Property ownership is the key internal link to reversing dispossession

Susan J. Smith, William A. V. Clark, Rachel Ong ViforJ, Gavin A. Wood, William Lisowski, and N. T. Khuong Truong, January 27 2022, “Housing and economic inequality in the long run: The retreat of owner occupation,” Economy and Society, https://www.tandfonline.com/doi/full/10.1080/03085147.2021.2003086

Capital is back: accumulating not on the platforms of agricultural land or industrial plant, but rather into residential property – housing and the territory it stands on. The difference between previous regimes of inequality and the one operating today is that, situated between the ongoing concentration of wealth and incomes, and any tendency to peak inequality, is the still-dispersed ownership of the world’s largest capital asset – housing. From the ashes of the inegalitarian proprietarian ownership regimes of the nineteenth century (Piketty, Citation2020), owner-occupation emerged to form the one thing, above all, that has – so far – prevented the repolarization of wealth reclaiming its early twentieth-century zenith.

Owner-occupation thus features centrally in the story of economic inequality. It was a counter-balance through the (re)turn to inequality in the late twentieth century, expanding across the class structure as earned incomes stalled. House price appreciation took off as welfare states rolled back, and cash strapped home-occupiers accumulated debts against property in order to make ends meet. All this, together with the ideological wrapper encasing owner-occupation, distracted attention from the disparities in income and wealth that the GFC exposed. What we have shown in this paper, however, is that across the twenty-first century, while historically unprecedented levels of wealth continued to accumulate into housing, those assets began to change hands.

The data presented are indicative; the changes they signal are recent and modest, albeit unevenly spread. Nevertheless, from representative cross-sectional and longitudinal national panel surveys spanning nearly two decades across three jurisdictions, three common facts stand out. First, owner-occupation is shrinking relative to other housing tenures, so that, for the first time in 50 years, a growing proportion of households – especially the young, but also those in older age – hold no property wealth at all. Second, notwithstanding the credit constraints that followed the GFC, mortgage debt has unfolded across the age range. This may provide leverage for the asset-rich, but it remains – in the shape of equity borrowing – a key source of funds for younger, poorer households with stagnant labour incomes. Finally, the distribution of any remaining unmortgaged home equity is highly skewed, and more uneven now than it was in 2001. So change is in the air adding a new chapter to the story of economic inequality in the long run.

That chapter – ‘post-homeownership’, or more properly post-owner-occupation – could from a housing services perspective offer, in theory at least, a welcome alternative to the financialised excesses of the housing status quo. In practice, however, and in terms of political economy, the scene seems set to amplify the present regime of inequality, as the de facto ‘other’ to owner-occupation – private renting – takes on the mantle of capital accumulation. Renting has always ‘oiled the wheels’ of tenure-divided housing systems and has of late been incentivized to that end. Initially, these measures favoured amateur landlords chasing capital gains, thereby enlarging a housing wealth divide flagged earlier (Ronald and Kadi, Citation2018). As the twenty-first century unfolds, however, with private land and property owners poised to annex the lion’s share of the economy, individual landlords, like their owner-occupying predecessors, are being edged out by a new generation of institutional investors focussed on rental income as well as capital gain. These big-ticket organizations are shifting the focus of financialization from debts to assets (Wijburg et al., Citation2018) while advancing a programme of housing-led rentierization (Ryan-Collins & Murray, Citation2020). This gained momentum from a fleeting post-GFC property slump, and thereafter began, albeit unevenly, to exploit what amounts to a rent-gap embedded in capital-gains-focussed ownership-centred housing systems (Christophers, Citation2021a).

Short-term speculators (private equity and hedge funds, raising capital from pension funds and insurance companies) came first, followed by a wave of real estate investment trusts and listed real estate companies investing ‘patient capital’ for the longer run. These large corporate landlords are steadily buying up extensive tracts of residential real estate including bulk-buy-to-let of multi-family dwellings (Fields, Citation2017), targeted acquisition of single-family homes (Fields, Citation2018) and purchase of land for ‘build-to-rent’ (Brill & Durant, Citation2021; Nethercote, Citation2020). Costs are managed and profits boosted by a growing array of post-GFC technological innovations (‘PropTech’) aiding search, appraisal and acquisition, as well as tenant vetting, property management and rent collection (Fields, Citation2019). Encouraged by governments, to a mixed reception from tenants, these increasingly-global corporate landlords are targeting the heartlands of owner-occupation, expanding from the United States and Canada, into Europe, the United Kingdom and the rest of the English-speaking world.

Unsurprisingly, it is a moot point whether, by taking residential property into their long-term investment portfolios, these professional corporates can do better than their ‘amateur’ counterparts in the delivery of housing services. They are unforgiving in the setting and extraction of rents, and the research literature is pessimistic (Walks & Soederberg, Citation2021). Even in the world of social investing, new styles of dispossession, some linked to the rise of state rentierism, have emerged (Beswick et al., Citation2016; Lees & White, Citation2020; Penny, Citation2021; Rosenman, Citation2019).

Whatever else this latest financial turn represents, it exposes a cluster of large, consolidating ‘permanent universal owners’ in the world of property, analogous to those emerging in finance, where the mass migration of money into index funds, overseen by just three large asset managers, is eclipsing shareholder capitalism (Fichtner & Heemskerk, Citation2020). Any monopolistic tendency this represents may not yet have cascaded through the big three residential property-owning democracies profiled in this paper, but there is a drift towards the rentierization of everything that suggests it might (Christophers, Citation2020). In this vision for ‘post-homeownership’, the equity ebbing out of households’ wealth portfolios is reshaping the landscape of inequality in ways reminiscent of Piketty’s (Citation2020) nineteenth century ‘proprietory ownership’ societies, wherein most households rented their homes and owned (nearly) nothing else.

These surely are the expropriating forces that Piketty had in mind when he talked about ‘the conditions under which the concentration of property might return to pre-1914 levels’. The question that remains is how much momentum they will gather. The constraint is owner-occupation: still the majority tenure in a wide range of jurisdictions; still blocking any neoliberal ‘end game’ in the annexation of land and property. So, for all the sector might have failed to deliver as a housing service (as noted earlier), as ‘the people's’ asset it may yet have a role in anchoring the future. Here, there is much to consider, including the potential highlighted earlier for housing movements to turn the tide (see also Humphrey, Citation2020; Tattersall & Iveson, Citation2021). Whatever the catalyst, interrupting the ongoing concentration of residential property wealth will require some ‘third way’ between the financialized owner-occupied past and a progressively rentierized residential future. To that end, we conclude with a reflection on two possible points of departure – two nudges against inequality in the long run. One of them, taxation, is a practical act that offers the best chance of ameliorating the accumulation and concentration of residential capital; the other is about enlarging the housing imaginary sufficiently to mobilize what Ireland and Meng (Citation2017) describe as ‘an untapped range of institutional possibility’ to reformat the future.