The Price of Staying at Home
by Florencia Labiano
In order to contain the spread of the Covid-19 pandemic, governments restricted circulation, cooling down economies and requiring people to stay at home. According to the Office of the High Commissioner for Human Rights, by April 2020, more than 3.9 billion people were simultaneously under lockdown (Rajagopal 2020). But what does it mean to stay at home if your housing is at risk? What does it mean to face eviction in a pandemic, when the primary public health measure is isolation at home? Covid-19 has led scientists and politicians to rethink the future of work, but it has also reframed the meaning of housing, its commodification, and the right to shelter (Kholodilin 2020). Housing became a public health device, and in doing so, became entangled in private relationships among market agents. How did we get here? And how have governments responded to housing insecurity during the pandemic? Argentina’s deregulated real estate market and unstable economic environment present an interesting case for analyzing these issues.
According to Aalbers (2016), some decades ago, a number of changes took place in housing economics and politics around the world. These changes were characterized as a shift in housing development from a Modernist/Fordist production model to a Flexible Neoliberal/Post-Fordist one. Under the first model, housing was produced or financed at a large scale by the state for the use of low- and middle-income groups, either through social renting or owner occupation. The Flexible Neoliberal/Post-Fordist housing model, boosted by the economic transitions of the 1970s including the end of the Bretton Woods system and the rise of finance, was characterized by an increase in homeownership rate, privatization of public housing stock, and the expansion of mortgage loans (Rolnik 2019). At the same time, rates of construction fell (Kohl 2018b). This coincided with the dismantling of tenant protectionist policies, including rent control, tenure securities, and housing rationing that had been in place since the interwar period (Kholodilin et al. 2018). Through financialization, housing acquired a new function as an economic asset for households and real estate investors but also for the stability of national and international financial markets and governments, sometimes at odds with its use value (Aalbers 2019).
One of the major consequences of these transformations was declining housing affordability. Since the 1990s, prices have been rising steadily in practically every country (Knoll et al. 2014). Although in many cases, price increases were accompanied by an expansion of credit, credit did not guarantee housing affordability, since associated market prices also rose (Ansell & Cansunar 2019). Recently, many of the largest cities have seen growing private rental sectors (M. Aalbers et al. 2020), record levels of household debt, and an expansion on the evictions numbers (Lima 2020) with especially large impact on young households.
Bricks or bills, that’s the question
But this trajectory doesn’t quite fit the Argentinian case (Murray & Clapham 2020). Although it is possible to speak of a Fordist period, the transition to neoliberalism differed from developed countries. Argentinian contemporary real estate markets developed in the context of a very chaotic macroeconomy, especially a long history of inflation and currency instability that altered frames of temporality and value, which in turn affected long-term assets and contracts like the ones involved in housing investment, mortgage loans, and rents.
During the 1970s, Argentina also experienced two major changes in housing commoditization. On the one hand, homes started to be priced and sold in cash dollars (Gaggero & Nemiña 2016; Luzzi & Wilkis 2018), and on the other, the last civic-military dictatorship ended the rental freezing that was more or less ongoing since the 1920s (Gazzoli 2006; Jacobo & Kholodilin 2020). The first change created a new meaning for housing as a “store of value” by disconnecting proprieties from the ups and downs of the national currency, but also from salaries and thus from non-owner purchasing power. The second change was part of the introduction of neoliberal policies in the country, which also involved the deregulation of labor and financial markets, the opening of foreign trade, and the privatization of public enterprises. Cumulatively, these changes led to the social collapse of 2001-2002 and hastened the concentration of wealth.
The 2001 crisis brought with it the rejection by households and small investors of banking their savings, when, in December of that year, bank deposits were frozen and withdrawals virtually forbidden. In many cases, those savings were channeled into construction, funding the Argentinian real estate boom during the first decades of the 21st century. Actors took advantage of the devaluation of working costs after the end of the fixed exchange rate and got their savings secured in dollars (Cruces, 2016), which undermined the financialization of the industry (Socoloff 2019).
With no deposits and a sustained increase in inflation since 2007, credit systems for home purchases practically ceased to exist. The increase in capital from small savers and commodities gains in the real estate market after the crisis pushed up housing and land prices in the main cities: the average sale value per square meter went from USD 600 in 2002 to USD 2550 in 2020, with a peak of USD 2986 in 2017. In addition, the restored gap between the peso and the dollar devaluated the saving capacity of the salaries and amplified the salary cost of accessing the same amount of space. Homeownership became more and more elusive, especially for the youngest and most vulnerable households, pushing non-owners or former owners into the rental market. The percentage of tenant households between 2001 and 2020 in the city of Buenos Aires grew from 22% to 36%, while that of owners declined from 68% to 42%.
The commodification of access to housing restricts the government’s capacity to intervene to guarantee housing as a right. Unlike what happens with other public goods and services in Argentina, such as health or education, the provision of housing remains a private problem that has to be solved privately. Housing is not financialized as it is in other countries—there is neither a mortgage market nor developer credit, and no speculation on mortgage payments—such that housing and its funding have not become a financial product. Nonetheless, commodified housing drives policy decisions. Policymakers prioritize investors and fiscal conditions, setting up opportunities for them to channel their capital, rather than focusing on living conditions or affordability for end users (household purchasers or potential tenants of those investors).
Housing between the cure and the disease
The COVID-19 pandemic arrived in Argentina within this context, and on 20 March 2020, mandatory and preventive social isolation began. The population was instructed to stay in their homes, only going out to perform essential tasks. Ten days later, the suspension of evictions and scheduled increases in written or verbal rental contracts was ordered through a Necessity and Urgency Decree (DNU), as well as the automatic extension of expiring contracts until September 30 of that year; the accumulated amounts could be paid in up to six installments after that period. The DNU was extended with slight modifications first until January and then until March 2021.
In June, Congress approved a new rent law, the first in 30 years, which, among its main innovations, extended the minimum duration of rental contracts to three years (previously it was two years), established an annual update of the index of price and salary evolution (previously this was established by private contract), and created an obligation to register the rental contract with the tax authority in order to be able to initiate eviction proceedings. The latter had always been mandatory, but according to estimates of the Federal Administration of Public Revenues in 2015, 8 out of 10 contracts were not paying any tax.
In 2020, consumer price inflation in Buenos Aires reached 36%, while salaries increased 32% and rent for new rental contracts rose 62% in the same months. Due to the pandemic, in many cases, tenant households lost income, but thanks to the decree, many of them were able to keep their housing (Comas Cañas et al. 2020).
According to ongoing research, in some cases, tenants had to go into debt with their landlords, borrow money from friends and family, or fall behind on other payments to safeguard the rental relationship. For many landlords, retaining a “good” tenant required being patient about payments or even going into debt themselves. But for many others, the tenants’ use of the decree was perceived as an affront to their power over their property for which someone had to be held accountable. Evictions, non-renewals, and very high price updates became common, if implicit, threats in tenant-landlord conversations. This situation revealed the precarious payment chains among households of tenants, landlords, informal lenders, and small retailers, as well as the juggling tenants have to do to secure a roof over their heads. This, in turn translates renting as housing insecurity into financial fragility in other domains, like food, utilities, medical supplies and prescriptions, or other necessary goods.
Toward an economic sociology of the city
Homeownership is not only a savings or investment alternative; it can also provide a buffer against the instability of the labor market and the insufficiency of the pension system. Homeownership is a certainty. This and other evaluations are part of the complex calculations made by households. They negotiate selection criteria, housing conditions, and prices that enable or restrict access to the city and sediment inequalities across groups and neighborhoods that, until a few decades ago, were much closer.
With a few exceptions (Raspall 2018; Socoloff 2019), Argentine urban sociology has often overlooked markets as integral components of urban production, sustaining a “hostile worlds” approach to economic urban relationships. Critiques of housing commodification often used a normative frame that rejected market agents. Meanwhile, economic geography and urban economy have shown the inequalities in the production and appropriation of urban surplus value produced by the market (Baer & Kauw 2016; Giovambattista & Rosanovich 2020), but failed to address the meaningful behavior of non-corporate agents, such as the households that compose the rental market.
An economic sociology of the city can contribute to dialogue between urban sociology and economics in Latin America, bringing in some theoretical and empirical developments in the field of valuation, price-setting, markets, and financial oikonomization, among others. These frameworks can help to understand the social relations that compose the market (Ariztía 2014; Desmond 2016), disputes over the formation of value (D’Avella 2019; Kopper 2016), and the ideas and emotions shaping agents’ reasoning (Besbris 2016; Motta 2016), and start to address some remarkable dimensions of intergenerational wealth inequality (Adkin et al. 2021; Felice 2017; Halawa & Olcoń-Kubicka 2019) and its political consequences (Ansell & Cansunar 2019; Kohl 2018a).
The pandemic revealed the extent to which commodification became the housing policy of many countries. Unpacking how these markets really work and how they are entangled in the everyday life of millions of Argentines, represents not only a major and urgent challenge for urban scholars but for the better design of policies and ultimately for collective survival and wellbeing.
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