Reconsidering the real estate state

Wilson and Wyly (2022) paint a doom-laden picture of cities in their recent paper, Toward a Dracula Urbanism: Smart City Building in Flint and Jakarta. According to the authors, urban futures are guided by the intersection of the smart city (smart growth policies meet technological gadgets) and the real estate state. The monstrous result is a new form of urbanism where “smart growth operatives target the dispositions of and cultures of select communities, plan their demise, and obscure the malevolent aspects of programs” (p. 6). Using empirical snippets from Flint, Michigan, and Jakarta, Indonesia, Wilson and Wyly seek to make visible a largely undetected process that unfolds across the globe.

A key component in what they dub “Dracula Urbanism” is the real estate state—a “powerful meshing of real-estate interests and government programs” (Wilson and Wyly, 2022: 1). Drawing on Stein's (2019) work, the real estate state takes shape within urban planning departments that “do everything in their power to make land more expensive, and [to] do nothing that would challenge its status as a commodity rather than a commons” (p. 38). In certain instances, urban planning is a vital state instrument of capitalist urbanization, but the novelty of its status as a real estate state and its maleficence, I suggest, is overstated.

This commentary offers a different perspective on the real estate state. I argue that urban planning is not just used to expedite the real estate industry and facilitate capitalist urbanization; instead, it manages vast portfolios of public wealth in the form of real estate assets that can be deployed for the public benefit. The problem is not that real estate interests have corrupted the urbanization process but that the state has lost confidence in its ability as a landlord. Aided by stories of an absent, greedy, and lethargic state, the public sector has lived down to the expectations we have set for it. Recovering the optimism and possibilities of a public real estate state is both theoretical and technical, but ignoring this public imperative only increases inequality in the age of financialization.

Reconsidering the real estate state

Urban planners are developers of government-owned land. Efforts like post-war social housing construction mark the high point of urban planning's welfare state interventions. In that sense, modern urban planning has always been real estate planning. However, unlike private developers who are guided by profit-maximization imperatives and responsibilities to shareholders, public developers aim to equitability (re)distribute resources. Their tasks include the delivery of affordable and public housing, public buildings and infrastructure, and public recreation and forests (Committee on Urban Land Policies, 1937). Yet, to the public's detriment, 21st-century urban planners have repeatedly shied away from embracing their long-held public mantle.

Viewing the real estate state in a positive light is heretical in many circles. Some urban theorists and practitioners criticize urban planning that has been “polluted” by financial thinking (for overviews see Peck and Whiteside, 2016; Stein, 2019). Across the aisle, some policymakers and politicians hold fast to the illusion that private interests can better manage resources than the public (e.g. in practice see Ashton et al., 2012; Christophers, 2018). Ironically, these orientations reinforce each other. Denying that urban planners are developers disadvantages the state in negotiations because planners show up willfully underinformed (Peiser, 1990). Consequently, private sector actors mistake this ignorance as evidence of the ineffective management of public resources (Simons, 1994). The reality is that when the state shirks from its mandate, it cedes public power to private actors. This dynamic ultimately narrows the scope of government action and increases inequality as public resources become private rewards.

In today's financialized economy, wealth and political power come from property ownership. Corporate landlords have increased their ownership of land and housing since the 2008 global financial crisis, making financial firms, not individuals, the largest property owners in many markets. In the United States, scholars have demonstrated an increasing concentration of corporate ownership of housing and land (Ashwood et al., 2022; Charles, 2020; Tapp and Peiser, 2022; Van Sant et al., 2023). Consolidated ownership of housing in the hands of investors leads to higher prices (Linger et al., 2022), higher rates of eviction (Raymond et al., 2021; Seymour and Akers, 2021), and worsening living conditions for tenants (Fields, 2017). Calls to regulate financial and corporate landlords (Tapp and Peiser, 2022) face challenges at the local scale when most urban planners don’t know who owns their city (St-Hilaire et al., 2023). This includes their own inventory of property.

Cities own a gold mine of real estate assets. Their extensive holdings often make them the largest property owners in town. They own everything from housing to offices, schools, vacant lots, and more. Some of this property supports government operations (i.e. city hall), while other buildings deliver public services (i.e. the post office and public housing). However, not all of it is in use. Many cities own more than they can manage, use, or even know they own (Kaganova, 2010). This untapped inventory could dampen inequality by putting public propertied resources to use in combatting the excesses of financialization. The classic example is Vienna, Austria, where subsidized housing moderates private sector rents and tenant protections and tampers evictions and price gouging (see also Kadi and Lilius, 2022). Rather than privatizing and liquidating assets, the state needs to experiment, explore, and invent new ways to create public value and redistribute wealth.

Creative thinking around ownership and financing is at the heart of a public real estate state. For example, if there is a lack of affordable housing in a city, why not repurpose government-owned buildings into government-owned housing? To provide long-term finance for this housing, what if the state, instead of Blackstone, collected rent from commercial tenants like Amazon, and this income could be redirected to public housing? Outlandish? Futuristic? Not quite. Look to the Alaska Permanent Fund's ownership of a luxury apartment building in Chicago as an example of innovative public financing already in practice (Williams, 2021). States could also make stronger equity claims, particularly in joint ventures. In public–private partnerships, for example, the state wouldn’t offload risk and profit to the private sector but instead insist on priority returns to capture the upside. If urban planners are already socializing risk, why not socialize the rewards?

Beyond the bad

For urban planners and theorists, the question is not if the state should engage with the real estate industry. It already does. What should be central to urban planning, theory, and policy debates is how the state can lessen inequality with its real estate assets. In the case of Flint and Jakarta, the story told in this way is less about how capitalism captures public institutions and more about the multiple opportunities where urban planners could have used public assets to achieve different outcomes. For Wilson and Wyly (2022), this might include asking how urban planning departments could have intervened differently. What assets did the city own, and what could it acquire to achieve public benefit? What forms of ownership could the cities negotiate with private developers that redirect private profit back to the public? Ultimately, theories that abandon the state's productive capacity reinforce the myth that the state sits outside or is captured by the market. This does more harm than good. Critique without action, like a market without the state, prevents the development of bold policies for addressing urgent problems.

Bad planning and policy decisions are not born in a vacuum. Urban planners easily fall into public choice theory and private sector efficiency models without being encouraged to think outside the box. Here, we, as educators and scholars, are complicit in feeding the problem. Often, we ask students to engage with critical theories about urbanization but fail to connect those ideas to practice. On the application side, we teach students the neoclassical canon of urban economics that align with the extant policy and planning toolkit and yet expect them to realize more just and equitable distributions of wealth. As a result, we are leaving students energized but hamstrung or unimaginative and repetitive. If our goal is to encourage planners to challenge conventional thinking around urban development, we must change what we teach and how we teach it. This means giving students the frameworks for new economic thinking and the applied skills to make alternative planning choices.

Rereading the real estate state is part of a larger effort to change the way we talk and think about the state (see Mazzucato, 2015). This requires getting urban planners off the sidelines and into the fray of urban development. Timidity and doubt don’t get us any closer to addressing the big issues society faces. Instead, this is an invitation for urban planning, policy, and theory to reclaim the real estate state for the public interest, to retain rather than sell their holdings, and to put public assets to work for the present and the future. Urbanism done that way can be less “punishing” after all.