4. Why do bourgeois socialists retreat from the economic sphere to the moral sphere? What function does that serve?
  5. Dr. Sax blames workers for their own housing and hygienic conditions. What connections can we draw between this and the demonization of China during the Covid-19 pandemic?
  6. Why does Engels argue that working-class homeownership is a way to “break their power of resistance?”
  7. What does Engels mean when he notes that solving the housing question won’t solve the social question, but that solving the social question allows for solving the housing question? What is he getting at?

Section II

  1. Why is Dr. Sax’s solution to the housing question both nothing new and a source of great profit for the capitalist?
  2. Why does the capitalist “not desire to abolish the housing shortage even if it could”?
  3. How do these same principles show up in the U.S. context?
  4. What argument does Engels offer against the doctrine of so-called “self-help”?
  5. What argument does he offer against “building societies”?
  6. Why doesn’t bourgeois state intervention offer a real solution to the housing question?

Section III

  1. What does Engels mean by “Haussmann” as the method of solving the housing question? What is the other interpretation of Haussmann?
  2. How does this relate to what we call gentrification today?
  3. Read the description Engels gives of Manchester from his book, The condition of the working class in England, and compare and contrast it with the situation in the U.S. today.
  4. In the beginning of this section, Engels writes that “the bourgeoisie has only one method of solving the housing question after its fashion-that is to say, of solving it in such a way that the solution continually reproduces the question anew.” What does this mean, and how does it happen?
  5. Engels concludes by insisting that the only real solution to the housing question and poor housing conditions is the abolition of capitalism. How does this relate to what Engels wrote about social revolution and reform so far?

Part 3: Supplement on Proudhon and the housing question

Section I

  1. Why is it important to remember that the “driving spirit” of “the working class movement nowhere lies in ‘principles,’” but in the actual material conditions of the productive forces and the working class? Think about this in relation to the current Covid-19 pandemic.

Section II

  1. How does Mülberger falsify economic relationships by “translating them into legal terminology”?
  2. How does Engels utilize the concept of use value to refute this?
  3. What is the difference between scientific socialism and Proudhon’s socialism?
  4. Do you see this divide play out today? Where?
  5. Why is this important for properly understanding Mülberger’s position on the housing question?
  6. Why is this important for our agitation today?

Section III

  • What is it about Mulberger’s formulation that Engels finds reactionary?
  • Can you think of any reactionary arguments of today’s liberals regarding the housing question?
  • Why does Engels continue to argue that Mulberger’s position is utopian?

Section IV

  1. How would you summarize Mülberger’s so-called positive statements versus Engels’ responses?
  2. What new arguments does Mülberger introduce here, and how does Engels address them?
  3. How can you use Engels’ polemic to formulate slogans in housing struggles today?