Circuits of Capital,Ground Rent and the Production of the Built Environment: A (New) Framework for Analysis

Abstract

This paper develops prior work on Marxian theories of ground rent and property investment to outline a framework for interpreting the long-term rise in property prices observed in the neoliberal period. Orthodox economists and private developers have consistently maintained that the primary barrier to addressing affordability problems in expensive urban regions is excessive regulation. A diametrically contrasting view is developed in this paper. I argue the affordability crisis expresses the confluence and interaction of three primary factors: widening income and wealth disparities; the fictitious nature of land as a commodity, and the ability of property developers to extract surplus profits. Land is not a genuine commodity; and housing is a heterogeneous economic good whose production is targeted toward particular buyers of this good. Contra the hypothetical constructions of neoclassical economics, there is no “general supply” or “general demand” in urban housing markets. I show why increased production can lead the market toward higher overall levels of rents and prices. The primary counter-tendency to this basic dynamic is recurrent overproduction crises, with some modicum of affordability restored only through a collapse of prices once markets become severely overbuilt. Internal factors within the land market operate to limit the actual fall in prices, so that the longer-term trend in the neoliberal period shows a pronounced inflationary bias.