There’s a certain kind of person who sees real estate everywhere they look — someone who walks around a city and thinks not just, “who lives here?” but “who owns this, who’d they buy it from, and where’d they get the money?” Some think this way because they’re in the property racket, or hope one day to be. Others with this mentality are just perpetually pissed off at the ways land and housing have been hyper-commoditized, turning cities into luxury products. We are definitely in the latter camp, and as such have quite a bit to obsess over these days. The following dialogue, between two urban planners and property scholars (one in New York City and one in Chicago), ruminates on the meaning of the Trump presidency and the relationship between property development and governance.
Samuel Stein is a geography PhD student at the CUNY Graduate Center and the author of a forthcoming book tentatively titled “Capital City: Gentrification and the Rise of the Real Estate State” (Verso, 2018).
Rachel Weber is Professor at the University of Illinois at Chicago and the author of the recent book, From Boom to Bubble: How Finance Built the New Chicago (University of Chicago Press, 2015)[1]
Samuel Stein:
Many cities throughout the country — and around the world — are becoming increasingly oriented around real estate, in terms of both their economic drivers and their planning priorities. This transformation manifests in a number of weird ways: shiny new condos are built for no one but sell for millions; prime-located environmental disaster sites are seen as firm ground for speculative development; entire television networks are dedicated to programs about how to raise property values and flip houses. Perhaps the most glaring manifestation of our real estate age is the Trump presidency.
Donald Trump is not the first US president whose fortune is based in land—that distinction would go to our original executive, George Washington[2]—but while we’ve seen ex-presidents get involved in real estate schemes (see Richard Nixon in San Clemente[3]), we have not before seen a full-fledged real estate schmuck[4] ascend to the White House. This raises all sorts of questions about our moment: questions of local, national and global political economy; questions of cities and urban planning; and questions of housing and land struggles.
Perhaps we can start with Trump’s past practices as a real estate developer. As a scholar of planning, finance and real estate in Chicago, what do you think Trump’s adventures tell us about the relationship between planners and real estate capital in US cities today?
Rachel Weber:
There’s a great story in Ross Miller’s book Here’s the Deal[5] about how (to use your terminology) real estate schmuck Arthur Rubloff arrogantly presented Mayor Richard J. Daley with a plan for Chicago’s North Loop that essentially granted him monopoly power to assemble land and develop new commercial real estate in a formerly marginal area. After shouting him out of his office on more than one occasion, Daley eventually succumbed to the developer’s charms and adopted the North Loop Redevelopment Plan as if his own planning department had devised it.
A developer “in drag” – acting as a planner – is an extreme example of the co-dependence that has characterized the planning-real estate relationship since professional planning came into its own in the post-war period. City governments have required developers to implement urban renewal plans, grow the tax base, and provide the investment capital to build infrastructure. Developers have needed local governments to sanction uses that maximize land rents.
These relations of co-dependence have persisted over time – and one of the reasons is that developers like the Trump Organization have mastered the art not just “of the deal”[6] but of the rules governing entitlements, assessment, and campaign finance. They have made investments not only in places but in the relationships necessary to build large-scale projects in dense urban areas. In doing so, they have been able to extract value from land and redirect tax revenues from the public fisc. As urban development has become increasingly complex and competitive, those developers who can differentiate themselves with insider knowledge (of future plans, networks, projects in pipelines), brand recognition, and publicity can wield more power over the public sector. Their threats – to walk away from a project unless the city meets its demands – carry more weight.
This is not to imply that the public sector is comprised of hapless victims of developers’ schemes. Local governments, to quote Susan Fainstein, “devote(d) themselves to reinforcing expansionary tendencies.”[7] When Chicago altered the zoning to allow for Trump’s supertall skyscraper[8] or New York City granted his hotels generous property tax exemptions, the city governments got something out of Trump. The deals may not have made sense from a strict cost-benefit perspective but they gained status, attention, and bragging rights. In cities where so much development activity takes place under the radar, they got visible symbols of their ranking in the world system.
In this game of mutual manipulation, no one wants to look like the chump. It’s easier to hide the competitive shifting of costs and risks if the relationship is framed as one of “partnership” rather than as adversaries. Cities justify underwriting the redevelopment of their downtowns, subsidizing business, and reducing regulatory burdens as a way of bringing about the much-desired but poorly specified “development” that gives the impression that all is good in the city.
Stein:
The landscape you portray suggests that what is going on in real estate-driven urban economies today is not a one-way process in which either developers manipulate unwitting planners or city agencies lure tentative developers, but rather an unseemly dialectic—what you call a “game of mutual manipulation.” In some cases, developers want the public to see them as the driver of this process. That has certainly been the case for Donald Trump, who spent his entire adult life bragging about the concessions he could extract from municipalities around the country (and eventually around the world). In this he is not unique; Jeff Bezos, for example, is basking in the race to the bottom he has sparked among cities competing to host Amazon’s new second headquarters. In cities where voters are skeptical of such debasement—competing for gentrification by offering the lowest tax rates, labor costs, or environmental review standards—mayors might buy into the developer’s narrative and claim that there is nothing they can do but play along. Other mayors, however, embrace their image as developer magnets and tout their ingenuity in attracting and retaining real estate capital.
The Trump story shows that the line between real estate and the state is blurry at best. In the most obvious sense, the developer is now the president. Also, his inherited wealth and status came from his father and his father’s father, who—in quite different ways—both benefited heavily from state investments, subsidies, and acquisitions of land. Donald’s own business practice involved not only securing tax breaks and rezonings from city governments, but also acquiring city agents as advisors. When his first attempt at an enormous tax break for Trump Tower failed, his response was to hire the commissioner of the agency that denied him, who then guided Donald through the system and secured him not only that tax break but other lucrative public contracts.[9]
The dance of private developers and public administers is a good example of what Bourdieu called illusio— “an involvement in the game which produces the game.”[10] By playing along, both sides recreate an urban politics in which all roads lead through real estate development. The architect Michael Sorkin cites Donald Trump’s ghostwritten first book The Art of the Deal as the template for contemporary urban planning practice.[11] Everything is done through the deal, which is presented to residents as equally beneficial to the public and private parties but never really is. Developers only seek deals that make them winners, and thereby turn us into one of the President’s favorite monikers: losers.
Weber:
This question of “the game” or illusio is really at the heart of public-private real estate transactions. Which games are being played? Are they games that can be mutually beneficial – or are there always winners and losers?
The goals of developers like Trump are relatively uncomplicated: profit and repute. If they can get the public sector to cover any development expense, lower their cost of capital, or subsidize rents, they make more profit and gain the reputation as a savvy deal maker. It behooves them to beggar the city and to challenge any regulation that prevents them from maximizing developable, leasable space. If the developer really “required” these concessions in order to proceed with the project, the outcome may be more win-win (assuming, and this is a big assumption, the project is a good one and does not create additional costs – pollution, congestion – for the public). If the developer would have built the project without public sector concessions, every win for them is a loss for the city and its taxpayers.
Lacking a profit motive, the goals of city governments participating in real estate deals are multivalent, flexible, and harder to decipher: public spaces and infrastructure, voter satisfaction, prestige. These goals all depend on growth in asset values. Local government policies and borrowing are validated by future growth in asset values so future asset values become the focal point for city planning. And yet cities cannot grow or control asset values on their own (they rarely develop property, even public facilities). They try to influence market behavior, which – on its own – is uncoordinated, predatory and speculative, and sensitive to rumor and herding.
The game of maximizing asset values underlies most public-private deals. Those who have the most to gain from the game try to enroll others in it: the building trades, brokers, homeowners associations, affordable housing advocates. The more interest groups playing the game, the more powerful its hold on city politics and the more difficult it is to undo.
Stein:
I’ve been thinking lately about the position of urban planners in this system, given the conditions you describe. With enormous quantities of the world’s surplus capital pooled into urban land and real estate, policymakers and developers alike see maximizing the value of their assets—i.e. urban land and buildings—as key to their success, and the feature on which they will be judged (by voters, donors, and bond holders in the case of state actors, and by shareholders and investors in the case of developers).
If vast sums of the world’s money are invested in urban real estate, and planners must turn that investment into greater returns as a basic condition of their job, then what exactly is the nature of their work? Of course they are still tasked with producing beautiful, efficient, and maybe somewhat equitable spaces, and most planners come to the job with a strong public commitment and desire to make their cities—and the world—a better place. But if those priorities must necessarily lag behind the rising profitability of real estate, then in places like New York and Chicago local urban planners must act as wealth managers for the global 1%. In places where real estate capital has not yet flocked, planners appear somewhat analogous to start-ups seeking venture capital, advertising the ways they could make their city’s land yield ever-higher returns on investment.
Turning again to our developer-president, we see the booster in chief expanding his gaze from his own precarious real estate empire to the country at large (while never quite detaching himself from his corporate identity). Trump’s campaign was premised on the idea that his self-vaunted deal-making acumen would translate seamlessly from bargaining ruthlessly with cities on behalf of his company to bargaining ruthlessly with other countries on behalf of a raced and gendered construction of the US citizenry and workforce. Of course he hasn’t delivered on that promise to his supporters, but that only cements his status as our real estate president: luxury developers never fulfill their public commitments! There’s always an excuse for delivering less than they promised, either in terms of jobs, affordable housing, open space, or other public benefits: the cost of labor, capital or materials rose unexpectedly; external economic or political conditions changed the project’s calculus; bad weather intervened; whatever. “Oops, we screwed you again” would be a fitting slogan for both the Trump Organization and the Trump administration.
Weber:
I like your description of planners as asset managers for the global elite – at least in cities like New York and Chicago where this elite has stashed their cash. I would add that planners are responsible not just for managing but producing new assets: skyscrapers, branded neighborhoods, and infrastructure. Planners sanction both the demolition of older structures and new construction; they keep the “creative destruction” of the built environment churning. As one developer said to me: “There are a lot of different ways to make money off of things that get built, but not a lot of ways to make money off of things that don’t.”[12] Planners and elected officials measure their worth by the number of cranes in the sky and are eager to treat a frenzy of building as validation of their pro-growth policies and plans. Their short-term horizons lead them to take what they can get when they can get it. Apologists like Harvard economist Ed Glaeser justify incessant growth as providing benefits for the public: apparently, the “halo effect” of new high-end development will “pull up” the quality of life and lower prices and rents for all.
As a developer, Trump benefited from the growth-orientations of planners and council members who permitted his buildings, built infrastructure so he didn’t have to, and offered him regulatory concessions and subsidies. He seems to be taking the same approach as President – to help the private sector extract as much from government as possible while telling the public that such theft is ultimately good for them. His choice of cabinet members and administrators from the ranks of corrupt lobbyists and businessmen reveals his belief that government should be run as a kleptocracy. He has opened up Washington, D.C. for clever wheeler-dealers like himself – to appropriate the assets that government has heretofore managed (like federally owned lands and coastal oil deposits); to limit government competition with private providers (goodbye solar energy and public schools); to profit from procurement contracts (the goddamn Wall).
Ronald Reagan was a true believer in small government; in contrast, Trump’s administration is relatively small because he is inept. If he can find a way to grow government and its influence to help himself and his cronies, he’ll do it. Like many developers, he can get behind the idea of big government if that government shares its largesse with him and his pals.
The problem facing Trump is that, unlike in the small pond of urban real estate, knowing who’s your friend, who’s your competitor, and who’s your enemy is more challenging at the federal and international levels. He cannot control the growing ranks of White House staff, who turn over with regularity. Trump has found his deal-making skills challenged by the multiple interest groups, affiliations, and cultures at higher scales. He now has to negotiate with organizations and countries that are not part of his New York City or real estate networks. His boorish ways, acceptable among real estate schmucks, are considered crude in diplomatic chambers. Trump’s skills as a developer may have helped him sell the voters a proverbial bridge but they are an obstacle for effective leadership.
Notes
1 It won the Best Book Award from the Urban Affairs Association.
2 Rybczynski, Witold. Last harvest: From cornfield to new town: Real estate development from George Washington to the builders of the twenty-first century, and why we live in houses anyway. Simon and Schuster, 2008.
3 Fitch, Robert. “Richard Plays Realtor in San Clamente.” Ramparts, September, 1972.
4 Stein, Samuel. “How the Trumps Got Rich.” Jacobin, August 4, 2016.
5 Miller, Ross. Here’s the deal: The buying and selling of a great American city. Alfred a Knopf Inc, 1996.
6 Trump, Donald J., and Tony Schwartz. Trump: The art of the deal. Ballantine Books, 1987.
7 Fainstein, Susan S. The city builders: property, politics, and planning in London and New York. Oxford: Blackwell, 1994, pg. 69.
8 Weber, Rachel. “Edifice Rex: Egos, assets, and the financialization of property markets.” The Avery Review 21, January 2017.
9 Frieden, Bernard J., and Lynne B. Sagalyn. Downtown, inc: How America rebuilds cities. MIT press, 1991, 226-227.
10 Bourdieu, Pierre. Distinction: A social critique of the judgement of taste. Routledge, 1984, 79.
11 Sorkin, Michael. What Goes Up: The Right and Wrongs to the City. Verso Books, 2018, 153.
12 Weber, Rachel From boom to bubble: How finance built the new Chicago. Chicago: University of Chicago Press, 2015.