Housing is an industry, but it is also where people live, raise families, and stake their future. Yet increasingly, all around the world, housing has increasingly become just a commodity to be traded, often by foreigner investors, notably from China, as well as by large well-capitalized financial institutions who plan to cultivate a generation of lifelong renters. In the notorious words of the World Economic Forum, “You will own nothing, and love it.” Well, you may not love it, but the first part is coming true.
This shift has been taking place for decades, as the superrich and large investment companies buy up much of the land. In the United States, the proportion of land owned by the one hundred largest private landowners, reports the New York Times grew by nearly 50 percent between 2007 and 2017. In 2007, this group owned a total of 27 million acres of land, equivalent to the area of Maine and New Hampshire combined; a decade later, the one hundred largest landowners held 40.2 million acres, more than the entire area of New England.
In much of the American West, billionaires like Jeff Bezos, Bill Gates, and Ted Turner have created vast estates that systematically make the local population land-poor. Landownership in Europe, too, is becoming more concentrated in fewer hands. In Great Britain, where land prices have risen dramatically over the past decade, less than 1 percent of the population owns half of all the land. On the continent, farmland is being consolidated into larger holdings, while urban real estate has been falling into the hands of a small number of corporate owners and the mega-wealthy. Amidst instability in commodity and stock markets, this trend of big capital investment in housing may be expected to accelerate.
A profound threat to the future of the middle class
The implications of the current land grab are profound, threatening the future of democratic institutions and the middle class. These trends are distressingly common across the higher income countries. The Organization for Economic Cooperation and Development (OECD) reported in Under Pressure: The Squeezed Middle-Class that the future of the middle-class is threatened by house prices that have been growing “three times faster than household median income over the last two decades.” The pandemic drove prices even further, and, in the U.S., housing affordability is at the lowest level since 1989.
On both sides of the Atlantic, large financial institutions like Britain’s Lloyds Bank and BlackRock have placed multi-billion dollar bets on buying homes for the rental market. In the first quarter of 2021, investors accounted for roughly one out of every seven homes bought, a marked increase from previous years. The popular notion is of a “rentership” society where people remain renters for life, enjoying their video games or attending to their houseplants, never knowing the pleasure of having a real garden or backyard of their own. It might assure a steady profit for the landlord class, but would destroy the dream of ownership for the average person.
High home prices are the key driver of reduced social mobility. Matthew Rognlie, of Northwestern University, found that most of the increased inequality in Western countries was attributable to increased house values. In the United States over the past decade the proportion of real estate wealth held by middle class and working owners fell substantially while that controlled by the wealthy grew from under 20 percent to over 28 percent. In the last decade, high income households enjoyed 71 percent of all housing gains while the shares of middle and lower income families declined precipitously.
Property and democracy
Ownership has long been a critical issue for democratic institutions, from the Greek city-states to Rome to the Dutch Republic and North America. Aristotle saw a large class of middling owners as critical to Athens and its democracy, while warning, correctly, about the dangers of an oligarchy that would control both the economy and the state.
During the great democratic revolutions that swept western Europe, and later to the New World and Oceania, aristocratic and ecclesiastical landownership gave way to a more “individualistic” concept of property rights. By the thirteenth century, the Netherlands, a country short in natural resources, began to expand its territory by draining swamps and building dikes. The new lands made valuable by Improvements in agricultural methods fueled a widely spread economic “takeoff” driven by a new class of property owners. As the economic historian Jan de Vries observed, “capitalism grew out of the soil in Holland.”
After the Second World War, wider home ownership created unprecedented middle-class stability, broad social benefits, and helped subsidize comfortable retirements. Democracy grew stronger with the growth of a stable middle rank with a natural stake in economic progress and an interest in the political system. Property also remains key to financial security. Homeowners have a median net worth more than 40 times that of renters, according to the Census Bureau. As the radical social theorist Barrington Moore said a half century ago, “no bourgeois, no democracy.”
The great betrayal
Sadly, the next generation likely will have a far more difficult time buying property than their parents and grandparents. After 1940, U.S. homeownership rates grew rapidly, from 44 percent to 63 percent thirty years later. Now, the trend is in the opposite direction. Millennials are less likely to be homeowners than baby boomers and Gen Xers. The homeownership rate among millennials ages 25 to 34 is 8 percentage points lower than baby boomers and 8.4 percentage points lower than Gen Xers in the same age group. Their chances of buying now have been made more problematic by the rapid rise in interest rates.
Similar trends are seen in other high-income countries, including Australia, Ireland, and the United Kingdom. Australia historically has had high rates of homeownership, but the rate among those between 25 and 34 years old dropped from more than 60 percent in 1981 to only 45 percent in 2016. The proportion of owner-occupied housing has dropped by 10 percent in the last 25 years. A trend toward long-term “rentership” is also seen in Ireland. In the United Kingdom, only a third of millennials own a home, compared with almost two-thirds of baby boomers at the same age. At least one-third of British millennials are likely to remain renters for life.
High housing costs are particularly burdensome for middle- and working-class families. According to a recent AEI survey, high priced California is home to six of the nation’s worst markets for first time homebuyers; a recent study by economist John Husing found that not one unionized construction worker can afford a median priced home in any coastal California county. Oligarchs may favor more housing in principle, but certainly not near to where they live. In Houston, $350,000 buys you a new 1800 square foot home; in San Francisco, it barely buys a 350 foot studio. No wonder that, as MIT’s David Autor has suggested, dense core cities have become toxic to working class aspirations.
Policies that make things worse.
In many countries, government policy seems designed to accelerate the trend toward long-term tenancy. Australia, California, the United Kingdom, and New Zealand, all cite environmental concerns to impose a large regulatory noose around new developments, particularly in the periphery. Overall, far fewer Californians, notes demographer Wendell Cox, can afford to buy a median-priced home today than in 2000, even though nationally the percentage of people who can afford homes has actually increased.
The price spike has been worsened by well-funded investors and speculators, who see artificially high prices, guaranteed by regulatory restraints, as a sure bet. All-cash buyers have grown to nearly 23 percent, more than twice the percentage in 2006, according to the California Board of Realtors.
These investors have powerful allies both on the right and left. Libertarians generally favor policies that limit single family zoning, even at the expense of working- and middle-class people. Randall O’Toole, who had been Cato Institute’s land use expert since 2007, notes that libertarians have been working hand-in-hand with left-wing groups in “to force” Californians “to live in ways in which they didn’t want to live.“ That is, in small apartments.
One oft-celebrated driver for eliminating middle-class, family-friendly housing are the so-called YIMBYs (“Yes in my backyard”). YIMBYs, notes an investigation in the leftist In These Times, enjoy fevered support from Wall Street and the tech elite. They also have strong ties with green progressives, like the Democratic Socialists of America. These groups disdain suburbia, promote dense apartment living, and have little interest in expanded homeownership. Indeed some are open collectivists who reject the very idea of individual ownership and would welcome the prospect of a massive expansion of public housing.
The future battle over ownership.
In the coming decade, the decline in mass ownership of property will have profound implications. For one thing it will remove for most of the current generation—most of whom still believe in creating wealth through ownership—the incentive of capitalist accumulation, owning their own home. They certainly may “own nothing,” as some architects of the “great reset” dream, although this will leave them dependent on finance, or the state, for virtually everything from rent to transportation and furniture.
This may not be the future preferred by most people, most of whom are out of the market due to costs, but still seek to own a home. Yet the reduction in the chance of ownership is already shaping the politics of the future, particularly among the permanently propertyless young, who naturally opt for socialist policies—like those of Bernie Sanders or France’s Jean Luc Melenchon—that promise subsidizes and control their rents. All this suggest a future where economic autonomy, the key to bourgeois democracy, will barely exist for most families besides the most affluent. Ultimately the battle over land and property will define our future and whether we provide hope to the next generation, or force them to accept a lifetime of rental serfdom and permanent subservience to the state, or big capital, or both.
Joel Kotkin is a Washington Fellow at the Claremont Institute Center for the American Way of Life and the Presidential Fellow in Urban Futures at Chapman University and executive director of the Urban Reform Institute. His new book, The Coming of Neo-Feudalism, is out now from Encounter.
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