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Critical realism and housing studies: An explanation for diverging housing solutions. Lawson, J.M.
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Citation for published version (APA): Lawson, J. M. (2003). Critical realism and housing studies: An explanation for diverging housing solutions. Amsterdam: AME, Universiteit van Amsterdam.
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Chapterr 5 Postulating an Explanation for Housing Divergence
AA common aspect of all critical realist research is the priority given to conceptualizationconceptualization and abstraction, for how we 'carve up' and define our objec ofof study tends to set the fate of any subsequent research. Realists seek substantialsubstantial connections among phenomena rather than formal associations of regularities.regularities. In explaining associations, they seek to distinguish what must be thethe case from what merely can be the case. Explanation of the social world also requiresrequires an attentiveness to its stratification, to emergent powers arising from certaincertain relationships, and to the ways in which the operation of causal mechanismsmechanisms depends on the constraining and enabling effects of contexts. RealistsRealists also recognize the concept-dependency of social phenomena and the needneed to interpret meaningful actions, though since reasons can be causes this is notnot something separate from or alternative to causal explanation (Sayer, 2000:27). 2000:27).
5.11 Introduction Inn this Chapter we 'carve up' the object of study: dynamic and different networks of housing provisionn and propose a particular conceptualisation of how networks change and diverge overr space and time. This postulate will be employed and revised via two subsequent case studiess in Australia and the Netherlands. AA number of explanatory concepts have been distilled and developed from earlier discussions. Thesee concepts include necessary relations and their emergent powers; contingent conditions, risk,, trust and agency; embeddedness and path dependency; structural coherence, crises and reformation.. They are elaborated and synthesised to form a postulated causal mechanism of divergencee and change. Thiss postulate will be empirically tested and further developed via intensive case study researchh in Chapters 6 and 7 and sharpened via counterfactual thinking and contrastive questioningg in Chapter 8, towards the development of a empirically feasible explanation of divergencee and change for continuing critique and development.
5.22 Proposed Housing Ontology and Definition of Concepts HowHow can we decide which processes are necessary for particular outcomes, whichwhich are contingent, and which are irrelevant? How can we create appropriateappropriate cut offpoints for investigation, or allocate particular causal claims toto particular levels of generality? A set of tools is needed - not just theoretical interpretationsinterpretations but also an epistemological apparatus to help us link structure andand agency, concept and measurement (Dickens et al, 1985:246) Itt has been contended 4.3.3 that a particular cluster of social relations holds emergent powers andd can become 'packaged' or temporarily locked together in coherent albeit inherently crises pronee ways. This structural coherence tends to differentiate actual housing networks at the base.base. Forms of housing provision can be differentiated by the definition and packaging of key
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sociall relations concerning property, investment and savings and labour and welfare. The followingg sections provide a series of arguments for the selection of these key relations. 5.2.11 Necessary Relations
Theree are many different types of housing indicators, which capture and interpret various dimensionss of housing provision.'6 Indeed, it is easy to drown in a sea of qualitative and quantitativee detail. Yet if we are interested in the long-term development of housing solutions, wee must confine our empirical search to uncover traces of the causal mechanisms generating divergencedivergence and change in open, complex networks of provision. Towards this end, rather m fishingg in the sea of historical detail and official data sets for possible clues, if is tar more efficientt to strategically 'zero in' on the key causal aspects of housing provision. Following a realistt theory of ontology as outlined in Chapter 2, causality can be found in the contingent definitionn of emergent necessary relations. Yet, to guide this search we need some sort of theoryy of what these emergent relations are. Ass indicated in Chapter 3, housing provision is subject to contradictions and conflicts betweenn fractions of capital, expressed via the interactions between private landowners, house builders,, building workers, financial institutions, specialist professionals involved in buying, sellingg and hiring accommodation, and finally owner occupiers, renters and the state. Each of thesee actors strategically intervenes at one or more stages of housing provision. Ball states that: : thethe nature of its intervention and the responses by others to that intervention areare the key determinants to the present day owner-occupation provision and its problems.problems. (Ball, 1983:18, emphasis added). Whatt does Ball mean by "intervention" and "key determinants"? He later goes on to make a numberr of causal claims concerning the structure of housing provision abstracted from empiricall research in Britain. To guide our search for the causal mechanisms generating divergencee in forms of housing provision in Australia and The Netherlands, it will be argued thatt there are key emergent relations essential to both forms of housing provision, which have beenn very differently defined over time and space. How these relations have been contingentlyy defined is of causal significance. The following paragraphs concern the selection off these emergent relations.
166 Typical indicators measure tenure division, standards of quality, occupancy rates and bousing costs. Whilst thesee indicators may alert researchers to changes in the housing system, they cannot explain the reasons for change.. To do so one must to look to the underlying dynamics of housing provision and in particular to the role off risk sensitive housing actors play who are subject to contingently defined housing relations.
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5.2.22 Property Rights and the Exploitation of land and buildings HowHow any society regards and manages property, and particularly the ownership ofof land, is a central defining element, which helps to distinguish the collective valuevalue system underpinning the institutions ofgovernment and policy formations. WhilstWhilst property rights and relations underpin class structure, the property systemsystem also functions as a profoundly important - though often under-rated mechanismmechanism for the transfer of public and private wealth within society (Badcock(Badcock 1994:425). Forr the purposes of this research, we define abstract property relations as the distribution of rightsrights between agents engaged in the occupation, ownership, exploitation and exchange of landd and or buildings. Theserights,however defined, are considered one of the founding institutionss of the urban development process, and indeed the network of housing provision. Alll forms of housing consume space and thus land is an inevitable, integral component of housingg provision. LandLand is a peculiar commodity in that: it cannot be done without as all activity mustmust occupy a space; it is fixed geographically, and unlike other capital goods cannotcannot be moved around; although many site attributes or improvements can be modified,modified, the land itself, in being consumed, has a definite permanency and indestructibilityindestructibility (Badcock 1984:208). Reall propertyrightsinfluence therightsof access, exploitation and transfer of land. Urban laws,, policies and practices clarify rights of ownership, occupation, usage, and taxation. These rightsrights and responsibilities are important because they influence the nature of investment in the builtt environment. As suggested below, propertyrightsemit signals picked up by conscious actorss operating in the land market, influencing their perception of risk and consequent actions. . PropertyProperty rights are at the heart of the incentive structures of market economies. TheyThey determine who bears the risk and who gains or losesfromtransactions. In soso doing they spur worthwhile investment, encourage careful monitoring and supervision,supervision, promote work effort, and create a constituency for enforceable contractscontracts (World bank Report, 1996: 48-49). Thee actual nature and origin of these incentive structures is often overlooked, especially by supra-nationall organisations. World Bank housing economist Renaud promotes the developmentt of property relations, which clarify traditional, 'informal' propertyrightsand supportt the development of land via sound urban planning and primary infrastructure provision.. Accordingly, with proper land registration, land use control and basic services in place,, secure lending can occur, and in WB terms, 'enable markets to work' (Renaud, 1999:768). . Yet,, the power resources to act upon "incentive structures" are unevenly distributed and the subjectt of intense normative debate. Indeed, the actual (rather than idealised) distribution of propertyyrights,perceived risks and responsibilities may promote or impede flows of capital intoo land and housing development. Private propertyrights,characteristics of the land market
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andd the control of associated costs of development, influence patterns of investment: long term,, speculative, short term. Powerr in the property process strongly relates to one's position in the land and housing market:: a tenant in a tight rental market, an overburdened home purchaser desperately trying too sell, a individual small landholder constrained by planning law, privileged public agency or monopolyy land purchaser.
ThereThere is, in real life, a world of difference between the property rights attached toto my 'quarter -acre' block and those attached, say, to the thousands of hectares ownedowned by a speculator, finance company, insurance company, etc. My ownershipownership of my quarter-acre block, in practice, gives me the right to occupy i forfor my own use (shelter, etc.) for as long as I choose, with a fair amount of psychologicalpsychological security, and to pass it on to my children. It does not give me opportunityopportunity to profit and to exploit others. But if I owned several properties, o severalseveral hundred thousand hectares, then the right attached to that ownership areare precisely the rights to profit, to exploit the labour of others. (Berry, 1983:1983: J27) Existingg social structures surrounding land tenure: tribal, collective or capitalist, are of causal significance.. In advanced capitalist economies, home ownership tends to be associated with landd markets characterised by commodified, freehold tenure.' According to Ball: [ojwner[ojwner occupation needs the free, rapid and unquestionable transfer of small landland plots and single dwellings without which it is exceedingly difficult to borrowborrow on the security of a property (Ball, 1983:29). Wheree leasehold is the norm, lease market conditions, the pattern of rent reviews and related provisionss must be acceptable to the financial institutions from which credit is obtained (Cadmanetal,, 1991). Butt why are propertyrightsof relevance to housing finance? As mentioned above, land is an essential,, unavoidable component of housing provision. Obviously, housing is spatially locatedd and where durable materials and workmanship have been utilized, a relatively permanentt object. Property rights affect the value of that land upon which the house rests and visaa versa, the value of the dwelling influences land value. The method of property valuation andd exchange process are crucial as they affect the transferral of assets and the security offeredd to investors and lenders. Value can be determined by government, the 'open' market, definedd by the interaction of buyers and sellers; income value (also sustainable mortgage) method,, based on the rent stream, operating costs and discounting factors; or reproduction value,, based on the cost of "bricks and mortar' reconstruction (ECE, 1998:6). Together, the 177 Most recently, private, individual land ownership has been viewed as a necessary pre-requisite in 'growing' homee ownership. International financial institutions, such as the World Bank, promote the development of freeholdd land tenure and title registration systems as a means to facilitate and secure investment in individualised housingg forms in developing countries. Yet private ownership of land tends to promote speculation, as disastrouslyy experienced in the ownership promoting housing programs in South Africa, ultimately undermining explicitt policy intentions of affordable housing for low income squatter settlers. In contrast, a number of critical housingg economists and other commentators (Achtendberg and Marcuse, 1986, Ball, 1983, Berry, 1983) argue thatt in order to avoid inflationary problems in areas of scarcity, a policy of publicly owned and allocated land is necessary.. Indeed, many social housing programs such as in The Netherlands, incorporate a high degree of state interventionn in land development and non-market allocation procedures, to avoid just such problems (Needham, Kruijt,, Koenders, 1993).
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definitionn of propertyrights(exclusivity, use, exploitation rights and transferability) and the structuree of the land market (nature of internal and external competition) influence the exploitablee value of land, house prices and thus, the extraction of surplus value under commodifiedd housing relations. Off relevance to this study is the explicit recognition that land value influences the relative attractivenesss of housing investment and the potential for the extraction of surplus value. Thus,, not only forms of land tenure, but land market conditions play a key role influencing thee behaviour of a range of actors including land developers and financial institutions. Indeed, markett conditions in particular areas may promote or impede levels of investment. Market conditionss are not only affected by the ebb and flow of demand but are also significantly structuredd by the actions of the state. Consider the significance of rentfreezing upon the value off rental dwellings, the importance of expropriation rights on property in the path of new freewayy and conversely, the imposition of a betterment tax where basic infrastructure is providedd to Greenfield sites. Wheree no barriers exist, investment mayflowinto areas perceived to offer relatively less risk andd greater return on investment. In a negative scenario, market perceptions may become institutionalised,, leading to declining investments and the practice of red lining: blockading investment,, accelerating levels of deterioration and causing 'urban blight' in existing residentiall areas. Institutional barriers may also exist in the public sector, land use plans may prohibitt housing development in some areas and specify certain densities and housing standardss in others. Capital gains and inheritance of property may also be taxed. As mentionedd earlier, the definition of propertyrights,process of land registration and exchange aree also influential state functions. Together, these actions influence the value of land and the perceivedd risks to housing investors. Propertyyrightsinfluence incentive structures in another important way. Real property can offerr a form of collateral, to be pledged by the borrower to ensure the fulfilment of obligations inn the event of repayment difficulties and loan default. Throughout the duration of the mortgage,, any number of unpredictable events may occur preventing payment of interest and principlee as required by the mortgage contract. Small parcels of land, of sufficient size to accommodatee a single homeowner, provide a disposable, tangible asset that can be pledged as debtt security. The threat of re-possession of such an asset, so intimately entwined with the dwellingg that rests upon it, re-enforces the borrowers obligations under the mortgage contract. Landd also provides a convenient hedge against inflation. Thus, lenders tend to have a 'natural' interestt in the value of the pledged collateral and may monitor any maintenance and alterationss to the property that in turn, may influence its capital and operational value. Indeed, inn the case of rental housing, the value of the dwelling partially depends on its capacity to generatee rental revenue. In a competitive market, the landlord must ensure a reasonable rent to qualityy ratio in order to minimise vacancies and maintain a steady rental income. Other transferablee assets such as stocks, bonds and insurance policies may also be pledged as security.. However, mortgage providers often prefer registered land title where this is expected too increase in value; indeed, any less trust worthy product may hinder the financing process.18
188 In Australia, for example, company share apartments are difficult to finance in a market dominated by strata titledd apartments. The former involves the purchase of the internal space and a share in a building company, whichh manages the maintenance of the building structure and communal areas. The risk of poor management arrangementss to the ongoing maintenance is considered too high and a threat to the maintenance of value. For thiss reason few banks are willing to finance the purchase of company share apartments.
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Inn sum, property relations are emergent social relations of great relevance to the development housingg solutions and subsequent trajectories, embodying and distributing power between differentt groups in society, influencing investment patterns and important for this study, modess of housing consumption. 5.2.33 Savings, Borrowings and the Circulation of Investment in Housing Att a European housing conference in 1996 (Nunspeet, The Netherlands), World Bank economistt Renaud provoked his audience by claiming that cities were merely built the way theyy were financed. With aerial images of informal (incremental, self build), private (diversified,, professional, competitive) and socially financed housing (large-scale, standardised,, monotonous), he declared that 'private' finance was the answer for developing countriess to promote appropriate forms of urban development. Renaud later published his boldd claim in Urban Studies (1999) but did not explain why different channels of finance necessarilyy produced such different urban forms and tenures. Little mention was made of the propertyy and labour relations underpinning financial transactions and influencing the capacity off households to pay for housing. His generalising claims underestimated the multi-causal naturee of housing development. Nevertheless, the relationship between savers, borrowers and thee role of financial institutions is crucial because: ftjheftjhe major activities in housing, house buying and house building, are, due to thethe high price of housing in relation to other goods bought by a consumer and thethe structure of the construction industry, heavily dependent upon the cost and availabilityavailability of finance (Hadjimatheou, 1976:1). Ass suggested above, the mortgage instrument plays a key central role in capitalist housing relationss - regardless of tenure. Houses are expensive to produce and thus relatively costly to consume.. Yet a house is generally bought from a vender in a one off cash payment. This swift transactionn requires the arrangement of credit by the purchaser, through which loan repaymentss can be spread over time. In most circumstances, when a landlord or owner occupantt purchases a dwelling, they purchase with borrowed investment capital. Repayments aree made according to a fixed schedule of payments of principle and interest, possibly subject too variation. Payment for housing services varies by tenure and is subject to either individual incomee in the case of private home purchase, or pooled capacity to pay in the case of rental. Thee following simple diagrams abstract the circuits of mortgage capital and payment for housingg services in different housing tenures (Terhorst and Van de Ven, 1983). In the first diagramm below, mortgage finance is used to finance the landlords' purchase of rental housing.
||
Cost,, Pooled or Markett Rent
Loann amount
>n>n ''
Tenant t
Landlord d
Lender r
;; ;,; accordingtoo i 'r'rev6rKiee basis '-
mÈmSt&Z m
t ty y
>k >k Interestt and Principle e
<<
Housingg services
—> >
FigureFigure 5.1: Abstraction of capital flows in rental housing (adaptedfrom Terhorst and Van de Ven, 1983:23)
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Assrevenuerelates to a series of multiple renters, it is not tied to the capacity of any one householdd Rents may be based on a variety of models including cost rent, rent pooling and markett rents. Exploitation of dwellings based on the principle of costrentrequiresthe paymentt ofrentsequal to the cost of building, owning, maintaining and managing the dwellings.. Strictly applied, where accommodation is rented according to cost price, the demandedd sum may decline every year as the remaining loan principle reduces. Thus, the rent forr old buildings would be much lower than for new ones. Yet this scenario, based on historic costt price, will not cover the replacement cost of the dwelling — which under inflationary conditionss will always be higher than historic costs. For this reason, cost rent must be dynamic,, increasing every year with the inflating cost of replacement. However, in certain markett conditions, tenants may be free to move to similar quality older buildings, leaving newerr more costly ones vacant. In such a system, governments may intervene to provide subsidiess to permit the payment of project specific cost rents, especially in the early phase off the mortgage via a number of instruments on both the supply and demand side. Subsidies onn the supply side may reduce the amount of credit required, and limit cost rents to those affordablee for tenants. These include securitisation of loans to lower the interest demanded, payingg the difference between market and below market interest rates, providing grants reducingg the cost of land development and construction or topping up the exploitation account whenn shortfalls occur. On the demand side, renters may be assisted to pay costrentsvia allowancess for rents in specific housing projects (thus tied to their cost rent profile). AA variation of cost renting is cost-rent pooling. For larger landlords, rents may be pooled acrosss a range of buildings to enable harmonisation between old and new buildings and or subjectt to government allowances or regulation. In such a cases, the problem of differential costt rent is hiddenfromthe renter, but the risk mayremainfor the landlord depending on their positionn in therentalmarket (Kemeny, 1981:19). However,, in many cases wefindthat rents do notrelateto the cost of financing building, owning,, maintaining and operating dwellings. In an open rental market, where tenants can choosee between dwellings of different type, quality and location, market rent in the norm. Thiss scenario is radically different, as there is a no immediate relationship between the costs incurredd by the landlord and the exploitation revenue. Instead,, market rents are defined by institutional constraints, market structure and the ebb anddflowof effective demand and supply. The landlord anticipates that market rents are sufficientt to cover the cost of finance, operation and maintenance and generate sufficiënt surplussrevenue.In this scenario, new rental buildings may beriskyloss makers in the early phasee of the mortgage but may potentially generate surpluses in the mature phase of the mortgage,, making 'mature'rentalproperties more profitable. To reduce the risk of loss, larger landlordss try to include a range of mortgage maturities in their investment portfolio. Landlordss may also demand state assistance in the early years of the mortgage to cover any exploitationn deficit, or even lobby for a system of housing allowances to permit full cost paymentt of rental revenue. Homeownerssfinancetheir purchase with home loan mortgage capital. In the second diagram (Figuree 5.2), ownership and the consumption of housing services have been teasedfromeach other.. In this way, we can see that homeowners are both investors and consumers. This is oftenn a surprise to many owners unconscious of this division. Nevertheless, rental 'income' is thee subject of much debate amongst housing economists. Is housing a capital good or
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consumptionn good, and thus, how should it be taxed? Fictitious income from the rent of the dwelling,, as distinct from outgoings associated with mortgage payments and maintenance, mayy be treated as income and thus liable for taxation. As these 'imputed rents' are fictitious, thee taxes they attract are often unpopular and tend to be set at a low level. For this reason, homee ownership is often found to be more affordable than renting in the long term. Ass mentioned, purchase of the home occurs in one swift transaction, most commonly funded byy home mortgage finance. Yet few purchasers have the ready cash for such a large transactionn and therefore must enter a mortgage contract with a lending institution, to repay borrowedd funds over a maximum period of 20 to 30 years. Long-term loans are necessary as thee amount of the loan is often several times the annual income of the borrower. In this way paymentss of principle and interest can be spread over time (Boleat, 1986). Unlike rental investment,, the term of the loan for individual ownership must be limited to the life and incomee expectations of the owner occupant.
House e
>f f> Seller r
Ownerr purchaser A
Lender r
AA
MM
** Interestt and Principle e
Purchasee sum
<<
Fi i;titio us o
Rent t
s
Housü ü Servic es cs
>t__ >
__.
Ownerr purchaser A
FigureFigure 5.2: Abstraction of capital flows in owner occupied housing (adaptedfrom Terhorst and Van de Ven, 1983:25) 1983:25)
Followingg initial purchase, there is no relationship between the amount of credit borrowed andd the fluctuating value of the property. If the value of the house increases payments remain thee same. Payments can be fixed according to the schedule agreed with the lender for a period upp to 30 years. This schedule provides certainty to the owner occupant regarding their long term,, often declining housing costs - especially where interest rates are fixed for longer periods.. By the end of the loan term, housing costs are minimal. In contrast, a tenant does not havee this certainty as their housing costs may fluctuate according to the rent demanded (be it costt rent or market rent) and rarely reduce over time. Ass with rental housing, a range of subsidies may be provided affecting both the supply and demandd of owner occupied dwellings. On the supply side, various subsidies and regulations mayy affect production costs by influencing the cost of land, materials, building methods, and 199 Kemeny (1981:20, 1983) has much to say about the desirability of individualistic home purchase, which concentratess costs in the early phases of the family cycle yet relieves mature households capable of paying higherr costs.
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qualityy standards. Further, intervention may also occur in thefinancingof dwellings via regulationn of mortgages, interest rates, interest rate subsidies, and the securitisation of loans. Purchasee may be assisted via the supporting wage levels and conditions, favourable income taxx rules permitting deduction of interest paid and minimal imputed rent taxes, and simple 'starters** grants. Thee previous Figures 5.1 and 5.2 represent high-level abstractions of actual forms of housing financee and do not situateflowsof housing capital within the wider context of saving and investmentss or the capital markets. Indeed, the housing sub-circuit is one of many that exist inn the capital markets. This circuit provides an important link in the chain of housing provision.. It is also implanted in the broader financial, fiscal and legal infrastructure of specificc banking laws, contracts, regulations, subsidy and accounting systems. In turn these aree also linked to conditions in the world economy, and the nations exchange rate, interest rate andd credit policy. Movingg 'down' from this level of abstraction of tenure related capital circuits, we can considerr the interplay betweenn institutions involved infinancinghousing provision. The followingg paragraphs and Figure 5.3 and 5.4 deal with the different routes and sources of investmentt in mortgages, the different forms of mortgage instruments, interest policies and thee importance of real property as collateral securing mortgage obligations. Mostt importantly, the housing finance system is influenced by the capacity of people to save, too deposit these savings and express effective demand. This process of linking savers to borrowerss is called 'intermediation'. Figure 5.3 addresses this link and portrays the housing financee system as an intermediary between a wide variety of savers and specific borrowers of housinggfinance(Boleat.1985, Lindfield and Baharoglu, 2000). Ideal typically, savers place theirr money in bank accounts or mutual funds (unit trusts) and those institutions either providee long term loans to house buyers directly (eg building societies) or lend to, buy bonds of,, or buy shares in specialist mortgage providers that in turn provide mortgages. Finance for housingg production may be issued in a variety of forms: as a grant, subordinated loan, mortgagee or equity share holding. For loans, the level of principal and interest may befixedor varyy for a defined term (Haffher, Turner and Whitehead, 1997). The conditions of credit may requiree a down payment or collateral for security, payment for insurance against defaults and aa reliable guarantor (Boelhouwer, 1993). The investor may demand particular forms of marketablee development, building processes and standards, or the minimum the rent level and evenn specify the desired profile of eligible tenants.
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Supplyy Side
Demandd Side
Savings s Housingg Provider e.g.. Housing Association n
Mortgagee Loan
Repaymentt of Loan principall + interest Housing g Finance e Institution n
Households s Buying g (Renting) ) Houses s
Mortgagee Loan -term, , -- interest rate
Investmentt in Financial Intermediary y -bonds s -- savings deposits
Own'' ;rship/ Servi:es s Purchase/Rent t
Asset t
-«harps s
Otherr Savers -- individuals -otherr financial institutions -- government (taxpayers)
Collateral l providing g security y
House e -- with title (e.g.. freehold or leasehold) )
FigureFigure 5.3: The circulation of savings and loans in the housing finance system (Lindfield and Baragalho, 2000)
Figuree 5.3 is merely one conceptualisation demonstrating the link between savings, investors, propertyy rights and housing purchase. In everyday reality, intermediation occurs via many differentt institutional routes, linking different types of savers to different types of purchasers. Savings,, for housing purposes, may be channelled through various types of financial institutionss (in the organizational sense) that concentrate on different fields and interests. Thesee institutions include investors, commercial and savings banks, pension funds and insurancee companies, building societies, mortgage banks and government agencies (Boelhouwer,, 1997, Lomax, 1991, Boléat, 1985). Somee institutions seek long-term, risk free, low return investments, whilst others pursue flexible,, short-term, high return opportunities. This is because the financial institution's own sourcee of investment may cause it to be vulnerable to a range of «on-housing concerns. Their immediatee environment may also influence investment behaviour. This environment may comprisee competing investors or pricing cartels (sf. Bengs and Rönka, 1994); stimulate or impedee product innovation (Haffher, Turner and Whitehead, 1998); and or promote trust in contractuall arrangements (Buckely, 1994, Ando, Guiso, Visco, 1994). Alternatively, institutionss may be very exposed to housing issues such as housing shortages and quality. Specifically,, housing investors may rely on a financial return via the developments in rental revenue,, improved land value, or the sale of related mortgages. Alternatively, non-economic, societall objectives may play a role. For these reasons, the observable behaviour and interests off the investor must be critically analysed to explain their contribution difference and change inn various systems of housing provision. 70 0
Accordingg to Ball the type of institutional arrangements, which exist for channelling savings forr home purchase and rental are also crucial to the development of housing provision (Ball, 1983:25).. The following Figure 5.4 illustrates the various routes for channelling savings into mortgages.. Savings may be channelled directly via personal or business relations (a), contractuallyy via special purpose savings banks (b), via commercial banks from retail deposits (c)) or mortgage banks funded by funded bond issues purchased by institutional investors (d) (Boleat,, 1985). d)) Mortgage Bank Route
Government t Intermediary y
Mortgagee Bank
Insurancee Company andd Pension fund
T_ _
ikk
Generall Bank Savingss Bank Buildingg Society
(c)) Deposit Financing Route
(b)) Contractual Koute
rr 1rr fi f
ii
*. *. Intermediary y
Housee buyers
Personall Investors Potential l Others s House e Buyers s
(a)) Direct Route
FigureFigure 5.4 Routes for channelling savings into home finance (Boléat, 1985)
Mortgagess not only flow via different institutions to housing purchasers who in turn make repayments.. They are also subject to very different types of contracts for these repayments. In Thee Netherlands, for example, the development of new mortgage products has been rapid; eachh imposes different obligations on both borrower and lender and offers different types of subjectivee and objective risks for both parties. They require the same long-term schedule of paymentss spread over the loan term for the borrower, but the use of borrowed funds and instalmentss differs considerably. Traditionally, annuity mortgages were repaid on a defined schedulee of declining instalments of principle and interest over the term of the loan.20 Today, aa wide range of different mortgages exist offering fixed or variable interest rates, invest instalmentss in stocks and shares, involve interest only payments that are tax deductible with separatee arrangements for saving for the principle, or double as life insurance policies. Governmentss may influence the housing finance system for a range of reasons: to increase accesss to housing for low income households, reduce housing cost related wage demands or enhancee economic growth by facilitating housing construction and related consumption. In particular,, the state may play an important role by influencing the security and profitability of investmentt in certain forms housing provision, specifying standards for lending such as loan too value ratios, subsidising market interest rates, providing certain tax provisions and prudentiall norms, thereby encouraging or discouraging flows of investment via specific channelss into different parts of the housing market. Via financial policy, national banking Kemenyy (1981) criticizes this type of mortgage contract for its mismatch with the family life cycle, housing needss and spending power.
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institutionss and publicly owned banks, the state may regulate the volume of credit entering the mortgagee market, specify 'safe' loan to income and valueratios,cap interest rates and set a loww threshold for savings interest. In an effort to promote affordability, the state may establish speciall purpose vehicles to allocate loans or provide a mortgage guarantee to eligible borrowerss and specify allocation criteria for mortgage applicants. To encourage particular formss of housing, it may intervene in the realm of production, in the form of grants to reduce thee capital and maintenance costs, tax breaks on certain materials, schemes to mechanise and savee time in construction processes. Nevertheless,, many aspects of housing provision such as finance, construction, management, exchangee and consumption, are beyond the total control or influence of the state and rest in thee hands of various private bodies. Indeed, mortgages, being the long term financing method forr both tenures, are not only subject to the reglatory structures and actionss of the state but alsoo other contingentt circumstances, which can arise affecting the financial relations between thee lender and borrower. These include rising interest rates, inflation, and the fluctuating capacityy to pay for housing services. Inn sum, financial relations are causally significant in tandem with both property relations and thee capacity of households to save and purchase housing services. Financial instruments are unavoidable,, under capitalist housing conditions, due to the high cost of housing relative to householdd income and payments must be spread over time. Lending conditions (term, interest rate)) vary according to the mode of consumption or tenure, and are subject to the institutional andd market constraints affecting the entire finance system. 5.2.44 Labour, Welfare and Housing Consumption Whatt role do households play in directly promoting forms of housing provision? This section providess an outline of their emergent role, as influenced by welfare and labour conditions. Welfaree and labour conditions are important because they influence the manner in which housingg is consumed and the relationship within households and the workplace. Yet welldevelopedd conceptual models of this complex realm, and its influence on forms of housing provision,, have yet to be developed. An outline of differing perspectives is provided below, followedd by a more definitive statement. Hamnettt and Allen (1991) examine the spatial aspects of labour and housing markets with particularr reference to commuting patterns and urban form; spatial differentiation of labour andd housing opportunities; and the relative fixity of housing, relative to the mobility of employmentt opportunities (ibid, 1991: 3-15). They contend that the relations between housing andd labour markets, home and work are varied and complex, rather than static or universal, andd therefore must be understood historically and geographically. Randolff (1991:16-51) stresses the contingent nature of the link between housing and labour markets,, often operating within different spatial scales. He emphases to the following types of contingencies: contingencies: determination of the number ofjobs by employers; the relative importance of bargaining between labour and capital; discrimination and entrapment in labour sub-markets; particularly by gender and racial characteristics; ; 72 2
spatial unevenness and mismatch in job opportunities; dynamic power balance of particular segments of labour markets; uneven flexibility of labour markets to cope with change; fragmentation and fluidity between segments of the labour force social, historical and spatial contingency of labour markets. Alsoo important is the structure and function of the household and the role intergenerational wealthh transfers and capital gains play in determining ability to pay for housing services. Randolff goes on to stress, as for labour markets, the social, historical and spatial contingenciess of housing market processes. Together these labour market and housing market contingencies,contingencies, including the role of domestic labour, affect the relative bargaining power of workersworkers in competing for housing services. Byy understanding housing demand in terms of the position of workers in the labour market a moree sensitive analysis can result Further, Watson (1991:136-154) stresses the importance of thee changing nature of home and work and the nature of work undertaken in the domestic sphere.. She argues for a feminist approach to labour and work relations that is sufficiently sensitisedd to explain the complex interplay of culture, gender and class. Capacityy to pay is of significance to rental as well as ownership housing. Landlords must have payingg tenants. Yet rental housing does not require substantial savings to enter (other than a bond),, unlike mortgage-financed purchase, which may require a substantial deposit Capacityy to pay for home purchase is inevitably linked to one's capacity to save. As discussed earlier,, the network of housing provision and particularly the sub sector of mortgage finance iss especially sensitive to the capacity and willingness of households to save. Incentives to save includee an attractive level of real interest rates for deposits, reliability of banks, security of bankk deposits from government intervention, and their liability to taxes on savings and availablee subsidies, if any, influencing purchase (Lindfield and Baharoglu, 2000). Capacityy to pay affects not only the volume of housing investment, but the mortgage contract conditionss which evolve over time, forming the dynamic institutional structures of housing investment.. Mortgage arrangements are implicitly coupled with the savings capacity of households,, which in turn relate to their work and welfare arrangements. Forr the home purchaser, the 'bottom line' remains that the "mortgagor does not invest his capitall in the house as such but in the capacity of the mortgagee to repay"(Berry, 1983:99). Indeed,, proven capacity to make regular, adequate payments is of crucial significance to home ownership,, and in addition to property rights and financial relations, forms the third dimensionn of the emergent relations underlying forms of housing provision.
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'' In Southern European countries for example, the direct route dominates. Parents transfer their savings to their offspringg to assist the process of home purchase. In doing so they maintain their influence over the choice and locationn of their children's home to ensure the provision of familial care as they reach old age. In Spain for example,, the cadastral system and registration of land titles is less developed and land ownership can come into dispute.. Procedures for repossession are costly and lengthy. Together these features erode the financial security forr mortgage providers and more secure investments are made elsewhere. Partly, for this reason, the contract savings,, depositfinanceand mortgage bank routes for housing finance are relatively undeveloped in this country.
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Onn the consumption side, the capacity to pay for housing services may be influenced by state actionn in the realm of labour market policy and wage regulation, progressive taxation schedules,, and targeted housing allowances (Lundqvist, 1992, see Appendix 2). Finally,, labour and welfare conditions not only concern capacity to pay on the demand side, theyy directly contribute to the cost of construction affecting the supply of housing. Wages in thee construction sector (alongside the cost of land, development finance and building materials)) must not reach a level that increase building costs to such an extent that the cost pricess becomes too high to extract a surplus from sale or rent off the dwelling. In such cases, productionn may slow down and even cease for a period. Inn sum, labour and welfare relations, as with property and investment, play a key emergent rolee generating savings and influencing not only the capacity to pay for housing but the very supplyy of housing services. Once again important contingencies define these relations, none thee least the position of households in the paid labour force and the role of the state in regulatingg wages, making transfer payments and setting rent levels and conditions.
5.33 Emergent properties of necessary relations Movingg from this concrete discussion of housing provision above, Section 5.3 returns to more abstractt issues concerning the emergent properties of the property, savings and investment andd labour and welfare relations outlined above. Drawingg upon the taxonomie work of Lundqvist (1992) and Ambrose (1991) it is feasible to vieww the relations of housing provision outlined above, as generating different distributive outcomes,, along commodified- individualised, de-commodified- coHectivised continuums. TableTable 5.1: Commodification and decommodification of social relations underlying housing housing provision
SocialSocial relation
Commodified-individualised Commodified-individualised Decommodified-collectivised Decom
PropertyProperty rights
Privateerightto exploit
Publicc right to exploit
Savingss and investments channelledd to maximise SystemSystem of investment/savings privatee capital accumulation
Savingss and investments channelledd too maximise publicc benefit
Labour/Welfare Labour/Welfare Individualised-Subsidiarity y
Co-operative-Universality y
Yet,, this approach remains static, fragmented and taxonomie rather than explanatory. It obscuress the connections between the different relations (Sayer, 2000:6) and does not suggest howw or why certain social relations hold causal, emergent powers. Nor does it highlight the rolee of contingency in the actual definition of social relations, which of course changes over time. .
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Sectionn 5.2 contended that the 'internal' relations of property, savings-investment and welfare-labour,, have emergent properties. The following Table 5.4 summarises these properties: : TableTable 5.2: Emergent properties ofsocial relations underlying housing provision
KeyKey relation
EmergentEmergent properties expressed via forms of housing provision provision
PropertyProperty relations
Influencee the nature of use, exchange, exploitation of land, andd subsequently, patterns of investment in land developmentt over space and time.
Savings/investmentSavings/investment Influenceerelations the distribution of credit, entitlement and other resourcess amongst different societal groups over their lifetime.. Ultimately, the definition of this relation influences investmentt in housing over space and time. Welfare/labourWelfare/labourInfluencee relationsthe cost of housing construction, the capacity to consumee housing resources, the labour conditions required to maintainn housing costs and domestic services to reproduce 'productive'' labour.
Emergentt properties are not essential or static, but change when combined with other relations andd under different contingent conditions. To use a metaphor from natural science, just as hydrogenn and oxygen can combine to form water, particular social relations can combine to generatee specific forms of housing provision. The power of oxygen to form water, for example,, is dependant upon its' relationship with hydrogen. Andd so it is with certain combinations of social relations, which may tend to generate specific formss of housing provision (Castles, 1997). For example, freehold tenure, individualised savings,, regulated wages and low levels of welfare provision tend to generate and sustain moree privatised forms of housing provision than those generated by a combination of communall land rights, contributory and extensive welfare arrangements. Thee institutional architecture, which supports investment in housing provision, is of fundamentall importance in distinguishing between dominant housing 'solutions'. Yet this basicc architecture of housing provision: the propertyrights,circuit of savings and investment andd labour and welfare relations that influence housing consumption, is dynamic and contingentlyy defined. There are no law like combinations of social relations that consistently determinee forms of provision. This is because contingent conditions are always present and oftenn causally important I now turn to the important role contingent conditions play in the definitionn of these relations and the generation of divergent forms of provision.
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5.44 Contingency in Housing Provision Justt as hydrogen and oxygen, under certain contingent conditions, can also form ice and steam,, different contingent conditions have a significant influence on forms of housing provision. . Contingencyy is a very important notion in housing provision. With its' many multidimensionall relationships, the production, exchange and consumption of housing is highly vulnerablee to changes in specific contingent conditions. Many different, often unanticipated actions,, events and relations may influence internal dynamics of provision, and indeed have a cumulativee effect on the entire housing network. For example, the level of housing production iss sensitive to the availability of mortgage credit, which at any given time may be diverted to moree lucrative forms of investment. It is also sensitive to increased labour and material costs, andd of course changes in planning rules and development standards. Soo far the emergent relations of housing provision and their contingent definition, have been depictedd as separate and isolated realms for ease of explanation. In reality this separation is clearlyy not the case. Necessary relations only ever exist in the context of contingent conditions.. The following series of illustrative figures attempt to bring the concept of necessity,, contingency, practice and outcomes closer to everyday reality. Figures 5.5 to 5.7 outlinee the type of contingencies, which influence the definition of key emergent relation in housingg provision.
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Too begin, Figure 5.5 below illustrates how property relations can be defined, under the influencee of contingent conditions and the relevant risk reducing practices.
Actuall property rights influencing land development for housing
ÏÏ
Property Property FreeholdFreehold or leasehold land. LocationLocation of land, accessibility to endend users, existence of related infrastructure. infrastructure. CertaintyCertainty and flexibility of land useuse or zoning rights: relative value ofof existing and potential uses.
Users Users
CostCost of developing land, availabilityavailability of materials, suitability forfor development. CostsCosts associated with land holding. taxes,taxes, levies, maintenance or transferringtransferring property rights. ExclusivityExclusivity of land title: undisputedundisputed ownership or threat of repossession. repossession. LandLand value: inflating, stable or deflating. deflating. Competition,Competition, collaboration, or monopolymonopoly position of landowners oror purchasers. AA secure, long-term method of financingfinancing purchases. CapacityCapacity to repay the loan, the orosoectsorosoects of return.
VV
Propttly Propt tly ContingentContingent Conditions Owners Own ers
ClearClear system of land survey, legallylegally enforceable system of ownership,ownership, undisputed occupation rights. rights. RightRight of compulsory purchase or repossessionrepossession to meet 'public interestinterest goals. LawsLaws permitting the collection of bettermentbetterment taxfor unearned incrementincrement in property values. EfficientEfficient and cost-effective system forfor transferring ownership. PricePrice regulation, compensation basedbased on former usage. State-subsidisedState-subsidised infrastructure provision. provision. LandLand use planning clearly defined. longlong term, and protective of propertyproperty values. MonopolyMonopoly buying or selling strategies. strategies. MaximisingMaximising formal and informal influenceinfluence upon land use defining agents. agents. CrossCross subsidisation.
RiskRisk reducing practices
FigureFigure 5.5: Relations between agents involved in property development, in their contingent, risk-reducing context. context.
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Manyy different contingent conditions and risk reducing institutions influence the definition of savings-investmentt relations of housing provision over time and space. Once again, concrete casee study research is required to define the relations integral to forms of housing provision. Figuree 5.6 abstracts the relations between agents involved in housing investment, in their contingentt and institutionalised context:
Actuall financial investment in housing
TT Lenders Lenders
<4—
ExistenceExistence of lenders offering favourablefavourable terms and conditions. Competition,Competition, collaboration or monopolisationmonopolisation of credit providers for particularparticular segments of the housing market. market. LendingLending criteria, portfolio policies, servicesservices offered and territory of operation. operation. Risk-returnRisk-return ratio of housing investment relativerelative to other forms of investment, influencinginfluencing the volume of credit available. available. DesiredDesired liquidity and mobility of investment. investment. PerceivedPerceived credit worthiness of borrower,borrower, existence of desired security. ExistenceExistence of a range of financial productsproducts providing borrowers with a competitivecompetitive choice. DegreeDegree of integration of lenders with otherother components of the housing networknetwork such as mortgage lending, landland banking, infrastructure investment,investment, residential construction, retailretail development, etc.
TechniquesTechniquesfor assessing risk and risk-avoidingrisk-avoiding conventions (redlining) lining) PromotionPromotion of certain financial managementmanagement norms, values, processesprocesses and standards. PromotionPromotion of practices supportive ofof maximising property values ana rents. rents. RightRight of repossession over the propertyproperty or other assets of the borrower. borrower. DemandDemand an equity share in the developmentdevelopment or defined share of the profits. profits. SecuritySecurity funds to protect investors fromfrom defaulting borrowers. GovernmentGovernment policy regulating systemsystem of credit provision. Cross-nationalCross-national treaties defining the globalglobal borrowing limits of governments. governments. SubsidiesSubsidies to channel investment intointo particular sectors. MutuallyMutually reinforcing lending strategies,strategies, land banking, or companycompany directorships.
ContingentContingent Conditions Borrowers Borrowers RiskRisk reducing practices
FigureFigure 5.6: Relations between agents involved in housing investment, in their contingent, risk-reducing
7S S
context
Finally,, Figure 5.7 illustrates the interaction between housing consumers and providers in theirr contingent contexts.
Naturee of housing consumption
Housing Housing consumers consumers WageWage indexation and accords to
Economic value of skills possessed by membersmembers of a household as determined byby the labour market or prescribed by thethe state. Gender relations within a household allocatingallocating participation in paid work, Economic relations within the householdhousehold and wider community networks. networks. Existing labour market norms, includingincluding discrimination against older men,men, migrants or married women in timestimes of job scarcity. Informal or formal support services, suchsuch as affordable or free child-care. Economic policies of government regulatingregulating job growth, wage levels; suchsuch trade- offs and conditions influenceinfluence the ability of households to consumeconsume certain housing services. Role of labour organisations in promotingpromoting certain forms of housing productionproduction and services. System of social security, which may or maymay not cover ongoing housing expensesexpenses post retirement. RoleRole of welfare organisations in divertingdiverting collective resources to or awayaway from housing-related support or formsforms of provision.
regulateregulate income levels and working conditions. conditions. IncomeIncome transfers to maintain a certaincertain level of purchasing power amongstamongst households. HousingHousing allowances to assist paymentpayment of housing costs. RentRent regulations to reduce or sustainsustain a certain level of housing costs. costs. LoanLoan insurance to reduce risk to lenderlender and permit low-income householdshouseholds to borrow with limited deposit. deposit. FiscalFiscal system of income, sales and propertyproperty taxation. AA vaiiable support services, such as affordableaffordable or free child-care.
Housing HousingRiskRisk reducing practices ContingentContingent Conditions providers providers FigureFigure 5.7: Relations between agents involved in housing consumption, context. context.
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in their contingent,
risk-reducing
Further,, some emergent relations have more influence upon certain phases of housing provisionn than others and can be perceived as primary emergent relations, linked to other moree secondary emergent relations. Specifically, it is argued that property relations hold primaryy emergent powers over the process of land development and redevelopment, and secondarilyy over phases of residential investment and dwelling construction. Further, financial relationss hold primary emergent powers over patterns of investment in housing production, andd a secondary role in allocation and consumption. Finally, it is contended that welfare and labourr relations hold primary emergent powers over the process of allocation and consumptionn and secondly influence savings and investment. Thee following diagram should be viewed as synthesis of Figures 5.5-5.7 and illustrates how thesee primary and secondary emergent powers of necessary relations, defined by contingency andd agency, influence particular stages in the housing provision process:
**r°pe*>''
VipEfevewH
Wiirf
FigureFigure 5.8: Emergent relations and stages in housing provision - Promotion, investment, construction, allocation,allocation, consumption, maintenance, and redevelopment.
Off course, using these ideas and concepts as prompts, historical case study research is requiredd in order to abstract explanatory causal mechanisms at work. Butt can everything be put down to the contingent context? Sayer asks "how far, or at what depth,, are social structures and processes context-dependent?"(2000: 133) andd argues for a respectfull exchange between narrative and analysis, cautioning against strong social constructionism,, non-causal description, and structural reductionism. The following section bringss actors into the causal explanation, reflecting the weak social constructionist position outlinedd in Chapter 4.
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5.55 Agency and the Concept of Risk Off course, it is the actions of agents that operationalize emergent and contingent relations. Thuss agency is something we need to understand by developing appropriate ideas and concepts.. To appreciate the rationale for the action of particular agents operating in the networkk of housing provision, the concept of risk can be helpful. Risk is the indirect, experientiall outcome of social relations that may influence relationships between agents in the housingg network. It can be differentially perceived between different interests, professions, groups,, classes and cultures - there is no fixed or concrete definition ofrisk.Decisions to save,, build, buy, rent or invest are all made (or not made) in a context of dynamic incentive structures,, which are both materially and socially constructed. Yet,, agents operating in housing networks are only partly guided by risk avoiding behaviour. Inn this regard the work of Nooteboom (1995), which concerns the dynamics of social relations,, which shift over time under different contingent conditions is relevant and interesting: : wewe are interested in the dynamics of relations. Such dynamics include at least thethe following two types of phenomena: -Shifts-Shifts of perception, knowledge and understanding (including mutual understandingunderstanding between transaction partners), competence, goals, motives,motives, trust and opportunism, as a relation develops. -Events-Events and changing conditions outside the relations: technological developmentdevelopment shifts in supply and demand due to entry and exit of firms, etc. etc. TransactionsTransactions are to he seen as embedded in relations that develop in time under changingchanging conditions (Nooteboom, 1995:3-4). Nooteboomm (1995) is critical of rational choice theory, where knowledge and competence are merelyy perceived as objective and given, rather than learnt and path dependent. He argues thatt transactions betweenfirmsare embedded in relations that are developed over time. Itt is argued that the perspective and actions of agents is indeed selective and uneven (Sayer, 2000:43).. Importantly, agency is also influenced by a system of ideas or ideology that defines whatt is 'common sense' and guides everyday decision-making. According to Gramsci (1971), majorr institutions in society, such as the financial institutions, the media, religious organisationss and government agencies can drive ideological hegemony reinforcing certain formss of housingg provision. Such ideologies may concern the role of women in domestic labour,, the importance of regular work and freedom of markets, responsibilities of government,, individual duties and collective welfare.
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Kemenyy (1983,1986,1995) has examined the role of ideology in reinforcing home ownership inn Australia and rental systems in Europe. He remarks: EachEach system is informed by a specific ideology and view of how markets operate andand is the product ofdifferent kinds of power structures. (Kemeny, 1995:5) Accordingly,, it is important to appreciate the shifting ideologies influencing housing agents overr time that influences actors perceptions ofrisk(for a concrete case study, see Allen and Thrift,, 2001). Riskk is also a concept that can be applied to institutions affecting a cross section of society. Theree is often talk of the distribution of risk, over time, between vulnerable and less vulnerablee groups in society. The state may choose to prevent poverty amongst non-working (elderly,, disabled) households by enforcing a system of savings or redistributing collective taxationtaxation to a system of benefits. With regard to housing provision, the state may support the savingg for deposits for home purchase, regulate home finance or rent levels, or intervene in thee development of land and construction of housing. One rationale for such actions is to influencee individual housing expenditure and thereby minimise risks to other elements of economyy or society (high wage demands, long job commutes, eviction, overcrowding and substandardd housing). Yett the reasons how and why such actions are undertaken are far more complex than mere riskk perception. Individual agency in the housing system is embedded in a socially and materiallyy constructed reality. This reality encompasses different ideologies affecting the provisionn and consumption of housing that may emerge over time, more durable social relationss affecting property rights, savings and investment mechanisms and labour and welfaree provision which may underpin a housing system, dynamic material contingencies, anddfinallythe institutionalised everyday 'common sense' practices of actors in the housing network. .
5.66 Trust and Embeddedness Embeddnesss is a much-abused term in sociology. What does it actually mean and how does it relatee to causality in divergent forms of housing provision? One straightforward approach is too consider embeddedness as simply 'the way things are done in a particular time and place". Butt we need to go beyond the observable to understand social conventions. When anticipated patternss of behaviour are followed they build more certainty in future social exchange. Indeed,, there is reassurance in repeated actions. Successful, predictable exchange builds trust, whichh generates more lasting interactions (Nooteboom, 1995:5). In recent times, trust has beenn applied beyond individual exchanges and organisational culture to explain different levelss of regional economic performance (Fukuyama, 1995):
VirtuallyVirtually all economic activity in the contemporary world is carried out not by individualsindividuals but by organizations that require a high degree of social cooperation.operation. Property rights, contracts, and commercial law are all indispensab institutionsinstitutions for creating market-orientated economic systems, but it is possib toto economise substantially on transaction costs if such institutions are supplementedsupplemented by social capital and trust. Trust, in turn is the product of pr existingexisting communities of shared moral codes or values. These communities, at
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leastleast as they are lived and experiences by their most recent members, are not thethe product of rational choice.... (Fukyama, in Wolf, 1995:95). Butt is it enough to say that trust and the institutions of social exchange are historically embedded,, without a critical explanation of how or why! Sayer argues that social exchange theory,, and the lubricant of trust, idealises market interactions and underestimatesunderestimates the material aspects of economic life and /presents] an overly benignbenign view which underestimates the instrumentality of economic relations (Sayer,(Sayer, draft, 2000). Inn reference to McDowell (1997), he goes on to suggest that codes of trust and embedded institutionss may indeed be orientated towards hierarchical domination and 'the bottom line': oppressive,, inequitable and far from 'mutually beneficial' as the term trust suggests. Indeed, systemss of housing provision often incorporate uneven power resources, monopolistic coalitions,, and opportunistic and exploitative players.22Building upon this critical understandingg of the institutionalisation of trust and embeddedness, the following section concernss die relevant concepts of structural coherence, path dependency and institutional fix.
5.77 The Role of the State, Structural Coherence, Path Dependency and Institutionall 'fix' Ass stated throughout this paper, there are no universal definitions for emergent relations underlyingg housing provision because they are contingently defined in an open network of housingg provision. Further, there is no master blueprint or single agent, such as government, whichh has the power to map out such a network. Certainly, forms of provision may be promotedd to guide economic and social outcomes and likewise, certain social and economic outcomess may guide forms of provision. Organs of the state, such as central and local government,, major welfare providers, religious movements and labour unions, may consider somee forms of provision as being instrumental in reaching certain social (adequate shelter for all)) or economic goals (wage moderation). They may support or discourage investment in the residentiall environment as a priority or direct investment into other productive sectors (agriculture,, industry). Explanationss for housing provision aree often strongly state-centred, focusing on policy historiess and program structures, with little reference to broader, influential, structures of housingg provision influencing the promotion, investment, construction, allocation and consumptionn of housing. In agreement with Ball et al (1988), the state itself is considered to playy only a partial role in defining emergent relations and networks of housing provision. Accordingly: : ThereThere is particularly a need to downgrade the autonomy and power of the state, whichwhich is assumed to exist in the housing sphere (Ball, Harloe and Marteens, 1988:32). 1988:32).
Onn this point, the work of Bengs and Rönka (1994) concerning competition and monopoly in Finnish housing provisionn provides an appropriate illustration.
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Fromm this perspective, the state is considered to play a mediating, sometimes conflicting role inin establishing structurally coherent networks of housing provision. Beyond the state, one mayy imagine a temporary coherence or flow between different phases and stratum of housing provision. . Followingg Ambrose (1991) and Ball (1998), housing systems are perceived as a chain and a structuree of provision, comprising numerous economic interdependences and organisational interactions.. These relationships may be enforced or undermined via the shifting ideological hegemonyy (Kemeny, 1995, 1983) and uneven power relations of various agents both internal andd external to housing provision (Lundqvist, 1992). Further, various contingent conditions, externall to the chain of provision, may lead to a crisis of accumulation and social regulation underminingundermining the neat functional-institutionalfitof the status quo. Inn Regulation Theory, Jessop uses the term structural coherence to describe the interaction betweenn modes of capital accumulation and social regulation, which form relatively stable regimes.. Structural coherence is defined as:
historicallyhistorically contingent ensembles of complementary economic and extra-e mechanismsmechanisms and practices which enable relatively stable accumulation to oc relativelyrelatively long periods (Jessop, 1997b, 503 in Goodwin, 2001).
Suchh a term is also useful when explaining the long-term development of divergent forms of housingg provision. One may imagine a temporary coherence in the emergent relations of housingg provision: the property relations (rights, market structure and value), the system for channellingg savings into housing investment, and labour/welfare relations influencing capacityy to pay for housing services. When these emergent relations mutually reinforce one another,, a coherent structure of provision may prevail. This coherent cluster of emergent relationsrelations generates and is generated by numerous economic interdependencies, long ter obligations,obligations, and reinforced by organisational practices and ideological hegemony (K 1995,1983).. Yet coherence is neither given nor static. Rather, it is subject to a wide variety of contingentt circumstances and the uneven power relations of various agents both internal and externall to housing provision (Lundqvist, 1992). Nevertheless, during periods of coherence it cann be said that a neat structural, institutional and agency fit maintains the status quo.
Buildingg on this perspective, coherence based upon the interdependencies of emergent relations,, day-to-day practices and dominant ideologies, ensures that housing solutions are neitherr random nor 'natural'. They result from cumulatively causal and multiple layers (structure,(structure, institutions and agency) of structured open reality. Given the relative durabil housingg and urban forms, today's housing choices are 'sticky'. That is, they are heavily path dependentt and embedded in the solution, structures, institutions and practices of the past. Iss there a law that defines structural coherence? Most recently Jessop has argued that coherencee is something that is inherently spatio-temporal. For this reason, concrete research is requiredd to:
examineexamine how specific structures and structural configurations selectively reinforcereinforce specific forms of action and discourage others. Combining these concernsconcerns leads one to examine the continuing interaction between the reflexive reorganizationreorganization ofstrategic selectivities and the recursive selection and rete (or(or evolutionary stabilization) of specific strategies and tactics oriented to those selectivities.selectivities. In some circumstances this interaction can result in a relative 84 4
durabledurable degree of "structured coherence" (or stability) in a given institutional complexcomplex (Jessop, draft, 2000).
5.88 Defining Crisis Whatt is it that 'undoes' structural coherence, which may have sustained a particular form of housingg provision in the past, and lays the foundations for the establishment of new forms (Terhorstt and Van de Ven, 1997:80)? Firstly, it is important to recognise that the process of capitalcapital accumulation is an open one, contingently defined and dynamic. Rather than being merelyy a closed market exchange between supply and demand, markets are inherently imperfect,imperfect, subject to monopolies, misinformation, opportunism, resource constraints, unpredictableunpredictable contingencies, ideological shifts and the inevitable rise and fall of profits. Marketss aree not only vulnerable to local conditions, but increasingly to those beyond the peripheryy of regions in the global arena. Capitalism easily catches a cold from many different sourcess and there is no reliable or permanent cure. Housing provision is part of such a world, andd often comprises highly commodified relationships, subject to imperfect market relations andd the chaotic,, conflicting struggle for capital accumulation. Even 'public' housing is not immune:: built by private contractors, financed by loan capital, with (subsidised) rent levels to coverr these costs (Ball, 1983). Givenn the conflict ridden and crises prone nature of capitalism, it is easy to imagine that a neatt functional fit, between a particular form of housing provision and die broader political economy,, may only exist for short periods of time. In an effort to moderate die 'worst excesses',, institutions may constantly evolve new policies, practices and ideas. Government policiess and programs also have unforeseen and sometimes, hidden consequences. As modes off capital accumulation and social regulation are inherently spatio-temporal, the process of coherence,, crises and adaptation, must be concretely researched and defined (Jessop, draft, 2000). . Soo what is a crisis and what role does it play in providing a causal explanation for housing solutions?? The following examples aim to clarify two points. Firstly, as discussed in section 5.4,, the emergent relations of housing provision are contingently defined. ContingentContingent relations influence the definition of necessary relations underlying housinghousing networks. They are circumstantial relations that intersect with necessarynecessary relations to divert their 'necessary outcome'. Contingent relations maymay impede, mute, stifle and even extinguish the necessary relationships of a network.network. They are always present in open, interactive systems. Secondly,, emergent relations are abstractions from complex multi-dimensional forms of provision.. They are not atoms but mutually dependent; mus any shift in the definition of say propertyy relations may affect financial relations under certain contingent conditions. As above,, given that housing systems are always open, their emergent relations are always contingentlyy defined. It is therefore possible that one or more components of the emergent clusterr evolves in such a way to destabilise other mutually reinforcing economic interdependencies,, long tern obligations, organisational practices and ideological hegemony. AA simple example concerns housing investment during periods of war.. Housing investment doess not tend to take place in disputed areas, along borders or in regions of conflict. This is becausee land prices and their potential to rise, are too uncertain and thus provide inadequate
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securitysecurity to enable mortgage lenders to invest. During such times, building materials may als bee scarce and expensive. For these reasons, unstable areas often suffer from declining investmentss and dilapidation - compounding their economic, political and social problems.
Takee the more complex example of co-operative housing, which is dependent upon communal formss of property rights, cost-rentfinanceand rent pooling. This coherence could be underminedd by any number of contingencies including the sale of older houses which had previouslyy enabled cross subsidisation; deregulation of interest rates making financial costs higherr than affordable rent revenue, and orr long term unemployment amongst tenants leading too high levels of rent arrears eroding provisions for expansion and improvement of the cooperative.. Further, coherence in the co-operative sector can also be undermined by countervailingcountervailing ideology; by promoting more individual, private housing solutions such homee ownership, enticing wealthy cooperative tenants seeking higher quality homes from the tenure. . Thee above examples illustrate the importance of strategic contingencies that may erode or stiflee mutually supportive emergent relations. It is worth noting that in both scenarios, coherencee was disrupted by crises, creating a different risk risk profile for agents in the housing sector. . Inn periods of crises, the perception ofrisk,however real or imperfect, influences the actions of actorss who may establish new norms, practices and institutions, leading to the development of neww or adapted solutions for housing provision. Depending on the contingent conditions, risk perceptionn and uneven power resources of key agents, a whole range of social practices and institutionss may cumulatively arise to moderate (or exacerbate) the excesses of crises prone housingg provision. These may include improving the transfer of market knowledge, asserting codess of banking practice, ensuring the steady release of land for development, and regulating wagess and rental conditions. Amongst many other possibilities, is the regulation of housing costs,, protecting vulnerable constituents and maintaining social harmony, whilst minimising thee threat of wage demands to pay excessive housing costs. These actions also have their cumulative,, unintended and ongoing affects.
5.99 Defining Periods for Analysis Thiss section concerns the creation of appropriate cut off points for investigating and contrastingg periods of coherence and crisis in housing history. It is contended that contrasting periodss of coherence and crisis defined at the level of emergent relations can help to reveal thee causal mechanisms at work in the two divergent case studies of Australia and the Netherlands. . Inn this way, the basis for defining periods for contrast goes beyond mere indicators of aggregatedd housing outcomes. Thus, the division of periods or phases will not be based uponn the rise and fall of certain tenure forms. Such indicators will not reveal the causes of changee and divergence. Arguments against a direct cause-effect view of causation, as distinct fromm a contingent one, have already been put forward in Chapter 4. Rather, division should be madee at a deeper ontological level of adaptation, coherence and crisis amongst key emergentt relations in their contingent context underpinning housing provision. Such a definitionn may mean that the boundaries appear fuzzy, as they cannot be statistically 'proven'. Theyy are of course a researchers construction and thus contestable. Nevertheless, precise 'switches'' in forms of housing provision do not exist in real life. Modes of provision are
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stickyy and not change over night;ratherthey are subject to multiple causal mechanisms, whichh must be revealed by a process of abstraction and plausible notion of causality. Byy contrasting appropriately denned periods of adaptation coherence and crisis, based on contingentlyy defined clusters of emergent relations abstracted from empirical case study research,, the causal mechanisms driving divergence and change are more likely to be revealed.. Such an approach is based on a clear ontological argument, a theory of emergent relationss and a contingent view of causality.
5.100 Concluding Statement Housingg is neither an isolated nor a static object, but surrounded and sustained by an environmentt of path dependent and dynamic institutions. The manner in which housing is consumedd is subject to a strategic package of emergent relations. For this reason, to understandd and explain different forms of housing consumption, research must focus on the changingg definition of interdependent emergent relations in their contingent context. Itt is contended that systems of housing provision can be understood as the mutually reinforcingg outcome of a dynamic package of coherent emergent relations of housing provision.. These relations form clusters that partially generate the institutions, processes and dominantt ideas of housing production, allocation and consumption. In turn, existing patterns off housing consumption also influence the development of future housing options. The system off propertyrights,organisation offinanceand mode of housing consumption not only generatee but also are mediated by the existing process of housing provision. These key or necessaryy relations can be contingently defined and packaged in a variety of coherent ways, overr time and space. Thiss Chapter has postulated that changes in forms of housing provision are generated when thee architecture of housing provision, the emergent relations, are fundamentally redefined and thee socially and materially contingent conditions permit new forms of action or inaction. Fundamentall change may include the alteration of property relations shifting opportunities andd risk in favour of public or private land developers; deregulation and privatisation of state basedd housing loans; a shift from market allocation to queuing for housing distribution. Yet, strategicc events in housing history, such as a new property law orfinancialinstrument, may nott directly lead to change. Only under the right contingent conditions, will emergent powers becomee operational. For this reason, strategic events when linked to the definition of emergentt relations and contingent conditions are of explanatory importance. Forr each case study in subsequent Chapter 6 and 7, an attempt will be made to pin point and illustrate,, contrasting periods of adaptation, coherence and crisis. This will be done by criticallyy re-reading and reinterpreting housing history in the search for the strategic events andd contingent conditions that have reinforced or undermined mutual interdependenties, practicess and ideologies.
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