Capital City

1. Capitalism's Growth Strategy Centralizes Urban Real Estate

Through this process, the price of land becomes a central economic determinate and a dominant political issue.

Global shift. Capital is increasingly converging on urban real estate as a primary growth strategy. This trend is fueled by financial deregulation, low interest rates, urbanization programs, and the search for secure investment havens. Real estate now constitutes a staggering 60% of the world's assets, with housing comprising the vast majority.

Consequences. This centralization of capital in real estate leads to several critical outcomes:

• Gentrification becomes widespread, displacing long-term residents.
• Housing transforms into a globally traded financial asset, creating synchronized bubbles and crashes.
• Governments prioritize raising property values, often at the expense of residents' well-being.

The Real Estate State. The rise of real estate capital culminates in the emergence of the "real estate state," a political formation where real estate interests exert disproportionate influence over urban development, politics, and individual lives. This influence manifests at all levels of government, but is most pronounced at the municipal level, where physical planning decisions are made.

2. Planners Navigate Contradictory Goals in the Real Estate State

Planners manage the levers of urban change and make crucial decisions about land use, transportation, housing, the environment and more.

Conflicting mandates. Urban planners find themselves at the center of a complex dynamic, tasked with the contradictory goals of inflating real estate values while simultaneously safeguarding the best interests of residents. This tension creates an existential crisis for planners, forcing them to question whether they are merely wealth managers for the capitalist class.

Limited agency. Capitalism imposes strict limitations on planners who aim to alter the balance of power, particularly when it comes to private property and real estate. This makes it difficult to improve cities without inducing gentrification and displacement.

The planner's dilemma. Planners are often caught between their desire to create more beautiful, sustainable, and sociable spaces and the reality that their work often results in higher land prices, increased rents, and displacement. Without control over the land, planners struggle to deliver on their promise of a better society.

3. Gentrification is a Planned Process, Not a Natural Occurrence

Gentrification, then, is a political process as well as an economic and social one; it is planned by the state as much as it is produced by developers and consumed by the condo crowd.

More than economics. Gentrification is not simply a natural evolution of urban areas, but a deliberate process involving investors, developers, landlords, and wealthier residents. It requires the active participation of the state, which uses land use policies, tax incentives, and neighborhood initiatives to attract investment and desired residents.

State involvement. Planners play a crucial role in facilitating gentrification by:

• Luring producers with land use and tax incentives.
• Inviting consumers through race- and class-inflected neighborhood initiatives.
• Managing the levers of urban change to benefit organized capital.

From local to global. Planners have helped transform gentrification from a localized phenomenon into a global business model, shaping cities around the world to cater to the needs of real estate capital.

4. Rent Gaps and Value Gaps Drive Gentrification

Gentrification, he theorized, “occurs when the gap is wide enough that developers can purchase shells cheaply, can pay the builders’ costs and profit for rehabilitation, can pay interest on mortgage and construction loans, and can then sell the end product for a sale price that leaves a satisfactory return to the developer.”

Rent gaps. Gentrification is driven by the exploitation of "rent gaps," the difference between the current rents a property generates and the potential future rents it could command after renovation or redevelopment. This gap motivates speculators to invest in undervalued properties and displace existing tenants.

Value gaps. In addition to rent gaps, "value gaps" exist when a property's current use masks its potential income if it were given over to another activity. For example, converting factories into residential or commercial spaces can generate significantly higher rents.

Closing the gaps. Real estate developers and city planners work together to identify and exploit these opportunities, using housing, policing, education, and design strategies to close rent, value, and functional gaps, ultimately driving up property values and displacing long-term residents.

5. Cities Use Geobribery to Lure Real Estate Investment

Critics call this “geobribery”—the way planners use public finances to lure private investment into specific areas.

Tax cuts. Local property tax cuts are a primary tool used to attract and retain real estate investment. These cuts come in various forms, including those for renovation (e.g., J-51 in New York City) and new construction (e.g., 421-a in New York City).

PILOTs. Payment In Lieu of Taxes (PILOT) projects allow developers to pay a low annual fee to the municipality instead of full taxes, often with the requirement that the funds be used to upgrade nearby infrastructure, benefiting the developers even further.

TIFs. Tax Increment Financing (TIF) involves designating an area as "blighted," issuing bonds for infrastructure development, and then handing the land to a developer. The increased tax revenues are used to pay off bondholders, but if property values stagnate, the city is on the hook.

6. New York City: A Case Study in Bipartisan Gentrification

The story of New York in the early twenty-first century is one of continuity despite change.

Real estate dominance. New York City serves as a prime example of the real estate state, where private property is the city's biggest business and a major political donor. Both Republican and Democratic politicians depend on the real estate industry, even if it harms their constituents.

Bloomberg and de Blasio. Despite their divergent styles and priorities, both Mayors Michael Bloomberg and Bill de Blasio have ultimately pursued policies that stimulate real estate development and raise land values, contributing to gentrification.

The real estate state. This continuity demonstrates the power of the real estate state, where the imperative to raise property values overrides ideological differences and shapes the actions of both conservative and liberal administrations.

7. Bloomberg and De Blasio: Continuity Despite Divergent Styles

Conservative Michael Bloomberg and liberal Bill de Blasio are very different mayors, with divergent styles, priorities and coalitions.

Bloomberg's approach. Michael Bloomberg, a technocratic billionaire, favored mega-developments and public-private partnerships, managing the city as a "luxury product" to attract wealthy residents and businesses.

De Blasio's approach. Bill de Blasio, a progressive populist, campaigned on fighting inequality but ultimately pursued similar policies, including upzonings that led to gentrification.

Mandatory Inclusionary Housing (MIH). De Blasio's signature housing initiative, while intended to create affordable housing, relies on upzonings that often lead to speculation and displacement, benefiting developers more than low-income residents.

8. The Trump Family Saga: A Microcosm of Real Estate's Rise

The Trump family saga makes clear who, exactly, has benefited from the historical development of the real estate state, and just how they did it.

Friedrich Trump. The family's patriarch made his fortune by providing services to miners during the westward expansion, capitalizing on state and bank investments in land and industry.

Fred Trump. Fred built government-subsidized segregated housing during the mid-20th century, profiting from federal programs like the FHA and Section 608.

Donald Trump. Donald transitioned the family business to Manhattan, focusing on luxury development and leveraging tax breaks and zoning changes to maximize profits.

9. The Developer President and the Real Estate State

With his election, it was now not just real estate in the aggregate that ruled, but an actual racist landlord running the country.

Trump's background. Donald Trump's career as a luxury property developer is crucial to understanding his presidency. His policies and appointments reflect a commitment to advancing the interests of the real estate industry.

Key appointments. Trump's cabinet choices, including Ben Carson as HUD secretary and Steven Mnuchin as Treasury secretary, signal a shift toward deregulation and privatization in housing and finance.

Real estate agenda. Trump's policies, from tax cuts to infrastructure projects, are designed to benefit real estate developers and investors, further solidifying the power of the real estate state.

10. Socialized Land and Public Stewardship: Reclaiming the City

The promise of planning—of creating more beautiful cities; of imposing order on capital’s chaos; of undoing the exploitive relations between people and land, and between city and country—is virtually impossible to realize under these conditions.

Public stewardship. A key principle for challenging the real estate state is public stewardship over planning, which means expanding public access to and ownership of urban space.

Socialized land. To achieve true democratic control over the city, land must be decommodified and treated as a commons, rather than a commodity. This can be achieved through various means, including community land trusts and public buyouts.

Reordered regionalism. A reordered regionalism, operating at multiple scales, is necessary to resist capitalist control and ensure that planning functions are matched with the appropriate geographical scale. This requires democratic and responsive planning at all levels, empowering residents to shape their communities.

Last updated: March 15, 2025