April 10, 2023
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Excerpted from Poverty & Race, Volume 32, No.1 (Jan – March 2023)
John Whitlow
One of the central insights of the analytic frame of racial capitalism is that processes of capital accumulation generate – and, in fact, depend on – racial differentiation. Put differently, racism is an essential element of value creation within capitalism. And as modalities of accumulation and growth shift – as profit-seeking strategies become increasingly extractive and rapacious – private and public power combine to articulate profitability and race in ways that are at once historically-rooted and innovative. This essay will explore the dynamic process of racially inflected value creation in the context of market-based, state-facilitated gentrification in New York City, where landlords and developers have engaged in a mix of legal and extralegal tactics to raise rents and displace working class tenants, in the process altering the racial composition of urban space. More specifically, the essay will explore this process through the example of rent stabilized building owners’ navigation of the City’s rent laws – particularly vis-à-vis apartment vacancies – to close racialized rent gaps. The essay will also touch on tenant resistance and organizing against these practices.
In an effort to understand the articulation between race and economic structures, Stuart Hall famously observed that “race is the modality through which class is lived, the medium through which class relations are experienced, the form in which it is appropriated and fought through” (Essential Essays Vol. 1: Foundations of Cultural Studies, 2018). At the level of people’s every day, lived experiences, Hall’s framing is a nod to the ways class relations are filtered through race – i.e. are racialized – via the social realities of residential segregation, labor market segmentation, differential access to public benefits, and the like. On a more theoretical plane, the importance of Hall’s intervention is to show that within a capitalist political-economic and social order, the reproduction of class relations is structured by race, in uneven, fluid, and often contradictory ways (Bhandar, 2018). Race and racism, in this framework, are never outside of ‘the economy’; rather, they inflect class relations and play a key role in how capital accumulates.
Hall’s formulation of the interrelationship of race and class is useful in understanding the engineering of racially derived property values, or – as K-Sue Park puts it – the long history of leveraging racism to produce financial value in land (Park, 2020). In the context of New York City’s ongoing crisis of gentrification and displacement, this history can be traced to the raft of state-backed discriminatory housing practices (redlining, urban renewal, suburbanization) in the last century that produced a highly segregated urban landscape. The latter formed the geographical seedbed of targeted disinvestment and austerity in the mid-1970s, when the City faced a massive budget shortfall and a capital strike by bondholders. In response to this crisis, through a series of moves that one city official notoriously characterized as “planned shrinkage,” municipal and state officials slashed funding and services to the neighborhoods and institutions of the City’s Black and Brown working class. At the same time, legislative authority over many of these same institutions was rescaled from the local to the state level.
The resolution of the City’s fiscal crisis amounted to a kind of organized abandonment – structured along racialized class lines – that devalued certain areas of urban space, rendering the people who lived there expendable and setting in motion intensifying waves of gentrification. Key to understanding this view of gentrification is the concept of the rent gap, which refers to the incentive for real estate developers to invest in a particular location when they identify a gap between the rents currently offered by land and the potential future rents when some action is taken – e.g., evicting long-term tenants or demolishing and reconstructing buildings (Stein, 2019). Rent gaps can operate at multiple scales simultaneously – from disinvested neighborhoods to neglected buildings; at the broadest conceptual level, they are a manifestation of capitalism’s tendency to resolve crises of accumulation through a “spatial fix” – i.e., a way to profit from previous disasters and to find new places for investors to turn money into more money (Stein, 2019). The fact that the creation of rent gaps is derived in significant part from racially inflected modes of property, investment, and policymaking resonates with Hall’s view of the centrality of race in the accumulation of capital and in the reproduction of class relations.
As New York City has undergone successive phases of gentrification in recent decades, the City’s unique system of rent regulation has been a key site of struggle between landlords and tenants over the closure of rent gaps. The development of rent regulation through these phases – particularly its diminution in the 1990s and 2000s – illuminates the role of law in facilitating racialized value creation in property. Rent stabilization, the predominant form of regulation, is a remnant of the federal government’s World War II price control regime. It was expanded by the New York City Council in 1969 and then taken over by the State Legislature in 1971 after fierce lobbying from the real estate industry. The significance of rent stabilization for tenants is twofold: it confers security of tenure in the form of a statutory right to a renewal lease and it places strict limits on rent increases. In theory, this means that rent stabilized tenants are buffered from the market forces associated with gentrification, as they can remain in their apartments, at relatively low rents, even when local property values are escalating. In practice, however, the decades long weakening of key aspects of the rent laws at the behest of the real estate lobby allowed landlords to instrumentalize legal loopholes to price out and/or evict longtime tenants.
Legal loopholes that relate to apartment vacancies are particularly instructive in understanding how law has been deployed to help close racialized rent gaps. Beginning in 1997, rent stabilized landlords were permitted to increase rents substantially above allowable annual increase amounts (up to 20%) upon a vacancy; and when the monthly rent of a vacant apartment reached a certain threshold ($2,000 per month in 2004, when I began working as a tenant attorney; $2,774 per month most recently), that apartment could be removed from rent regulation altogether, i.e. it could be rented at a “market rate” with new tenants afforded no statutory protections. These vacancy provisions functioned as a magnet for financialized real estate investment, which flowed into rent stabilized properties with the aim of vacating low rent apartments and obtaining a quick, high rate of return.
The combination of legal maneuvers to hollow out the rent laws and the influx of financialized real estate capital had a profound impact on New York City’s residential real estate landscape. According to the Community Service Society, between 2000 and 2007, New York City lost over 345,000 rent stabilized apartments primarily because of vacancy decontrol and excessive rent increases (Jones, 2011). Many of these lost affordable units were located in working class Black and Brown neighborhoods – the same places that had been subjected to austerity and disinvestment in the 1970s and early 1980s. In other words, the racialized devaluation of the spaces of the working poor in one historical moment laid the groundwork for future profitability, with politically orchestrated shifts in the City’s rent laws facilitating the process by providing the legal mechanisms for the closure of rent gaps.
In recent years, amid an intensifying crisis of affordable housing that has transformed much of the City into what the musician David Byrne called a “pleasure dome for the rich,” an invigorated housing justice movement has mobilized to win major legislative victories. Chief among them was the Housing Stability and Tenant Protection Act (HSTPA) of 2019, which closed the legal loopholes – including those related to apartment vacancies – carved out in previous decades. Following the passage of the HSTPA, owners of rent stabilized properties are no longer permitted to increase rent significantly when a tenant moves out; perhaps more importantly, there is no longer a threshold beyond which a regulated apartment can be removed from the system of rent regulation. The significance of these changes is that the rent gaps created during prior urban crises cannot be closed as readily as they could before, or at least not by the same means.
With rent stabilized landlords no longer able to use apartment vacancies as they once did to generate value, new tactics and strategies are emerging. An internal memo from New York State’s housing agency recently revealed that the number of rent-stabilized apartments reported vacant on annual registrations doubled between 2020 and 2021. While that number may have been an outlier due to the pandemic, there is concern among tenant advocates that landlords are essentially warehousing vacant rent stabilized apartments, keeping them off the market as part of a concerted effort to undo the gains of the HSTPA. Tenant groups, including the Coalition to End Apartment Warehousing, are escalating calls for landlords to fill empty apartments, given the intensity of the City’s affordable housing crisis, and its homelessness crisis in particular (the average number of people sleeping each night in the City’s main shelter system recently hit an all-time high of 65,633). As of the writing of this essay, it remains unclear how the issue of the warehousing of rent stabilized apartments will be settled. Given the salience of vacancy rent increases in closing rent gaps in recent decades, this will likely remain a terrain of contestation in struggles over the future of urban space.
The claim that kicked off this essay – that capital accumulation depends on racial differentiation – extends to the realm of racially derived value creation in property. It follows that what is needed to put an end to the destructive feedback loop of racialized rent gap creation/closure – which manifests as the selective destruction of the spaces and possibilities of human life, followed by joint public and private efforts to generate profit from this destruction – is to move toward the decommodification of urban property. That is to say that the advent of a truly humane housing program requires that housing’s value as home be placed above its value as real estate. In a recent post on the Law and Political Economy Blog, Jessica Hornbach, Oksana Mironova, Samuel Stein, and Jacob Udell take up this mantle, arguing that we need to fight for a range of policies that transfer land and housing to social ownership, make extractive and predatory housing models less viable, and strengthen tenant organizing. These policies include support for community land trusts, social housing, tenant opportunities to buy back their buildings, rent control and good cause eviction, and tenant unions and collective bargaining. Taken together, all of this will dislodge the political-economic power of the real estate industry and will bring us closer to challenging the fundamental logic of our current system of property relations, which, as we have seen, is constituted through law, and structured by racism.
References
Bhandar, B. (2018). Colonial Lives of Property: Law, Land, and Racial Regimes of Ownership, 11.
Danton, E. (2013). The Rich Are Destroying New York Culture. Rolling Stone.
Hall, S. (2018). Race, Articulation, and Societies Structured in Dominance. Essential Essays Vol. 1: Foundations of Cultural Studies, 305, 341.
Hornbach, J., Mironova, O., Stein, S., and Udell, J. (2022). Social Housing and Housing Justice: Pathways to Housing Decommodification. Law and Political Economy Blog.
Jones, D. (2011). City’s Rent-Controlled Apartments Are Vanishing. The Community Service Society: The Urban Agenda.
Park, K. (2020). How Did Redlining Make Money. Just Money.
Stein, S. (2019). Capital City: Gentrification and the Real Estate State, 48, 49.
John Whitlow (john.whitlow@law.cuny.edu) is an Associate Professor at CUNY School of Law, where he co-directs the Community and Economic Development Clinic.
