Capitalism produces the housing crisis

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In September 2012 legislation came into force that made squatting in the UK a criminal offence. At the end of the month the first person was convicted under the new legislation and sentenced to 12 weeks in prison. He had come from Plymouth to London looking for work and had occupied a flat owned by a housing association.

Prior to this a number of Tory MPs and newspapers made much of cases where homes that were lived in had been squatted and used this to justify the new law, despite knowing that there were a number of laws already in place aimed at preventing squatting. This suggests that the new law is actually aimed at keeping squatters out of unoccupied houses, offices and other buildings, which are those usually squatted. It is also part of the wider campaign to divide and control the working class. This was given a new boost at the start of 2013 with the spat over ‘scroungers’ versus ‘strivers’ that preceded the vote to limit increases in most benefits to 1% a year.

No official figures on the number of people squatting have been collected since the mid 1980s, but a recent article in the Guardian reported that there are between twenty and fifty thousand people squatting, mostly living in long-term abandoned properties.[1] This is part of the larger picture of increasing numbers struggling to keep a roof over their heads. For example, the figures gathered about homelessness show increases in the last few years: in England 110,000 families applied to their local authority as homeless in 2011/12, an increase of 22% over the preceding year. 46% of these were accepted by the local authority as homeless, an increase of 26% over the preceding year. The figures for Wales and Scotland also show increases in both the numbers applying and being accepted.

The charity Crisis, from whose website the figures above are taken, underlines that these official figures are likely to be very inaccurate since the majority of those who are homeless are hidden because they do not show up in places, such as official homeless shelters, that the government uses to gather its data. Another indicator that housing is becoming an increasing problem is provided by the data about the numbers sleeping rough. In 2011 official figures show that over two thousand people slept rough in England on any one night in 2011, an increase of 23% over 2010. However, once again, the real figure is probably far higher as non-government agencies report that over five and a half thousand people slept rough in 2011/12 just in London, an increase of 43% over the previous year.

Globally, it is estimated that at least 10% of the world’s population is squatting. Many of the slums that surround cities such as Mumbai, Nairobi, Istanbul and Rio de Janeiro are largely comprised of squatters.[2] The types of accommodation, the services, or lack of them, available to inhabitants, the type of work undertaken and the composition of the population all vary, but collectively they show that, for all the goods produced and all the money swirling around the world, capitalism remains unable to adequately meet one of the most basic of human needs. The purpose of this article is to try and examine the reasons for this.

The starting point is the recognition that the form the housing question takes under capitalism is determined by the economic, social and political parameters of bourgeois society. In this system, the interests of the working class, and of other exploited classes such as the peasantry, are always subordinated to those of bourgeoisie. At the economic level there are two main dynamics. On the one hand, housing for the working class is a cost of production and thus subject to the same drive to reduce the costs as all other elements linked to the reproduction of this class. On the other, housing can also be a source of profits for part of the bourgeoisie, whether provided for the working class or any other part of society. At the social and political level, housing raises issues about health and social stability that concern the ruling class, while it can also offer opportunities for both physical and ideological control of the working class and other exploited classes. This was true in the early days of capitalism and remains true today.

Housing and early capitalism

The situation in Britain in the late 18th and early 19th centuries was a consequence of the full unfolding of the capitalist system that had been developing for several centuries previously. The industrial revolution that was a consequence of these early developments led to a transformation in all areas of life within the capitalist world, in the economy, in politics and in social life. The development of large factories led to the rapid growth of cities, such as London, Manchester and Liverpool, and drew in millions of dispossessed peasants, transforming them into proletarians. Advances in productivity and the cyclical crises that typified early capitalism periodically ejected hundreds of thousands of workers from employment while the expansion of production and its extension into new fields, driven on by the same crises, drew them back in. For the bourgeoisie this meant there was a readily available workforce: the reserve army of those ejected from work or newly driven from the land, that tended to help keep the cost of all labour down. For the working class the result was a life of exploitation, poverty and uncertainty.

The Condition of the Working Class in England written by Engels after he moved to Manchester in 1842 and published in German in 1845, revealed the true face of the industrial revolution. A central theme of the work is an examination of the living conditions of the working class. Drawing on various official reports as well as his own observations he described the accommodation endured by workers in cities such as London, Liverpool, Birmingham, and Leeds: “These slums are pretty equally arranged in all the great towns of England, the worst houses in the worst quarters of the towns, usually one or two-storied cottages in long rows, perhaps with cellars used as dwellings, almost always irregularly built…The streets are generally unpaved, rough, dirty, filled with vegetable and animal refuse, without sewers or gutters, but supplied with foul, stagnant pools instead. Moreover, ventilation is impeded by the bad, confused method of building of the whole quarter, and since many human beings live here crowded into a small space, the atmosphere that prevails in these working-men’s quarters may readily be imagined.”[3]

He notes the gradations of misery within this overall picture. In St Giles in London, which was near Oxford Street, Regent Street and Trafalgar Square with their “broad, splendid avenues”, he distinguishes between the dwellings located in the streets and those in the courts and alleys that ran between them. While the appearance of the former “is such that no human could possibly wish to live in them” the “filth and tottering ruin” of the latter “surpass all description”: “Scarcely a whole window-pane can be found, the walls are crumbling, door-posts and window-frames loose and broken, doors of old boards nailed together, or altogether wanting in this thieves quarter…Heaps of garbage and ashes lie in all directions, and the foul liquids emptied before the doors gather in stinking pools. Here live the poorest of the poor, the worst paid workers with thieves and the victims of prostitution, indiscriminately huddled together, the majority Irish, or of Irish extraction, and those who have not sunk into the whirlpool of moral ruin which surrounds them, sinking daily deeper, losing daily more and more of their power to resist the demoralising influence of want, filth, and evil surroundings.”[4] In the new factory towns industrialists and speculators threw up houses that were poorly built, overcrowded and lacking in ventilation. Within a few years most had become slums, albeit profitable ones. From these and many other descriptions of the environment Engels goes on to consider the consequences on the physical and mental health of the inhabitants. He shows the link between mortality, ill health and poverty, examines the poor quality of the air breathed by the working class, the lack of education of their children, and the arbitrary brutality of the conditions and regulations of employment.

The pattern set by Britain was quickly followed by other countries such as France, Germany and America as they industrialised. Everywhere that capitalism developed the working class was housed in slums and in most of the great cities the working class areas were places of poverty, filth and disease from which the new bourgeoisie drew the wealth that allowed them to live comfortably and moralise according to their various tastes about the immorality and fecklessness of the working class.

Bourgeois solutions to the housing crisis

In The Housing Question, published 27 years after the Condition of the Working Class in England, Engels acknowledges that some of the worst slums he described had ceased to exist. The principal reason for this was the realisation by the bourgeoisie that the death and disease that reigned in these places not only weakened the working class, and thus the source of their profits, but also threatened their own health: “Cholera, typhus, typhoid fever, small-pox and other ravaging diseases spread their germs in the pestilential air and the poisoned water of these working class districts… Capitalist rule cannot allow itself the pleasure of generating epidemic diseases with impunity; the consequences fall back on it and the angel of death rages in the ranks of the capitalists as ruthlessly as in the ranks of the workers.”[5] In Britain this resulted in official inquiries, which Engels notes were distinguished by their accuracy, completeness and impartiality compared to Germany, and which paved the way for legislation that began to address the worst excesses.

This was the era that saw the building of sewerage and water systems in towns and cities in Britain. If the impulse for these reforms came specifically from the self-interest of the bourgeoisie and more indirectly from the pressure of the working class and the need to manage the growing complexity of society, the possibility of realising them was due to the immense wealth being produced by capitalism. Engels notes that the interests of the bourgeoisie in this matter are not only linked to issues of public health but also to the need to build new business premises in central locations, to improve transport by bringing the railways into the centre of cities and building new roads, and also by the need to make it easier to control the working class. This last had been a particular concern in France after the Paris Commune and resulted in the building of the broad avenues that still characterise much of this city.

However, Engels goes on to argue that such reforms do not eliminate the housing question: “In reality the bourgeoisie has only one method of settling the housing questions after its fashion – that is to say, of settling it in such a way that the solution poses the question anew.”[6]  He gives the example of a part of Manchester called Little Ireland that he described in The Condition of the Working Class in England. This area, which was “the disgrace of Manchester”, “long ago disappeared and on its site there now stands a railway station”; but subsequently it was revealed that Little Ireland “had simply been shifted from the South side of Oxford Road to the north side.”[7] He concludes: “The same economic necessity which produced them in the first place produces them in the next place also. As long as the capitalist mode of production continues to exist it is folly to hope for an isolated settlement of the housing question or of any other social question affecting the lot of the workers.”[8]

Subsequent developments in Britain seem, ultimately, to refute this since the slums of the 19th and early 20th century are gone. The First World War left a shortage of 610,00 houses with many pre-war slums untouched. In its aftermath local authorities were given powers to clear slums and to build housing for rent. Between 1931 and 1939 over 700,000 homes were built, re-housing four fifths of those living in slums.[9] Many of the new houses were built in large estates on the outskirts of major cities including Liverpool, Birmingham, Manchester and London. Some local authorities experimented by building blocks of flats. However, these efforts were dwarfed by the two and half million homes built privately and sold to the middle class and better off parts of the working class. Nonetheless, this did not mark the end of slums and severe overcrowding remained common in many working class areas. The Second World War saw a regression as house building all but stopped and inner city areas were exposed to bombing. The post war period witnessed the most concerted house building programme by the state in British history, which reached its peak under the Tory government of the late 1950s when over 300,000 council homes were built annually. The building of large tower blocks was a more prominent feature this time. Support was also given to private building and by 1975 52.8% of homes were privately owned, compared with 29.5% in 1951 (private rented properties fell from 44.6% to 16% during the same period).[10]

However, these developments were the product of their time and reflect the prevailing economic situation. In Britain and the other major capitalist powers, the post war period allowed some significant changes in housing. The post-war boom that was based on the very significant improvements in productivity that followed the destruction of the war gave the state the means to increase spending in a range of areas, including housing. As already noted, some important working class areas in cities that had been centres of production had been destroyed or damaged by bombing. The industries that developed after the war, such as car making, led to the building of new factories, often outside the old concentrations. This required the building of accommodation for workers. There was also a political motive in meeting social needs in order to reduce the risk of unrest following the war. In this the state drew on the failure of the policy of ‘Homes fit for heroes’ proclaimed after World War I, a failure that had helped to discredit the post-war government of Lloyd George.

However, the post war boom did not reach many parts of the world. These included some countries in the west, such as Ireland where severe poverty and slums remained until the economic boom that developed there in the 1980s. Above all, it encompassed what has been called the ‘Third World’, which essentially comprises those continents and countries that were subject to imperialist domination by the major capitalist countries. In short, most of the world. Looked at from this perspective it becomes evident that Engels’ argument is not just confirmed but confirmed on a scale he could not have imagined.

Housing in late capitalism

The present global situation is shaped by the structural crisis of capitalism that lies behind both the open recessions and the booms of the last 30 to 40 years, including the astonishing levels of growth seen in China, India and a number of other countries. This period has seen a reshaping of the whole world and its full analysis is far beyond the scope of this article. For many on the left this reshaping is a consequence of the triumph of neo-liberalism with its doctrines of reducing the state and supporting private enterprise. This is frequently presented as an ideologically based strategy and the crisis of 2007 as being of its making. While the critique of neo-liberalism and globalisation may describe aspects of the changes  that have taken place in the global economy, it tends to miss the essential point that this transformation is the result of the response of capitalism to the economic crisis. It is the result of the unfolding of the immanent laws of capitalism rather than the outcome of ideology. It is this that links the situation in the old heartlands and the periphery, in the Third World and the first, in the countries experiencing economic growth and those not. The housing question everywhere has been posed anew by these developments.

Today, one billion people live in slums and the majority of the world’s population is now urban. Numbers continue to grow every day and the slums that surround cities of all sizes in these countries grow ever-larger. Most of these slums are in the third world and, to a lesser extent, parts of the old eastern bloc (what was once called the Second World). This is a new situation. In the book Planet of Slums, published in 2006, the author, Mike Davis, argues that “most of today’s megacities of the South share a common trajectory: a regime of relatively slow, even retarded growth, then abrupt acceleration to fast growth in the 1950s and 1960s, with rural immigrants increasingly sheltered in peripheral slums.” [11] The slow or retarded growth in many of these cities was a consequence of their status as colonies of the major powers. In India and Africa the British colonial rulers passed laws to prevent the native populations moving from the country to the city and to control the movements and living arrangements of those in the cities. French imperialism imposed similar restrictions in those parts of Africa under its control. It seems logical to see these restrictions as linked to the status of many of these countries as suppliers of raw materials to their colonial masters. However, even in Latin America, where the colonial hand was arguably less severe, the local bourgeoisie could be equally opposed to their rural countrymen and women intruding into the cities. Thus in the late 1940s there were crackdowns on the squatters drawn to urban centres such as Mexico City as a result of the policy of local industrialisation to replace imports.

This changed as colonialism ended and capitalism became ever more global. Cities began to grow in size and increase in number. In 1950 there were 86 cities in the world with populations of over one million. By 2006 this had reached 400 and by 2015 is projected to rise to 550. The urban centres have absorbed most of the global population growth of recent decades and the urban labour force stood at 3.2 billion in 2006.[12] This last point highlights the fact that in countries such as Japan, Taiwan and, more recently, India and China this growth is linked to the development of production. One consequence of global significance is that over 80% of the industrial proletariat is now outside Western Europe and the US. In China hundreds of millions of peasants have flooded from the countryside to the cities, principally those in coastal regions where most industrialisation has taken place; hundreds of millions more are likely to follow. By 2011 the majority of China’s population was urban.[13]

This can give the impression that the process seen in the 19th century is continuing; that the early chaotic development will be replaced by a more steady progression up the value chain of production with resulting increases in wages, prosperity and the domestic markets. This is used to support the argument that capitalism remains dynamic and progressive and that in time it will lift the poor out of poverty, feed the starving and house the slum dwellers.

However, this is not the full story of the current period. In many other countries there is no link between the development of cities and the slums that go with them and the development of production. This can be seen by comparing cities by size of population and GDP. Thus, while Tokyo was the largest by population and by GDP, Mexico City, which was the second largest by population, does not figure in the top ten by GDP. Similarly Seoul, which is fourth largest by population also does not appear amongst the top ten by GDP. In contrast, London, which was sixth by GDP, is 19th by population.[14] Population growth in these cities seems more a consequence of wider economic changes, such as the reorganisation of agriculture to meet the requirements of the international market and fluctuations of the price of raw materials on the one hand and the often linked impact of war, ‘natural’ disasters, famine and poverty on the other. In some cities, such as Mumbai, Johannesburg and Buenos Aires there has actually been de-industrialisation. Davis also highlights the neo-liberal policies of the IMF as having a particular role in this process and in the impoverishment of many of the recipients of its ‘aid’ and ‘advice’.

The consequences can be seen in the shanty towns that encircle many cities in the south. While it is the megacities that hit the headlines, the majority of the urban poor live in second tier cities where there are often few, if any, amenities and which attract little attention. The accounts of the living conditions of the inhabitants of these slums that run through Planet of Slums echo parts of Engels’ analysis. In the inner cities the poor not only crowd into old housing and into new properties put up for them by speculators but also into graveyards, over rivers and on the street itself. However, most slum-dwellers live on the periphery of the cities, often on land that is polluted or at risk from environmental disaster or otherwise uninhabitable. Their homes may be made of bits of wood and old plastic sheeting, often without services and subject to eviction by the bourgeoisie and exploitation and violence by the assorted speculators, absentee landlords and criminal gangs that control the area. In some areas squatters progress to legal ownership and succeed in getting the city authorities to provide basic services. Everywhere they are subject to exploitation.

As in England in the 19th century there is money to be made from misery. Speculators large and small build properties, sometimes legally, sometimes illegally, and receive rents, which for the space rented are comparable to the most expensive inner city apartments of the rich. The lack of services provides other opportunities, including the sale of water. The inhabitants within the slums are divided and sub-divided. Some who rent shacks may rent a room to someone even poorer. Some may have jobs that are more or less precarious, others scrape a living through petty trading or providing services to their fellow inhabitants. This mass of proletarians, semi-proletarians, ex-peasants and so on constitute a reserve army of labour that helps to lower the cost of labour regionally, nationally and, ultimately, globally. They also pose a threat to capitalist order and offend the sensibilities of the bourgeoisie just as the slum-dwellers of Britain did in the 19th century.

The bourgeoisie continues to try to ‘solve’ the housing crisis that its society creates. Today as in the past this is always circumscribed by what is compatible with the interests of the capitalist system and of the bourgeoisie within it. On the one hand, there have been attempts simply to bulldoze the problem away, evicting millions of the poor, whether workers, ex-peasants, petty-traders or the cast-offs of society, and dumping them in new slums, or in the open countryside, away from the eyes, ears and noses of the rich. On the other hand, a whole bureaucracy has grown up aimed at solving the housing problem, including the IMF, the World Bank, the UN as well as both international and local NGOs; but they always do so within the framework of capitalism. Thus, new housing often benefits the petty-bourgeoisie and better off workers who have the contacts or can pay the bribes or afford the rent, rather than those it was nominally intended for. A priority is usually to keep costs low, resulting in either barrack-like housing schemes or reforming the slums without ending them. The latter has seen a particularly unusual alliance between would be radicals who want to ‘empower’ the poor and international capitalist bodies such as the World Bank who want to find a market solution that encourages enterprise and ownership.

Finally, there is the unspoken but ever-present objective of dividing the exploited through the usual mix of co-option and repression. Thus bodies that begin with radical demands, such as squatters’ groups, often end up collaborating with the ruling class once they have been given a few concessions. Amongst some ideologues there are even echoes of the past, such as the idea that the solution lies in providing the poor with legal entitlement to the land on which they are living. This echoes the ideas that Engels combated in the first part of The Housing Question that deals with the claims by a follower of the anarchist Proudhon that providing workers with the legal title to the property they are living in will solve the housing question. Engels shows that this ‘solution’ will rapidly lead back to the original problem since it does not change the basic premise of capitalist society that “enables the capitalist to buy the labour power of the worker at its value but to extract from it much more than the its value…[15]

In the old capitalist heartlands of Western Europe and the US, the return of the open economic crisis at the end of the 1960s led to two major changes that impacted on the provision of housing for the working class. The first was the need to reduce the expenditure of the state, and especially the social wage paid to workers; the second was the shift of capital from productive investment to speculation where the returns seemed higher. We will focus on Britain in examining this, as we did at the start of this article, mindful of the fact that the particular form taken varies from country to country.

The tightening of state spending led first to a slow down in the number of council houses built and then, under Thatcher, to the selling of the council housing stock and the restriction of further building by local authorities. This is frequently portrayed as an example of Thatcherite dogma and it is indeed true that it was partly an ideological campaign to promote home ownership. But none of this began with Thatcher. We have already noted the efforts to promote home ownership by both Tory and Labour governments both before and after the Second World War, principally through tax relief on mortgages. The selling of council houses not only reduced the capital costs of building homes but also the revenue costs of maintaining them, since the new owner assumed individual responsibility for this. The idea that owning property would help to curtail the threat from the working class goes back further still. In The Housing Question Engels quotes one Dr Emil Sax’s paean to the virtues of land ownership: “There is something peculiar about the longing inherent in man to own land…With it the individual obtains a secure hold; he is rooted firmly in the earth…The worker today helplessly exposed to all the vicissitudes of economic life and in constant dependence on his employer, would thereby be saved from this precarious situation; he would become a capitalist…He would thus be raised from the ranks of the propertyless into the propertied class.”[16]

Financial speculation became ever more feverish as the struggle to find a profitable return on capital became more intense over the last 40 years. The financial deregulation that was a feature in both Britain and the US in the 1980s allowed the bourgeoisie to develop ever more complex forms of speculation. In the 1990s money flowed into a range of new instruments based on the extension of credit to ever larger parts of the working class. The development of sub-prime mortgages in the US typified this approach. Speculators thought they were safe because of the complex nature of the financial instruments they were investing in and the high rating given to them by rating agencies such as Standard and Poor. The collapse of the sub-prime market in 2007 exposed this as the illusion it always was and laid the foundations for the wider collapse that followed, whose effects are still with us. In Britain ever-larger mortgages were offered with ever-smaller deposits and relaxed financial checks. The result was that mortgages made up the majority of the growth in personal credit that helped to underpin the ‘booms’ of the 1990s and early 2000s (the longest period of post-war growth as Gordon Brown used to claim).

The first housing bubble burst in the 1990s and plunged many into negative-equity, resulting in a high level of repossessions. This time round the bourgeoisie has managed to limit the impact so there are less repossessions. However, housing has now become less affordable due to a combination of the lasting increases during the bubbles and the tightening of credit following 2007, with the result that many young people can no longer afford to buy. At the same time, the rented sector has reduced. Council provision is limited and tightly controlled, with eligibility criteria that condemn younger people to small and poor accommodation if not to B&B. The new limits on Housing Benefit will also force families to move away from their home area or face being thrown on the street where one of the few options is to squat one of the thousands of empty properties. Thus we return to where we began.

The answer to the housing question

The housing question that confronts workers and other exploited classes around the world takes quite different forms in one country or another and often divides the victims of capitalism against each other. Between a young worker squatting on land prone to flooding or subject to industrial poisons on the margins of a city like Beijing or Mumbai and a young worker ineligible for a council flat in London or unable to get a mortgage on a house in Birmingham there can seem to be an unbridgeable gulf. Yet the question for all workers is how to live as a human being in a society subordinated to the extraction of profits from the many for the few. And for all the changes in the form and scale of the question the content remains the same. Engels’ conclusion remains as valid today as it was over a century ago: “In such a society the housing shortage is no accident; it is a necessary institution and can be abolished together with all its effects on health etc., only if the whole social order from which it springs is fundamentally refashioned[17]  

North 11/01/13

[1]. Guardian 03/12/12, “Squatters are not home stealers”. Part of the ideological campaign whipped up to justify the anti-squatting law involved loudly publicising cases where individual homeowners retuned from a period of absence to find their house being squatted

[2]. Ibid.


[3]. The Condition of the Working Class in England, “The Great Towns”. Collected Works Volume 4, Lawrence and Wishart p.331.

[4]. Ibid., p.332-3

[5]. The Housing Question, Part ii “How the bourgeoisie solves the housing question”. Collected Works, Volume 23, Lawrence and Wishart, p.337.

[6]. Ibid. p.365.

[7]. Ibid. p.366.

[8]. Ibid. p.368.

[9]. Stevenson British Society 1914-45, chapter 8 “Housing and town planning”. Penguin Books, 1984.

[10]. See Morgan, The People’s Peace. British History 1945-1990. Oxford University Press, 1992.

[11]. Davis, Planet of Slums, chapter 3 “The treason of the state”, Verso 2006. Much of the information that follows is taken from this work.

[12]. Ibid., chapter 1, “The urban climacteric”, p.1-2.

[13]. UN Habitat, The state of China’s cities 2012/13, Executive Summary, p.viii.

[14]. Davis op. cit. p.13.

[15]. Engels op cit., p.318

[16]. Engels, op.cit. p.343-4.

[17]. Ibid., p.341.



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