Philly Homeownership and the Myth of Tenant-Landlord Negotiations

By: Quinn McGarrigle

Compared to other U.S. cities of similar size, homeownership in Philadelphia remained fairly robust until very recently. In New York City, Los Angeles, Boston and Miami, over 60% of the residents are renters, not homeowners. Philadelphians are proud that it’s not as expensive to own your own home here. But from 2000 to 2010, Philadelphia’s renter population increased from 41% to 46%, according to the U.S. Census Bureau. This shift has continued — about half of Philadelphia rents now.

One might assume, based on the claims of the city government alongside many prominent Philadelphia news outlets, that our city is on an encouraging path of steady improvement. It is claimed that the data shows the success of gentrification and “urban renewal” as forces of improvement, with the glossy new condominiums and boutiques that we see popping up all throughout the city in neighborhoods previously impoverished praised as the objective success of city policy, supported by statistics about the rising property values, falling crime rates, and influx of young professionals and the services that cater to them. But as is often the case with ‘cold, hard facts,’ this data can lead us to very different conclusions depending on our priorities in considering the wider context. In the case of homeownership and renting in Philadelphia, the wider context to these glowing reports is one of crisis and contradiction.

A rising median income — from around $37,000 in 2013 to around $41,000 in 2016  — presented alone would seem to suggest that conditions are slowly but surely improving. A more complete analysis reveals that not only is that untrue, but conditions may be deteriorating even further for Philadelphians. Crucially, even those who fall into this median range of $41,000 a year cannot afford a median priced home, which would require a salary of around $53,000.  

And beyond those that have been affected by the rising income, the poverty rate has stayed the same, hovering consistently around 26% of the population, making Philadelphia the city with the highest poverty rate among the 10 most populous cities in the country.  Not only has the amount of poverty in the city stayed constant, but being poor in Philadelphia has actually become increasingly difficult as a direct result of the supposedly improving local economy: Rising property value means rising property taxes, and neighborhoods like Strawberry Mansion with a median annual income of $23,000 have seen their property taxes go up 47% in the past year alone.  This is often described as a “seller’s market.” Since property values are high, it is considered a better time to sell your home. But the economic model that a “seller’s market” operates under assumes a very narrow range of economic activity within which rational individuals interact as equals.

For example, the assumption is that, as a homeowner, you can weigh your options rationally according to the state of the market: “This is a seller’s market, so I will take advantage of the rising value of my property and sell my home. By moving to a cheaper part of the city, or to outside of the city, or renting an apartment, I can make a profit.” Alternatively, “Though perhaps I could make a profit off of selling my house in this market, it is my property and I can decide that my preference for this community and the sentimental value of my home outweigh the potential financial benefits.” This is the ideal model, but this ideal model falls apart, because social and economic realities do not conform to its basic assumptions. Here, the old truism about socialism “only working on paper” is reversed; on paper, capitalism and free trade as ideologies assume that all transactions take place as they might in a physical marketplace, where me and a merchant haggle over the price of something I would like to purchase. In reality, negotiations over a basic human necessity like a home take on an entirely different form — you make $30,000 a year, and suddenly developers with effectively bottomless funds are buying up homes in your neighborhood to flip them and sell them to wealthier people, or demolish them to build condominiums or luxury shops. Whatever is built will be necessarily out of your price range, because developers will only invest in what they can reap a profit from, and so would not buy up your neighbors’ property without trying to sell it as something more profitable than it was before. Suddenly you are paying a property tax that increases exponentially every year and are surrounded by restaurants, businesses, and grocery stores you can’t afford to shop at while still making the same meager salary as you were before. Technically, you can remain in this neighborhood — maybe you can get a better-paying job at one of the shops, maybe your kids’ schools will benefit from the higher property taxes. But if you’re like most Americans, taking a gamble like this would be gambling with the lives of your family: The bottom-earning 40% of Americans have an average of $29,000 in savings, and a median of $0 in savings. You have somewhere between $0 and $30,000 in the bank, so you are always one uninsured hospital stay away from having less than nothing.

In these circumstances, it would be hard to justify staying for sentimental value or commitment to the neighborhood, even if the community that sentiment was grounded in remained. But more often, in addition to the financial pressure, by the time you are making this already lopsided decision on whether to sell your home, much of the neighborhood already has been or is in the process of being pushed out by the same pressure, and many of the old stores and properties have already been bought up. To insist on an economic theory based on free decision-making between individual actors in light of the reality of this situation is irrational and based on ideology instead of an analysis of existing conditions. Instead, we clearly see the common interests of many different individuals creating a sensible division into groups — on one hand, the poor and working class homeowners, and on the other, real estate companies and developers. But even if we were to consider these groups (entities abstracted from individual actions) as the rational actors involved in negotiations of equal standing, on this scale, too, the reality of the situation runs contradictory to the ideals of the capitalist economy. Supposedly, these groups are then able to rationally act in their self-interest within the confines of the market to gain what they want. Realistically, homeowners, despite their common group interests, must interact with these financial demands as individuals, while developers and real estate companies act in each other’s interest, with an entire corporate ladder to efficiently allocate funds. Though they may compete against each other on their own terms, the shared interests of real estate companies lead them to leverage their collectively enormous wealth and influence to pass laws in the city government that benefit all of them. What can independent homeowners do against this besides agree not to move? Even if a few blocks of people collectively decided not to move (an unlikely prospect itself), what would stop developers from finding out the minimum amount that those people couldn’t refuse and raising their offer to that?

The situation, then, is that poor and working class people must interact with “the market” as individuals negotiating a deal, whereas the owning and profiting class can — through leverage over government policy and shared interests — collectively enforce its interests on individuals. In the case of homeownership, this relationship is already one-sided enough, and without a substantial income, the homeowner’s choice to sell or stay is mere formality. But one of the shared interests of the owning class is the perpetual expansion of private ownership, the divvying up of the world into more and more new markets and opportunities for profit. Most people intuitively recognize this as the expansion of “consumerism,” or the feeling that “everything is for sale.” And in the expansion of markets to all aspects of life, charging someone monthly for rent to temporarily reside in a home under certain strict conditions is preferable to selling them a house one time and giving them even the merely formal recognition of sovereign property. Perhaps it sound conspiratorial, but this expansion of what is for sale and in what portions is not the intentional scheming of some shady individuals, it is just the way an economy based around the accumulation of capital functions. Capitalism depends on the most counterintuitive reading of the old saying regarding self-sufficiency: “Give a man a fish, you’ll feed him for a day. Teach a man to fish, he’ll never be hungry again. But if you own the land around the river he is fishing from, and you own the fishing boats, and all the bait shops and canneries and fish farms, you’ll be able to hire him to work for you and then give him a small share of the money he and other laborers produced using the capital you own, so that they can buy back a small share of the fish they caught while under your employment, and eat for a day without being so self-sufficient that they can quit.” Likewise, “If someone buys a house, you’ll profit for a day. Rent out a house, and you’ll profit every month, and if the property value goes up you can kick them out and refurbish the place to attract wealthier renters.”

What many of us often describe as a city’s “character” is immensely degraded by the displacement of communities in this way. Philadelphia is often described as a City of Neighborhoods — but when a section of the city is no longer owned by the people living there, but by landlords that can evict them at will at the first hint of a higher profit, that is no longer a neighborhood or a community, it is a few blocks of businesses, some of which offer conditional residential privileges as a product. A community is something that arises out of shared spaces, mutual obligations, unspoken traditions, methods of communication and conflict resolution, that over generations grow into unique regional cultures like the ones Philadelphians are so proud of. This isn’t a luxury, it is a need as necessary for human flourishing as eating and sleeping. Look at the parts of other big cities where renters are a majority and “urban renewal” has taken a similar path as it is now in Philadelphia. Manhattan, San Francisco, Boston — on the surface it is clear they have been stripped of some “character,” but this shouldn’t be dismissed as reactionary locals upset the city has lost its grittiness or some generalized, natural nostalgia. There is a real loss when homes are replaced with rentals, when networks of families and friends are replaced with itinerant students and young professionals, when neighborhood delis are replaced with gaudy boutiques and novelty shops. As socialists, we begin our analysis with material conditions, but only because we understand that the immaterial aspects of human life that make living worthwhile are so inseparably tied to this material base, growing from it. Gentrification and “urban renewal” hold the ideal of the city above the reality of the city, and by doing so abandon what is worthwhile in both.    

Art by Stephanie Czapla

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