Housing as “capital”

This work is licensed under the Creative Commons | © Jane I. Guyer. ISSN 2049-1115 (Online). DOI: http://dx.doi.org/10.14318/hau5.1.024


Housing as “capital”

Jane I. GUYER, Johns Hopkins University

Comment on Piketty, Thomas. 2014. Capital in the twenty-first century. Translated by Arthur Goldhammer. Cambridge, MA: The Belknap Press of Harvard University.

Thomas Piketty’s enormous oeuvre must contain something for everyone.1 For me, the big picture he puts before us, in his accounting mode, contains specific components that stop my reading in its tracks to ask: “how did that happen?” Since Piketty’s explanatory mode is rather less developed than his descriptive mode, we are often left to supply our own answers or “next questions” when “pauses for thought” impose themselves. I have never really believed in the supposed selfpropelling “logics of systems,” except as a useful “as-if ” provocation. Thus, for me, the prospect of accepting the phenomena he documents as merely the playing out of the logic of (late) capitalism,2 rather than actually delving into the processes that produced them, would feel like a failure of nerve or just exhaustion in the face of enormity.

So here is the observation that stopped me in my tracks, in part because it connects with topics I have been presenting on of late (e.g., Guyer 2013, 2014). In his long-term documentation of the changing composition of capital, as a percentage of national income, from 1700 onward (Piketty 2014: 116, 117), Piketty shows the large increase in the proportion accounted for by housing (“including the value of the land on which buildings stand” [119]), which begins around 1960, with the [496]gradient rising faster than any other component from around 1990. His first graphs are for Britain and France, but then the same general trend is repeated for Germany (141), and, on a gentler gradient, for the United States (151). In general, he suggests capital “always tends to transform itself into rents as it accumulates in large enough amounts—that is, its vocation, its logical destination” (116; n.b., “rents,” of course in the broad economic rather than vernacular sense).

Piketty’s explanation for these changes in capital composition seems to have recourse more to pan-human propositions than dense social histories. For example, he writes, “This very long-term structural transformation reflects on the one hand the growing importance of housing, not only in size but also in quality and value, in the process of economic and industrial development; and on the other the very substantial accumulation since the Industrial Revolution of buildings used for business purposes” (2014: 199). Then later, “the annual rental value of housing, which accounts for half of total national wealth, is generally 3–4 percent the value of the property… . The returns on financial investments, which are the predominant asset in larger fortunes, are higher still. Taken together, it is these kinds of investments, in real estate and financial instruments that account for the bulk of private wealth” (209).

For those of us more focused on the people, as well as the broader “functions of money,” the following quote, while prescient also stands as further evidence of how he downplays politico-social processes in favor of pronouncements that evoke human nature. I quote in extenso, because I take it up as social history in the next section:

One can easily imagine a society in which capital is of no use in the production process… . Yet capital might still play an important role in such a society as a pure store of value… . Nothing prevents us from imagining such a society, but in all known human societies, including the most primitive, things have been arranged differently. In all civilizations, capital fulfills two economic functions: first, it provides housing (more precisely, capital produces “housing services,” whose value is measured by the equivalent rental value of dwellings, defined as the increment of well-being due to sleeping and living under a roof rather than outside), and second, as a factor of production… . Historically … increasingly sophisticated forms … came later, as did constantly improved forms of housing. (Piketty 2014: 213)

(Hold onto the idea that “housing services” / rental value measures “well-being,” alongside his passing mention of the value of “the land on which the buildings stand” as a component of the value of housing as a capital asset.)

Piketty then goes on to discuss the “marginal productivity of capital” and the place of monopoly in allowing the imposition of a “return greater than the marginal productivity.” It is the work of the financial sector to seek out “the best possible uses for capital, such that each available unit of capital is invested where it is most productive (at the opposite ends of the earth if need be) and pays the highest possible return to the investor” (2014: 214). As Chris Gregory has pointed out (see Gregory 2014) in passages like these, Piketty seems committed to marginalist thinking, in a rather conventional capital-labor sense, which greatly limits his [497]analysis of the qualitative shifts in the composition of capital that he himself shows the reader so clearly. One no longer needs to be a scholar to figure out that urban housing in certain places is deeply rooted in the “value of the land on which the building stands,” which has now become also a question of location (in all its aesthetic, social, political, and other asset-characteristics). The press covers the skyrocketing purchase and rental prices in many major cities of the world: New York, Paris, Miami, London, Athens, Copenhagen, et cetera.

But surely, the rise in the capital value of this housing cannot be seen as only a reflection of the long-term rise in housing quality, nor of the marginal return through rental. Since 1989, surely political stability and generally predictable civility have become an enormous asset in a turbulent world, especially for the wealthy classes of places that they themselves have helped to render profoundly unstable (in part through their own ambitions for capital accumulation). Many of the extremely expensive residential properties in these major cities and the plush coastal areas (like the Florida Atlantic coast) are owned by foreigners and remain uninhabited for up to ten months of the year. Wealthy citizens behave in a similar economic fashion, although perhaps less focused on urban centers. For example, see Mitt Romney’s addition to his housing portfolio—amounting now to at least six “homes”—of a log/chalet-type mansion in Utah with 7 bedrooms and 9.5 bathrooms, and a seafront house in La Jolla, California costing $12 million. The marginal rate of return for such properties seems no longer measurable in money at all. In fact, the transactional regimes for urban housing appear to be taking on some of the characteristics of the precious metal and gemstone markets of the distant past: a storage mode as very high-value items that are relatively easily guarded and protected, including by enduring institutions and technologies (safes, specialist assessors, professional guardians, a functioning law-of-property system, explicit and favorable tax regimes, etc.) for which the owner hardly pays, as long as the property in question is located in stable contexts. Just as a comparison, to probe the politicosocial stability factor in the value of location, I looked up Cairo prices, and found this statement: “The real estate market has been hard hit by this civil unrest in the past three months, according to local property experts.”3

Alongside the revival of such old “storage” cultures for wealth, there appears to be a return to old transaction terminologies as well. Horacio Ortiz (personal communication) explains the meaning of “cash transfers” in the financial sector as meaning simply simultaneous and total payment (no physical objet in your pocket and passed across a table!); this term is also used for the instantaneous bank transfers through which London real estate is purchased. Even those who could afford the high prices, within a mortgage system of payment, are shut out by the temporality factor. Bank transfer is instantaneous, as if the parties were sitting at a table together, whereas mortgages take time to arrange. Through a couple of connections (family and a workshop at UC Irvine’s Institute for Money, Technology, and Financial Inclusion) I heard of a similar dynamic in California, as financial organizations rush to buy residential property whose stream of rental income can be securitized (see appendix). They buy “cash” as soon as a property hits the market.

[498]The problem for Piketty and for all standard economic analysis is that the assimilation of this situation to a simple question of capital in supply-and-demand markets cannot possibly cover the socio-political dynamics that frame both the spectrum of monetary values and the transactional practices. In his implicit projections from the past, Piketty is still working with combinations of capital, labor, and technology (see 2014: 216), i.e., all of the conventionalized definitions and temporalities developed in the latter half of the twentieth century. Of course, this is a condition of making any kind of long-term summaries of evidence: don’t shift the definitions, mid-stream! His summaries, however, can do the enormous service of allowing the rest of us to plunge in deeper, at strategic points that his analysis has brought into view. How did this shift to housing as a major asset happen? And what is happening to it now? Neither question should be posed in the passive voice, as if “happening” just occurred by some abstract force, if we want to dig deeper, and to transpose the “how” question into “who” and “when,” and to reinvestigate the “what” (is “capital,” now?) as we slow down—“whoa!”—to take in all the components of the situations of the twenty-first century, which is now well under way. Reimagined in this new frame, the exploration of how this shift in the composition of capital works, as well as the increasingly unequal distribution of its ownership, would be a huge ethnographic topic, covering the entire 100 percent of the population, across the whole spectrum, since everyone is implicated in the dynamics of the housing market.

Digging into housing, up to now

I have opened up the “value of land” component of housing as capital, as a topic I’ve been collecting sources on lately, as the public commentary has grown. The definition of the capital value of housing, as “housing services,” to be measured by rental value and representing the contribution to “well-being” of having a roof over one’s head, is the mis-representation that drew me to the theme of housing in Piketty’s work in the first place. Within the American Consumer Price Index (CPI) administration, it was proposed in the 1980s that “the housing component of the CPI—for both renters and homeowners—should measure the cost of consuming the flow of shelter services” (Gillingham 2001: 31). Shelter services were defined as comprising “interest costs, taxes, maintenance, etc.,” judged to be “extremely complex,” but separable from the investment component. Finding it “impossible” to construct a valid user-cost model for the many “services” that “shelter” provides, they turned to rental equivalent instead. The consumption quotient for owner-occupiers was to be the imputed opportunity cost of not renting the same house. A concept coming forward from early modern and nineteenth-century practice—namely “rent”—is brought forward without disaggregation into the financial era. The same appears to be the case in France, and, indeed, CPI measures are internationally monitored for mutual consonance by the International Monetary Fund, because they enter into inflation calculations.

I have looked up the trends in house-purchase prices and rental prices in the United States to find that rentals are rising much faster. Doubtless this would be assimilated to the market conditions of demand and supply. But we need to ask [499]what conditions create that configuration of conditions. If more and more housing is “capital” and owned by the very wealthy or by financial organizations (or both), then their projections of the safety of stored wealth and the return on capital become a fundamental condition of housing supply. As we can see from the media coverage, if ownership of urban housing is also a “store of value,” then owners can presumably afford to leave it unrented and unoccupied, as they are apparently increasingly doing: according to one source because the work of administration as a landlord is too much trouble. The cost-benefit runs in favor of maintaining vacancy. So this is no longer a “house” at all, in the sense implied by Piketty. And the owners no longer use it much as a “home.” Even with large families or lots of visitors, it’s hard to imagine how all these properties are occupied in the sense implied by Piketty’s “wellbeing” criterion.

My basic anthropological point here is that we can appreciate the “native” terminology as a crucial guide, stepping-stone, and form of representation, but not remain satisfied with it as the acceptable definition of the entire domain of enquiry, nor as the final analytical vocabulary for coming to terms with it. If we rethink the whole variegated domain of “land” as “capital in the twenty-first century,” then we also necessarily bring in the land in the rest of the world that has remained sufficiently undefined by this vocabulary as to seem invitingly amenable to redefinition as some sort of this newly variegated “capital.” The revaluation of land-as-capital; the revised definition of “shelter” that masks the returns to wealth-storage and finance; the corresponding evaporation of “wellbeing” from consideration of how urban housing availability and cost impact on income allocation for the 99%; all these dynamics are created within political processes and play out in life in new ways. The press may well be ahead of us, but critical, empirical “digging” in systematic, anthropological ways is also needed.

Appendix: Some recent press coverage of urban housing in the United States

I. New York Times. June 29, 2014.

“Stash Pad: The New York real-estate market is now the premier destination for wealthy foreigners with rubles, yuan, and dollars to hide.” By Andrew Rice.

“The global elite,” says developer Michael Stern, “is basically looking for a safedeposit box.”

“And so New Yorkers with garden-variety affluence—the kind of buyers who require mortgages—are facing disheartening price wars as they compete for scarce inventory with investors who may seldom even turn on a light switch. The Census Bureau estimates that 30 percent of all apartments in the quadrant from 49th to 70th Streets between Fifth and Park are vacant at least ten months a year.”

II. New York Times. July 9, 2014.

“As New York Landlords Push Buyouts, Renters Resist,” By Mireya Navarro.

“The first offer from the landlord’s representative came in April: Take $90,000 to move out, the tenants said they were told, or the landlord would sue and they would lose their apartments anyway…”

[500]“Landlords and their lawyers said that buying out longtime tenants in low-rent apartments was the lawful way to make room for those who would pay more.”

III. Salon. July 9, 2014.

“One percent’s rental nightmare: How Wall Street scheme blew up in its face.” By David Dayen.

“Big Money investors thought they had the perfect plan to buy up rental properties. There was just one huge problem … substandard remodeling, shoddy maintenance and difficulty in contacting managers… . Renters get abused by bad property management, junior bondholders lose out on their investments, local housing markets get riled by price swings, tenants in the rental properties could face future evictions, and neighbors must live with increasing blight. We don’t yet know if bigtime investors are merely going through the growing pains of a new business, or if we’re seeing a vacancy spiral that won’t end.”


Gillingham, Robert. (1980) 2001. “Estimating the use cost of owner-occupied housing.” Monthly Labor Review: 31–34. Bureau of Labor Statistics.

Gregory, Chris 2014. “The three faces of Thomas Piketty: Reflections on a #1 best-seller.” Paper presented at the “Roundtable on Piketty,” at the MITMOWS (Money in the Making of World Society) conference, Pretoria, South Africa, August 19–21.

Guyer, Jane I. 2013. “Indexing people to money: beyond consumption?” Paper presented at the Human Economy conference, Pretoria, South Africa, August 2013.

Guyer, Jane I.. 2014. “Transitions in personhood and the consumer price index: The example of “shelter.” Lecture for the Interdisciplinary Market Studies Workshop, Saint Maximin La Sainte Baume, June 5–6.

Guyer, Jane I.. Forthcoming. “Indexing people to money: The fate of ‘shelter.’” In Legacies, logics, logistics: Essays in the anthropology of the platform economy. Chicago: University of Chicago Press.

Piketty, Thomas. 2014. Capital in the twenty-first century. Translated by Arthur Goldhammer. Cambridge, MA: The Belknap Press of Harvard University.


Jane I. Guyer
Department of Anthropology
Johns Hopkins University
404 Macaulay Hall 3400
North Charles Street
Baltimore, MD 21218


1. The present comment refers centrally to Piketty’s text. A more detailed argument with respect to housing in history and in the Consumer Price Index is developed in Chapter 9, “Indexing People to Money: The Fate of ‘Shelter,’ in Guyer (forthcoming).

2. See in Piketty’s conclusion, “The entrepreneur inevitably tends to become a rentier… . Once constituted, capital reproduces itself faster than output increases” (2014: 571).

3. July 10, 2014. http://www.globalpropertyguide.com/Middle-East/Egypt/Price-History.