**4. The capitalistic exploitation of dwellings**

Industrialization implicated a comprehensive division of labor and, consequently, the functional and spatial division of living and working. While productive activities had been relocated to firm sites, the home mainly served for tasks of reproduction. Further outsourcing of housing functions followed through with the proliferation of health, education, and cultural institutions. With the growing availability of leisure time, recreational and sports activities were outsourced increasingly as well. This intense spatial differentiation of functions has changed with the development of modern information and communications technologies over the last 20 or so years, as both productive and reproductive tasks can now be relocated to the home. This development, however, happens to take place selectively, voluntarily, and involuntarily. The measures to combat the COVID-19 pandemic are currently the most obvious signifier of a complex mix of functions at home. All these processes will influence – and partly even determine – the economic meaning of the dwelling as a commodity.

With the implementation of the neoliberal regime in market societies since the 1980s, economical housing functions have also altered. Globalization and deregulation of financial markets led to significant demand for properties as capital investment. Commercial and housing real estates are valued profitably, primarily in large urban agglomerations such as global cities, not least due to other capital investments are assessed less attractive because of low interests. Also, the privatization of public commodities like social housing complexes increased the revenue expectations of investors. For example, Germany's number of social housing units declined from almost 4.0 million (1987, only West Germany) to 1.2 in 2020 [23]. The economic and financial crises of 2008 further boosted housing commodification and reinforced housing market structures – with private interests outperforming social needs. Accumulating capital clearly prevails [24], though personal risk management is increasing likewise [25].

Land and real estates are finite and scarce commodities whose utilization depends on diverse interests and needs – agriculture, commerce, housing, transportation, recreation or natural livelihoods' preservation. Scarcity and competition ask for high demand, which also varies due to locational parameters. Globalization, deregulation, and privatization of commodity and financial markets made numerous and flexible possibilities of capital reinvestment available simultaneously. Overproduction of commodities and falling prices thereof produce a surplus of capital in the "primary circuit of capital" [26]. This capital seeks valorization in the "second circuit of capital", to which real estate markets

belong too. Urban and suburban housing markets are predominantly affected by increased exploitation of capital [27].

The influence of economic geographical parameters manifests, among other places, in processes of gentrification. Gentrification, defined as a process of economic, architectural, cultural and social upgrading of mostly attractive urban areas (concerning location), often accompanied by a displacement of less affluent households which have lived in these areas for long [28–31], is theoretically analyzed by different approaches. Rent gap and value gap theories focus on the investment behavior of financial companies (real estate agencies, insurances, mortgage lenders, private housing companies, etc.) and government agencies. Driven by suburbanization processes with rising land prices in these regions, "[…] the relative price of inner-city land falls. Smaller and smaller quantities of capital are funneled into the maintenance and repair of the inner-city building stock. This results in what we have called a *rent* gap in the inner city between the actual ground rent capitalized from the present (depressed) land use and the potential rent that could be capitalized from the "highest and best" use […], given the central location" [30, p. 133]. **Figure 2** illustrates the rent gap theorem. Though similar in its principle explanatory objective, value gap theories consider rent-housing markets of European cities mainly [32].

Unlike top-down approaches of capital accumulation, theories such as the invasion-succession-cycle theory primarily take the investment behavior of households into account. According to this theory, gentrification is distinguished into phases of invasion (firstly of pioneers who are engaged in activities of cultural upgrading, followed by gentrifiers whose primary interest lies in profit-making) and succession (an increase of firstly pioneers and then gentrifiers lead to a transformation of the residential population due to rising rent and property prices, referred to as 'social' upgrading). Despite these analytical differences, both approaches highlight the function of housing as a commodity.

**Figure 2.**

*The rent gap theory by Neil Smith (idealized). Source: Clark E (2010). https://www.slideshare.net/ environmentalconflicts/eric-clark. BV = building value; PLR = potential land rent; CLR = capitalized land rent.*

#### *The Impact of Contemporary Housing Functions on Its Social Sustainability DOI: http://dx.doi.org/10.5772/intechopen.99277*

Furthermore, the strong position of the economic functions of housing can be explained by the heavy meaning of the competition law and private property within the European Union. One conclusion of this meaning is that social housing policies must not distort competition. In other words, social housing is exclusively restricted to low-income households unable to afford homes offered on the private market [33, p. 20]. Private property is explicitly legally protected as a basic liberal right, while social housing needs are not. The human right to housing is interpreted as a right to "housing assistance" that obliges the state to issue adequate political conditions and not accomplish an individual right to housing. The consequences of this politics are far-reaching: Sweden, for example, had to adapt its previous praxis of fixing rents when it joined the EU in 1995. The "reasonable rent" was related to the dwellings of the public housing companies; private rent prices were not allowed to exceed five percent. Today, rents of public housing companies have to comply with freemarket conditions. In addition, Sweden has reduced public funds in housing to zero [33, p. 24].

It is not only private companies but also cities and municipalities which share a common interest in responsibly taking care of the economic functions of housing. In contrast to the private housing economy, public institutions are required to gauge economic, social and ecological concerns against each other, for which they have to adjust their local programs and plans to regional and national ones. Given their sovereign right to designate land to be utilized for construction, they govern the settlement development of their territory mostly independently, however. Income and commercial tax revenues force cities and municipalities to promote the economic development within their territory selfishly and independently, under which a trans-locally coordinated settlement development suffers. Planning rules (e.g., building density and height) as hard facts and cultural aspirations (e.g., preference of detached houses in suburban and rural regions) determine the housing forms sustainably. Middle- and high-income residents are supposed to be most attractive since they pay more taxes and spend more money which, in turn, increases municipalities' scope of freedom for future local development – a self-enforcing process has been initiated, which ultimately is economically risky and ecologically unstainable.

Even a balanced local housing market development is prompted to take the private interests of landlords into account, even though it affects low-income households adversely. Social housing associations increasingly struggle to supply affordable housing for all income groups (income that relates to the regional labor market with its salary structure). For example, the income and living expenses of Salzburg's residents grew by 22 percent, while rent prices did so by 30 percent and property prices by 70–100 percent [34]. Current rent prices for tenants of social housing are almost 11 Euro per m2 , compared to private rent prices of 15 Euro per m2 on average [35]. Although a significant difference is given, for a growing number of low-income households, it gets more and more difficult to afford these rent prices.

A related problem is that housing markets are spatially and temporarily volatile due to socio-demographically varying attitudes of housing preferences. Suburbanization, reurbanization, counter-urbanization or living in the countryside are all trends of changing popularity that affects the supply and demand of housing. While vacancy in demographically shrinking regions is accompanied by a dereliction of buildings and a decay of prices, it is a signifier of speculation in regions of growth. Economic sustainability of such processes is at least questionable, since individual profit-seeking is local and costs of housing conservation are socially outsourced. Ecological and social sustainability are disastrous because the emigration of people is followed by the emigration of businesses and services.
