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The land issue affecting property costs

17 augustus 2022

The investigations of the real estate business, the effects, and its evolution in countries and cities have been becoming a matter of maximum interest. The increasing relevance of the market as an agent of social allocation has triggered the study of both sociologists and economists and urban planners of an event that is showing great willingness to convert urban centers and also the city in its expansion phase.

Said observations on the area of ​​the real estate market have been busy on different occasions in the area of ​​classical economics, thus trying to give a response to media whose origin and development have to do with social relations, which escaped the logic of the market.

Around this, a series of myths took hold, among which the most deeply rooted referred to the fact that the scarcity of land is responsible for the rise in prices. This mentioned invention has the “soil problem” as a common origin, which generalizes two types of contradiction. The first is derived from the issues that the autonomy of income presents when projecting the city, and the second is the independence of land ownership with respect to capital, all this has led the practice of urban planning to become a management tool at the service of the real estate business.

In a first approach to the factors that affect the price of land, we could point out the existence of characteristics inherent to the final product such as the location, always unequivocal, or the existence of a final real estate product of greater or lesser quality.

Therefore, we are faced with an irreproducible “merchandise”, which generates an inelastic market in supply and whose demand has been detached from its obvious function of accommodation (demographics) and is seen as a niche for capital accumulation, which will inevitably be related to the profitability expectations that are foreseen with respect to the conditions granted by the different urban planning tools, which, together with the location, will set the price based, not on its own nature, but on the highest value that the demand can support at any given time and place. In other words, we are faced with a “merchandise” whose exceptionality makes its valuation depend on society as a whole and on the planning policies that are dictated to it.

Another characteristic to highlight is that the land, as a non-produced good, is not naturally a commodity, so its price must be understood as the valuation of the capital on the land, that is, it is a localized profit. Ground rent, therefore, is defined by the social relationship that generates it, a contradictory social relationship since it is subject to changes in the exchange relationships and therefore the dynamics of the accumulation process. Land rent, moreover, is a differential rent, due to the unequivocal condition of land placed on the market and monopolistic, since it is not determined by the conditions of production since ultimately the quantities produced are limited and irreproducible. Transferring these considerations on land to the specific case of the city, we find that the use values ​​are conditioned by the scarcity of an irreproducible product and by private property with a solvent legitimacy. These use values, linked to the spatial configuration of the city and to social relations, become merchandise when an individual capital takes possession of them, although paradoxically this same capital cannot reproduce the conditions that generate the value (the appropriable profit) of which it appropriates.

The real estate map of a city represents, therefore, the direct translation of its social structure and the differential ground rent, it becomes the vehicle that «ensures and reproduces the coincidence between the hierarchy of uses and the economic and social division of space.

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