Documentos de Académico
Documentos de Profesional
Documentos de Cultura
I n t h i s paper we sketch the answers t o two questions: (1) How do the macro and micro
features o f housing markets r e l a t e t o each o t h e r i n theory and i n p r a c t i c e ? (2) How i s ab-
s o l u t e r e n t r e a l i z e d i n t h e housing markets of l a r g e metropolitan areas? We can a f f o r d the
l u x u r y o f two questions because t h e same materials s u f f i c e t o answer both.
22
Since the 1930s, these concerns have generated aims t h a t have, by and large, been success-
f u l l y met.4 Economic growth has been accompanied and t o some degree accomplished by r a p i d
-
suburbanization a process t h a t has been f a c i l i t a t e d by n a t i o n a l housing p o l i c i e s . Much o f
the growth i n GNP (both absolute and per capita) since t h e 1930s i s wrapped up i n the sub-
urbanization process ( t a k i n g i n t o account t h e c o n s t r u c t i o n of highways and u t i l i t i e s , hous-
ing, the effective demand generated by t h e automobile, etc.). C y c l i c a l swings have been
broadly contained since the 1930s and t h e c o n s t r u c t i o n i n d u s t r y appears t o have functioned
effectively as one of several major counter-cyclical t o o l s . The evident s o c i a l discontent
of the 1930s has t o some e x t e n t been successfully defused by a government p o l i c y t h a t has
created a l a r g e wedge of middle income people who a r e "debt encumbered homeowners" and who
are u n l i k e l y t o rock the boat because they are both debt-encumbered and reasonably w e l l sat-
i s f i e d w i t h t h e i r housing. The discontent o f the 1960s e x h i b i t e d by blacks and the poor
provoked a s i m i l a r p o l i t i c a l response t o t h a t o f the 1930s i n t h e housing s e c t o r a' re-
sponse t h a t has n o t been p a r t i c u l a r l y successful i n o b t a i n i n g "a decent house i n a decent
l i v i n g environment" f o r many o f t h e poor and t h e black, although s o c i a l i n s t a b i l i t y o f the
1960s appears t o have been defused. A t t h e n a t i o n a l l e v e l , then, p o l i c i e s are designed t o
maintain an e x i s t i n g s t r u c t u r e o f s o c i e t y i n t a c t i n i t s basic configurations, w h i l e f a c i l i -
t a t i n g economic growth and c a p i t a l i s t accumulation, e l i m i n a t i n g c y c l i c a l influences, and
defusing s o c i a l discontent. Housing provides a v i t a l and e f f e c t i v e t o o l f o r s t a b i l i z i n g and
perpetuating t h e s o c i a l s t r u c t u r e of a market-based, c a p i t a l i s t system.
How are these general programs and p o l i c i e s transmitted t o t h e l o c a l l e v e l and u l t i m a t e l y
t o i n d i v i d u a l s making choices with respect t o housfng services i n d i f f e r e n t l o c a t i o n s ? The
mechanisms are very complex and we can do no more than sketch-in some o f t h e b a s i c r e l a t i o n s
between f i n a n c i a l and governmental i n s t i t u t i o n s , through which p o l i c i e s are f i l t e r e d and
transmitted t o the l o c a l l e v e l , S t a t e Savings and Loans, Federal Savings and Loans, mort-
gage bankers, savings banks and commercial banks a l l operate i n the housing market. The
operations of State and Federal S&Ls are confined t o housing and these i n s t i t u t i o n s are de-
signed t o "promote the t h r i f t o f t h e people J o c a l l y t o finance t h e i r own homes and the homes
o f t h e i r neighbors."5 The r u l e s and r e g u l a t i o n s vary b u t i n general S t a t e S&Ls tend t o be
small scale, community based and depositor c o n t r o l l e d , whereas t h e l a r g e r Federal S&Ls tend
t o be " p r o f e s s i o n a l l y " managed.6 But Federal S&Ls are u s u a l l y r e s t r i c t e d t o f i n a n c i a l oper-
ations w i t h i n 100 miles o f t h e i r head o f f i c e . Import and export o f funds f o r housing from
one market t o another cannot occur through these i n s t i t u t i o n s unless depositors s h i f t t h e i r
funds. The Federal S&Ls are, f o r t h e most p a r t , under the c o n t r o l and guidance of the Fed-
e r a l Home Loan Bank Board which has tended i n t h e past t o regulate the flow o f funds i n t o
the mortgage market i n a c o u n t e r - c y c l i c a l fashion with respect t o t h e economy as a whole.
FNMA and GNMA ( t h e government i n s t i t u t i o n s t h a t buy up mortgages from the f i n a n c i a l i n s t i t u -
tions t o provide the l a t t e r w i t h t h e l i q u i d i t y f o r f u r t h e r investment i n housing) on the oth-
e r hand, operate u s u a l l y t o dampen cycles i n housing c o n s t r u c t i o n which means t h a t two sets
o f governmental i n s t i t u t i o n s tend t o f o l l o w c o n t r a d i c t o r y p o l i c i e s . 7
Other i n s t i t u t i o n s such as mortgage bankers, savings banks, and commerical banks also
vary i n the way they operate i n the housing market. None o f these i n s t i t u t i o n s , however,
are confined t o housing. Mortgage bankers have complete freedom i n t h e geographic t r a n s f e r
o f mortgage funds, whereas t h e o t h e r i n s t i t u t i o n s are, t o some degree o r other, more re-
s t r i c t e d by Federal o r State r e g u l a t i o n . I n these i n s t i t u t i o n s i t i s t h e competition f o r
funds which d i c t a t e s t h e flow i n t o the housing market; housing finance i s best regarded as
a r e s i d u a l t h a t i s l e f t over a f t e r basic corporate needs are met. The counter-cyclical flow ,
t h a t t h i s generates i s emphasized by State and Federal p o l i c i e s t h a t p u t i n t e r e s t - r a t e c e i l -
ings on housing mortgages. I f there i s a heavy demand f o r c r e d i t and the i n t e r e s t r a t e
r i s e s (to, say, 10 per cent) then FHA o r State i n t e r e s t c e i l i n g s o f 8 per cent e f f e c t i v e l y
dry up the f l o w of funds i n t o housing (although a "points" system e x i s t s t o o f f s e t t h i s ) .
This d r y i n g up may be o f f s e t by the release o f more funds through FNMA, GNMA o r even through
the Home Loan Bank Board. Depositors are l i k e w i s e s e n s i t i v e t o i n t e r e s t r a t e s and are l i k e -
l y t o move t h e i r funds o u t o f , f o r example, a savings bank (with, say, a 5 per cent i n t e r e s t
r a t e c e i l i n g ) t o h i g h e r - y i e l d i n g investments.
How do a l l o f these f i n a n c i a l and governmental complexities r e l a t e t o the i n d i v i d u a l ? I n
the t y p i c a l micro-economic models o f r e s i d e n t i a l d i f f e r e n t i a t i o n and housing markets , i t I S
assumed t h a t income i s t h e r e l e v a n t determinant o f housing choice.8 I n f a c t , i t i s the a b i l -
i t y t o o b t a i n c r e d i t and a mortgage t h a t i s , f o r most people, t h e immediate determinant.
23
This a b i l i t y i s income-related, of course, b u t the a b i l i t y t o obtain a mortgage under s u i t -
able terms i s also a function of the p o l i c i e s of financial and governmental i n s t i t u t i o n s .
Because s e r v i c i n g costs are constant no matter what the p r i c e of a house, f i n a n c i a l i n s t i t u -
tions ( p a r t i c u l a r l y those geared t o profit-making) p r e f e r t o finance the more expensive hous-
ing. I n Baltimore, f o r example, savings banks r a r e l y finance transactions i n the p r i c e range
below $20,000. Mortgage bankers have n o t gone below $7,000 very often and have recently de-
cided as a matter o f p o l i c y t o try and stay above the $15,000 mark. Different i n s t i t u t i o n s
have d i s t i n c t i v e p o l i c i e s w i t h respect t o downpayments, credit-worthiness, and the l i k e ,
while government p o l i c i e s ( p a r t i c u l a r l y those o f the FHA) also intervene i n these respects
and play a major r o l e i n those sectors of the population w i t h moderate t o marginal incomes
o r slender resources f o r downpayment. There are also d i s t i n c t i v e p o l i c i e s w i t h respect t o
the nature o f t h e housing stock which financial i n s t i t u t i o n s a r e w i l l i n g t o finance (above
and beyond the general operating r u l e , t h a t appears t o have held good f o r the l a s t decade
o r so, t h a t "new means b e t t e r and safer" investment). There i s also no question t h a t d i f -
f e r e n t i n s t i t u t i o n s , both financial and government, e x h i b i t strong "neighborhood biases"
(both pro and con) over and beyond t h a t inherent i n the comnunity basis found i n the State
and some Federal S&Ls.
We w l l l now describe some o f the ways i n which a l l o f these factors coalesce i n the Bal-
timore housing market. Consider f i r s t of a l l the behaviour o f the d i f f e r e n t i n s t i t u t i o n s
w i t h respect t o house sales i n different p r i c e categories (Table 1). There i s c l e a r l y a
structured r e l a t i o n s h i p t h a t leads the "comnercial' i n s t i t u t i o n s t o operate i n the higher
p r i c e ranges w h i l e the State S&Ls, which tend n o t t o be very strongly p r o f i t oriented, take
up the housing i n the lower p r i c e categories. The health o f the housing market i n t h i s low-
e r p r i c e category appears t o be attached e n t i r e l y t o the f a t e o f the State S&Ls and a per-
petuation o f t h e i r community-based n o n - p r o f i t orientation. Should these i n s t i t u t i o n s c o l l -
apse, o r come t o have a strong p r o f i t o r i e n t a t i o n (as seems t o be happening), then the
housing market i n the below $15,000 p r i c e range w i l l s u f f e r irreparable damage, p a r t i c u l a r -
l y i f the mortgage bankers implement a p o l i c y o f a $15,000 minimum. There i s , clear1 , a
h i g h l y structured re1ationship between household c h a r a c t e r i s t i c s ( p a r t i c u l a r l y income7 and
the a v a i l a b i l i t y o f mortgage funds ( i n appropriate p r i c e categories) .9
TABLE I
DISTRIBUTION OF MORTGAGE ACTIVITY I N DIFFERENT PRICE CATEGORIES BY TYPE OF INSTITUTION
BALTIMORE CITY, 1972*
under $7,000- $10,000- $12,000- over
$7,000 $9,999 $11,999 $14,999 $15,000
Private 39 16 13 7 7
State S&Ls 42 33 21 21 20
Federal S&Ls 10 22 30 31 35
Mortgage Banks 7 24 29 23 12
Savings Banks - 3 5 15 19
Comnerci a1 Banks 1 1 2 3 7
Per cent o f C i t y ' s trans- 21 19 15 20 24
actions i n category
*Source: "Homeownership and the Baltimore Mortgage Market", D r a f t Report o f the Home Owner-
ship Development Program, Department o f Housing and Comnuni ty Development, Baltimore City,
1973.
24
This structured relationship has a geographical manifestation.10 To demonstrate this
we have divided the housing market i n Baltimore City i n t o 13 sub-markets which can be fur-
ther aggregated to eight primary sub-market types (see Figure l ) . W e have tabulated data
concernfng the ffnancfng of housfng f n each of these sub-markets (see Table 2). W e have
also tabulated some informatlon on house prices and socio-economic composition i n the sub-
markets. I t is plain that the housing market i n Baltimore City is highly structured geo-
graphically i n terms of institutional involvement and FHA insured mortgage activity. The
main features In this structuring are:
(1) The inner city is dominated by cash and private transactions (with scarcely a ves-
tige of fnstitutfonal or governmental involvement) accompanied by a low purchase price, low
incorns and a high proportion of tenants and blacks;
(2) The ethnic areas are dominated by small comnunity and neighborhood State S&Ls which
circulate money w i t h i n the community and i n some cases finance migration to, f a r example,
the middle income sub-market of Northeast Baltimore;
(3) Black residential areas are serviced mainly by mortgage bankers operating under FHA
guarantees (a response t o the social discontent of the 1960s). Comnunity-based State S&Ls
are absent and without a strong sense of comnunity will be difficult t o b r i n g i n t o being.
The Federal S&Ls apparently are reluctant to become involved i n financing black home owner-
ship.
(4) Mortgage bankers using the FHA guarantees (often of the no-downpayment sort) are
the predominant source of finance i n areas of h i g h turnover and racial change.
(5) The white middle class, largely brought i n t o homeownership through the FHA programs
of the 1930s. occupies a s o l i d area of northeast and southwest Baltimore as well as much of
Baltimore County (which surrounds much of the City). Federal S&Ls here dominate w i t h FHA
guarantees supporting the market ifi traditional fashion.
(6) The more affluent groups make greater use of savings banks and comnercial banks and
rarely make use of FHA guarantees.
This geographical structure forms a "decision environment" i n the context of which in-
dividual households make housing choices. These choices are likely, by and large, to con-
form t o the structure and t o reinforce it. The structure i t s e l f i s a product of history.
Attempts t o change the structure can i n fact generate considerable social conflict. For
example, middle-income buyers, disillusioned w i t h the suburban dream, have t o f i g h t the i n -
stitutional policies of the lending industry and the FHA i f they wish to renovate an inner-
city neighborhood.11 Likewise, low-income blacks cannot be turned into "debt encumbered
homeowners" painlessly. By struggles of this sort the structure can be transformed. In
practice, therefore, we f i n d that the geographic structure i s continuously being transformed
by the ebb and flow of market forces, the operations of speculators and realtors, the chang-
i n g potential for homeownership, the changing profitability of landlordism, the pressures
emanating from comnuni t y action, the interventions and disruptions brought about by chang-
i n g governmental and institutional policies, and the like. I t is this process of transfor-
mation of and w i t h i n a structure that must be the focus for understanding residential d i f -
ferentiation and, as we will l at e r show, provides the basis for understanding how absolute
rent i s realized i n the housing market. W e will examine two facets of this transformation
process in Ba 1t f more very briefly .
25
.:.y Non-residential lard use
::.-'
=
- Special residential areas
A Charles Village
Bolton
B Vernon
Hill-Mt
C E.Jefferson
\ Census Tracts w i t h l i t t l e
or no private
A housing or subject t o urban renewsl
Unallocated Census Tracts (mixed housing
v,stock and mixed financing)
26
TABLE 2 (i)
HAMPDEN 99 2.40 40.4 8.1 18.2 26.3 4.0 3.0 14.1 2.0 7,059
WEST BALTIMORE 497 2.32 30.6 12.5 12.1 11.7 22.3 1.6 3.1 6.0 25.8 4.2 8,664
SOUTH BALTIMORE 322 3.16 28.3 7.4 22.7 13.4 13.4 1.9 4.0 9.0 22.7 10.6 8,751
HIGH TURNOVER 2,072 5.28 19.1 6.1 13.6 14.9 32.8 1.2 5.7 6.2 38.2 9.5 9,902
1. Northwest 1,071 5.42 20.0 7.2 9.7 13.8 40.9 1.1 2.9 4.5 46.8 7.4 9,312
2. Northeast 693 5.07 20.6 6.4 14.4 16.5 29.0 1.4 5.6 5.9 34.5 10.2 9,779
3. North 308 5.35 12.7 1.4 25.3 18.1 13.3 0.7 15.9 12.7 31.5 15.5 12,330
MIDDLE, INCOME 1,077 3.15 20.8 4.4 29.8 17.0 8.6 1.9 8.7 9.0 17.7 11.1 12,760
1. Southwest 212 3.46 17.0 6.6 29.2 8.5 15.1 1.0 10.8 11.7 30.2 17.0 12,848
2. Northeast 865 3.09 21.7 3.8 30.0 19.2 7.0 2.0 8.2 8.2 14.7 9.7 12,751
UPPER INCOME 361 3.84 19.4 6.9 i(3.5 10.5 8.6 7.2 -
21.1 2.8 11.9 3.6 27,413
27
TABLE 2 (ii)
28
IRED MORTGAGES
OUSING SUB-MARKETS
Baltimore 1970
29
c e n t r a t i o n w i t h i n Baltimore City i n 1970, w h i l e Table 2 i n d i c a t e s the e x t e n t o f FHA involve-
ment i n t h e d i f f e r e n t sub-markets.
30
Investment Qua1
FIGURE 3
31
the most important element i n the landlord's decision i s the availability or non-availability
of landlord finance. In areas where the landlords can obtain mortgage funds they work on
the basis of "leverage" which works as follows. A $10,000 house is purchased w i t h a $1,000
downpayment and a $9,000 mortgage a t , say, a 6 per cent interest rate. The landlord manages
the property t o yield an overall 8 per cent rate of return on the $10,000 (which i s $800),
pays off the interest of $540, which leaves $260 t o be applied to the landlord's investment
of $1,000 which yields an effective return of 26 per cent on the landlord's part of the capi-
t a l . T h i s calculation i s more complicated when worked out over the lifetime of the mortgage,
of course, b u t the principle of leverage operates over each round and the average rate of
return is much higher for the landlord ( i t usually comes t o between 15 and 18 per cent) than
i s indicated by t h e - r a t e of return calculated against the total value of the house. The
tenant is also advantaged by this, for the tenant lives i n a $10,000 house for a rent that
yields only 8 per cent on that value, while the landlord, interested i n capital accumulation
i n the physical form of the house, will keep i t well maintained.
If the landlord cannot obtain mortgage finance, the story becomes rather different. The
landlord has t o obtain a "satisfactory" yield on the total value of the house. What i s
meant by a "satisfactory" yield is set by convention on the part of professional landlords
b u t i t i s obviously sensitive t o the rate of return possible i n the capital market i n gener-
a1.16 Professional landlords i n Baltimore, i n fact, look for a 20 per cent rate of return
on their capital, regard 15 per cent as "normal" and will s t i l l stay i n operation a t 11-12
per cent (this is after a l l expenses are met including interest payments and an imputed man-
agerial wage t o t h e d l o r d as manager). Using leverage, landlords can g n a 15 per cent
rate of return for themselves by t a k i n g , say, an 8 per cent rate of return on the total value
of the property. Without leverage they have to take a 15 per cent rate of return directly.
Leverage is not possible i n the inner city because mortgage funds are not generally avail-
able; so tenants here have t o pay a much greater rent relative t o the total value of the
property than would be the case i f mortgage finance were available. B u t the inner city i s
the worst sub-market i n terms of quality of housing stock, etc.. Landlords therefore find i t
d i f f i c u l t t o dispose of their properties i n this sub-market, except through urban renewal
schemes (which landlords frequently actively promote as a means of bailing o u t of the worst
sub-market). If profit levels f a l l or i f there is even an expectation that they will f a l l
below the limit of, say, 11-12 per cent (because of oversupply of poor housing, rising
management costs, vandalism, and the l i k e ) , then landlords will seek t o get their money out
through a disinvestment process (economizing on maintenance, milking properties, etc.).
Hence there arises a housing sub-market characterized by landlord disinvestment, housing
abandonment, and severe neighborhood decay. Landlords will s t i l l , on occasion, purchase
in this sub-market, b u t i f they do so, i t i s a t a very low market price (note the prices i n
Table 2 ) for a good quality dwelling which they operate t o regain their outlay over a short
t ime-hori zon.
I t i s evident that landlords "structure" their behaviour according t o their decision en-
vironment. There is a "rational" (profit maximizing) adjustment of landlord behaviour t o
sub-market characteristics. This behaviour, i n turn, structures outcomes w i t h respect to
the renter, the maintenance of the housing stock, reinvestment and disinvestment, neighbor-
hood decay and the like. This structuring activity i s not w i t h o u t i t s implications for
the way i n which financial institutions and government institutions together formulate, i n
turn, rationales for investment and intervention.
32
monopoly power i n t h e housing market. The m a t e r i a l s we have assembled i n P a r t I o f t h i s pa-
per i n f a c t provide a d e s c r i p t i o n of t h i s necessary basis. Through t h e s t r u c t u r i n g a c t i v i t y
o f governmental and f i n a n c i a l i n s t i t u t i o n s , urban space i s d i f f e r e n t i a t e d i n t o s p e c i f i c sub-
markets. I f absolute r e n t i s t o be r e a l i z e d we have t o show t h a t there are absolute l i m i t s
o f some s o r t operating over d i f f e r e n t segments of t h e housing market. These absolute l i m i t s
can be s e t by t h e j o i n t a t t r i b u t e s o f housing, o f financeers, of housing suppliers and o f
consumers. To become a low-income Owner of a $5,000 house i n Baltimore, f o r example, means
e i t h e r a cash t r a n s a c t i o n o r access t o a comnunity based State SBL. A low o r moderate i n -
come black w i l l purchase a $10,000 house through a mortgage banker operating under an FHA
guarantee. An upper-income person w i l l t y p i c a l l y go through a savings bank o r a Federal S&L
and purchase a house p r i c e d above $25,000. I n each o f these cases, t h e opportunities are
r e s t r i c t e d i n terms of t h e s t r u c t u r e . But the absolute l i m i t s are a l s o s e t geographically
through the s t r u c t u r e d p a t t e r n of housing sub-markets w i t h i n which speci f i c conditions hold.
"Absolute l i m i t s " means i n t h i s case the c r e a t i o n o f absolute urban spaces within which prod-
ucers and consumers o f housing services face each o t h e r as classes i n c o n f l i c t . ~ g What
transpires w i t h i n each sub-market depends (1) on t h e i n t e r n a l conditions w i t h i n t h a t sub-
market and (2) on the i n t e r a c t i o n between sub-markets. We w i l l consider these separately
and make the l i n k t o t h e r e a l i z a t i o n of absolute rent.
33
solute rents can be realized t o varying degrees depending upon the relative power of those
supplying housin and those consuming i t , as that relative power i s mediated by institu-
tional policies !legal, political, financial, governmental, etc.).
I t i s possible to document these relative powers w i t h respect to sub-markets i n parti-
cular historical situations. The relative powers shift continuously. Consider, for ex-
ample, the matter of consumer preference. In the more privileged sub-markets the constraints
-
t o consumer choice are social consumers have a wide range of alternatives, b u t considera-
tions of prestige and status make i t unlikely that individuals will consider a l l potential
choices. If these social constraints are strongly developed, then i t i s possible for produ-
cers of housing to gain considerable absolute rent as high-income consumers vie w i t h each
other for prestigious housing i n the " r i g h t " neighborhoods. The same considerations per-
mit absolute rent t o be extracted from suburban construction. In the inner city, on the
other hand, we find a low-income and uncreditworthy population confined to tenant occupancy
i n a situation where landlords cannot use leverage and must extract a h i g h rate of return
out of bad housing. Absolute rent i s here gained by the landlord from a population t h a t has
no other choice (unless, i n the Baltimore case, i t migrates back to the rural South). This
population i s trapped i n the structure of absolute space. On the next rung up the ladder,
i t is possible t o become either a low-income homeowner through the FHA 02 program or a low-
income b u t "reliable" tenant i n a situation where landlords can use leverage to provide
housing for a lower rent than would otherwise be the case. In this sub-market, absolute
rent accrues either t o the intermediary, who frequently buys cheap from the fleeing white
and s e l l s dear t o the incoming black, or t o the landlord- and i n both cases the financial
institutions take their interest.
In a l l of these situations - and we could specify the situation i n detail w i t h respect
t o each sub-market i f we so wished -the rates of return and the potential for obtaining ab-
solute rent are structured by the opposing forces w i t h i n each sub-market and the interac-
tions between sub-markets. Class conflict w i t h i n a sub-market i s tempered by class differ-
entials and class conflicts between sub-markets. And i t i s i n such a structured situation
that absolute rent is realized i n the housing market i n general.
We accept the view t h a t rent i s a transfer payment out of a social rate of return on
capital. We also accept the view t h a t rent accrues t o the inherent monopoly power of pri-
vate property.20 To understand how rent i s i n practice realized i s therefore t o understand
a l l of those situations and conditions which permit transfer payments t o occur and which
affect the actual amounts transferred. The categories of differential, absolute and mono-
poly rent, t o which Walker adds redistributive rent, provide generalized descriptions of
the theoretical circumstances which contribute t o the processes of transfer. The explana-
tory power o f these categories depends, however, on our ability t o specify i n practice
how actual transfer payments arise under the conditions theoretically specified f n each
category. In this paper we have shown that the category of absolute rent i s meaningful
i n the contemporary urban scene. We have shown that the conditions for i t s realization are
automatically generated by the way i n which institutional arrangements are structured t o
integrage national and local aspects of housing market behaviour.
The absolute spaces created by institutional arrangements form a geographical framework
w i t h i n which absolute rent can be realized. Within this geographical framework we f i n d
different interest groups facing each other as classes. The relative power of these clas-
ses w i t h respect t o each other, together w i t h the possibilities open for substitution in
other sub-markets, provides the social setting w i t h i n which the realization of absolute rent
becomes possible. The classes we identify here are not, of course, the classes relevant t o
understanding the production process, Rent is not, after a l l , inherent i n production b u t
arises only because the legal institution of private property i s a necessary feature i n the
capitalist mode of production and because i t proves difficult or impossible t o r e s t r i c t t h a t
legal r i g h t t o production solely. The classes we are here concerned with are, when s e t
against the broader class structure of society, perhaps best interpreted as sub-classes f n
conflict w i t h each other over the transfer payment that rent represents. The rich, for
example, may be forced t o yield a relatively h i g h transfer payment t o other members of their
34
own general s o c i a l class ( t h e company d i r e c t o r may y i e l d up absolute r e n t t o t h e class mono-
poly power o f t h e developer). A low-income tenant may l i k e w i s e gain absolute r e n t by sub-
l e t t i n g . The general p a t t e r n o f t r a n s f e r payments i s , however, f a i r l y obvious -
groups y i e l d a n e t t r a n s f e r payment t o r i c h e r groups because the former have l i t t l e power
poorer
o r p o s s i b i l i t y f o r s u b s t i t u t i o n , w h i l e t h e l a t t e r have considerable class monopoly power
and a greater range o f choice.
We are n o t claiming t h a t r e n t i n an urban s i t u a t i o n has t o be t o t a l l y understood i n ab-
solute terms. D i f f e r e n t i a l , monopoly, absolute and r e d i s t r i b u t i v e r e n t a l l c o n t r i b u t e t o
the formation o f actual r e n t . But we b e l i e v e we have shown, q u i t e conclusively, t h a t ab-
solute r e n t can c o n t r i b u t e s u b s t a n t i a l l y t o actual r e n t i n l a r g e urban areas. We have also
shown t h a t t h i s c o n t r i b u t i o n i s made possible by t h e way i n which social, i n s t i t u t i o n a l and
geographical s t r u c t u r e s are created f o r t h e purpose o f i n t e g r a t i n g l o c a l and n a t i o n a l as-
pects o f economies. We b e l i e v e t h a t we have a l s o shown t h a t a great deal can be learned i f
we are prepared t o adopt a methodology appropriate f o r understanding s o c i e t y as a t o t a l i t y
fashioned through a s t r u c t u r e d s e t o f i n t e r n a l r e l a t i o n s .
FOOTNOTES
1'A prologomenon to a methodological debate on location theory - the case of von Thbnen',
Antipode, Vol. 6, No. 1.
2See Harvey, D., Social Justice and the City (Johns Hopkins University Press, Baltimore; 1973)
chapter 7; Ollman, B., Alienation: Marx's Conception of Man in Capitalist Society (Cambridge
University Press, London; 1971) and 'Marxism and political science: prologomenon to a de-
bate on Marx's method', (Department of Politics, New York University; 1972).
3The concept of structure which we adopt is set out in detail by Godelier, M., Rationality
and Irrationality in Economics (NLB, London; 1972). See also Piaget, J., Structuralism
(Harper, New York; 1970).
4The views set forth in this paragraph can be documented in detail from The Douglas Commission
Report, Building the American City (Government Printing Office, Washington, D.C.; 1968).
More detailed analyses of cyclical swings are collected together in Page, A.N. and Seyfried,
W.R., Urban Analysis (Scott Foresman, Glenview, Illinois; 1970).
SSee Homeownership and the Baltimore Mortgage Market (Draft Report of the Homeownership Devel-
opment Program, Department of Housing and Community Development, Baltimore City; 1973).
6The management characteristics of Federal S&Ls are documented in Rose, S., 'The S&Ls break
out of their shell', Fortune, 86, No. 3 , pp. 152-70.~
7The details can be documented from the Douglas Commission Report (op. cit.).
8For a general critical evaluation of these models see Harvey, D. (op. cit.) chapter 5.
9See Homeownership and the Baltimore Mortgage Market (op. cit.).
lOThis material is summarized from Harvey, D. , Chatterjee, L. , and Klugman, L., Effects of FHA
Policies on the Housing Market in Baltimore City (Draft Report to the Urban Observatory,
222 E. Saratoga St., Baltimore, Md.; 1973).
llA typical struggle of this sort is documented by the Citizens Planning and Housing Associa-
tion, FHA: an Unsatisfactory Status Quo (Baltimore, Md.; 1973).
% h i s material is summarized from Harvey, D., Chatterjee, L. and Klugman, L., (op. cit.).
13Walker, R.A., 'Urban ground rent - building a new conceptual framework', Antipode, Vol. 6,
No. 1.
35
14The concepts of filter-down and blow-out a r e d i s c u s s e d i n d e t a i l i n Harvey, D., (op. c i t . )
and t h e i r relevance t o t h e Baltimore housing s i t u a t i o n i s discussed i n d e t a i l i n Harvey, D.,
C h a t t e r j e e , L., Wolman, M.G., Klugman, L. and Newman, J., The Housing Market and Code En-
forcement i n Baltimore (The Baltimore Urban Observatory, 222 E. Saratoga S t . , Baltimore
Md.; 1972).
2oThis, of course, was Marx's main p o i n t -see Marx, K., (op. c i t . ) and The Poverty of Phil-
osophy ( I n t e r n a t i o n a l P u b l i s h e r s E d i t i o n , New York; 1963) pp. 154-66.
36