The Economics of West Village
By Dave Eden –
The West Village project on the old Absoe site is dressed up in all the right language (or at least it was before they took all the content off their website). Yet it is looking to become the site of a conflict – a conflict between two very different ideas of the city. A conflict between a city where the driving force is the accumulation of profit and a city organised to facilitate human flourishing.
Everyone talks about housing all the time. House prices continue to hit nose-bleeding heights. Renters complain about the size of the chunks coming out of their pay packets and the paltry conditions and rough treatment it gets them. Those priced out of the inner city have to face public transport and road systems under strain. The cities we live in are changing: and whilst this can be exciting often we feel that we are being displaced. Bigger and more powerful influences are holding swaying.
These everyday conversations are generally true. House prices for capital cities have risen unbelievably (8.7% in one year), but wage growth is stagnating or falling and household debt continues to climb (pushing around 180% of disposable income) with most of that made up of mortgage debt. When you remember that about 1/3 of households rent and 1/3 own their own properties outright this means a lot of debt siting on the remaining third.
There has been a massive increase in inner city unit construction with more on the way. Thus we have at least 30,000 units in the pipeline for inner city Brisbane. (On the fringes of Brisbane this dynamic is also being played out with 10,000 units for Springfield and a new private city outside Caloundra called Aura.) The built environment is being transfigured.
These dynamics are playing out in a contradictory way. The vast expansion in unit construction has been driven by, and has facilitated, a remarkable rise in prices – but sober heads like the Reserve Bank of Australia are worried that we face a glut – meaning that there is a potential for the market to collapse with flow ons through out the entire economy.
Add this together what do you get? We are paying more and more for housing, largely through increasing debt, our cities are rapidly being reshaped in the hope of raising profits but this market itself looks very wobbly. Who knows what could happen? You only need a memory of ten years to realise that real estate crises can push the financial system – and thus capitalism in toto – into meltdown.
This dynamic is a product of a global crisis. As the IMF detailed at its Spring Meeting the global economy is looking bad with low growth and looming risks. A situation of global ‘secular stagnation’ has meant the end of the mining boom and has raised the prospect of financial shocks. Since 2007 bails outs and unorthodox monetary policy have stopped the roof collapsing but the world is awash with capital and lacking profitable investments.
Capital both from Australia and overseas is desperately looking for new sources of profit. And thus it has poured into the inner city unit market. As the prices continue to rise so do the debts. This is like a form of privatised Keynesianism: the debts of everyday people stimulate an industry that makes capital richer… and in the process generating a real estate asset bubble.
Perhaps this real estate bubble won’t burst and prices will continue to climb. What would that look like? More of us paying more to buy a place to live and more of us trapped renting. It would mean taking on higher debts and thus spending more of our (stagnating wages) making profits for the banks. And it means a city constantly being reshaped for the purpose of transferring wealth upwards like a vertical wealth vacuum.
And what happens if the bubble does burst? At best ruin for many and at worst a cardiac arrest for the whole social order.
Projects like West Village often use their location in areas of high ‘cultural capital’ as a selling point. But like a parasite they tend to use up and destroy the very cultural dynamics they plaster on their advertising. If the bubble continues to grow another part of the inner city will become expensive housing that collects mortgage payments, rents and functions as an asset for speculation above all else. And if it pops? Well the globe is full of cities that have surpluses of repossessed housing amid homelessness.
At this point we should stop and ask: ‘is the way we are organising housing actually in our interests?’ What does it mean to have debts so proportionally higher than our incomes, is it viable in a global economy so fragile to bank on house prices to rise indefinitely, and what would be a preferable way to live?
We should do all we can to stop the West Village project not just so we can save some old buildings – but rather so we can open up space to invent an alternative. We need one – and quickly. But inventions require experiments and experiments require space. If we stop the West Village project can we go the next step and start building alternatives? If we come together and actual engage in a radical and determined movement we may find that we already live in a different city.