From Privatisation to Community Use
We are witnessing an emergence of different strategies to counter corporate ownership, real estate speculation and privatization through community ownership models and cooperative land use schemes
In the last few decades, ownership has become a key factor of our societies and economies. As the economist Thomas Piketty demonstrated in his recent book, ”Capital in the Twenty First Century”, the late 20th and early 21st centuries witnessed the return of the primacy of wealth over work in economic benefits and ownership has become an increasingly important part of wealth production.
Piketty’s conclusion means that after a few decades following the welfare reforms of the 1920s, when work had constituted the principal path towards emancipation and social mobility, the dismantling of the welfare state in Western societies in the last third of the 20th century has globally reduced the value of work and has degraded it into a secondary source of income, behind revenues from property. Among the ownership of other goods like financial products or intellectual properties, the ownership of spaces, that is, real estate, has become a defining element of today’s urban and rural areas: this process corresponds to the increasing role of private and corporate owners in our cities and countryside and to a general withdrawal of public ownership across the globe.
The ownership of spaces determines not only physical access to spaces but also structures how these spaces are developed, maintained, controlled, and generate revenue. As sociologist Saskia Sassen suggests, the ownership patterns of our cities are changing and these transformations should concern all of us. The corporate acquisition of buildings that Sassen describes as “a shift from mostly small private to large corporate modes of ownership, and from public to private”, thus reducing the social diversity of cities and limiting the choices of disadvantaged communities.
This corporate takeover is not only occurring in global cities. To varying degrees, it is also happening in Central European cities like Vienna, Warsaw, Berlin, Rome, and Budapest; cities which are not necessarily the focus of global investment firms and development companies but which have undergone considerable transformation in the recent decades. This process, described by Sassen, of concentrating urban property ownership into the hands of the privileged few has not gone uncontested: we are witnessing an emergence of different strategies to counter corporate ownership, real estate speculation, and privatization through community ownership models, cooperative land use schemes, and new mechanisms for oversight of public property management. While these cases represent a variety of models and formats that help the establishment of non-speculative ownership patterns, their success is largely determined by the socio-economic contexts in which they unfold.
The Paths of Privatization
In the past decades, Central European cities have gone through massive transformations but with significant differences. In the 1990s, with the Fall of the Berlin Wall, cities in the region seemed to converge towards a shared path, that of embracing the liberal market economic model. However, while some cities in East Germany – most notably Berlin – advanced towards social democracy and others – like Vienna – followed the welfare-oriented growth patterns, characterized by strong public control over housing and the real estate market, the cities in Central Europe have proceeded towards a total privatization and liberalization of their property markets.
With different arrangements, cities from Warsaw via Prague through Budapest rapidly privatized their previously nationalized, publicly-owned property stocks, resulting in the highest proportions of private ownership in Europe. The different mechanisms of privatization created the varied landscapes after the post-communist transition. In Prague, properties were restituted to their original owners, who generally sold them to investors, who renovated them and turned them into high-end housing or hotels in the city center[i]. In Budapest, tenants had the right to buy the apartments they rented for 10% of the estimated market price: this resulted in a highly fragmented ownership structure, with difficulties in coordinating the desires of many small owners in apartment buildings and at industrial sites alike. In Warsaw, the privatization process had a few hidden turns: investors buying and collecting pre-war ownership certificates have begun to reclaim their ownership to parcels that ceased to exist in their previous form after the war; speculating with land under post-war buildings has created unprecedented tensions around the ownership of the land, buildings, and tenancies, resulting in both evictions and reactionary protests.
Privatization has not only affected housing but also other segments of the property markets in Central European cities. As space is a crucial component of community organizing, social cohesion, and cultural exchange, civic spaces accommodating gatherings and events of socialization, activities of education, sport, and work are key ingredients, “foundational institutions”[ii], of the public city. The buildings reclaimed for community functions vary in their profiles from “free spaces” through “houses of culture” to “co-working spaces”, and differ from each other in their organizational and management principles, accessibility, financial sustainability, and political dimension. What links these community-run, civic spaces – incubators, theatres, school buildings, cinemas, gyms, social kitchens – together is that they all address the lack of existing facilities for social activities, welfare services, independent work, and cultural exchange.
Privatization and speculation have therefore had a strong influence on how community spaces are created, run, and maintained, depending on public policies, funding sources, democratic traditions as well as on habits of activism and the availability of affordable spaces. While Vienna has continued to enjoy strong public institutions and publicly-funded and -owned community venues, in Berlin the emerging practice of temporarily using hundreds of vacant buildings and abandoned sites across the city has contributed to the emergence of a new cultural scene, with new roles in urban transformation, first with spatial pioneers and then with spatial entrepreneurs. On the other hand, in Warsaw, Prague, Bratislava, and Budapest, many new initiatives grew out of civic initiatives with significant community backing: their relative independence from public funding and the lack of framework for long-term tenures gave community spaces some autonomy but little stability in these cities.
From the second half of the 2000s, flexible regulatory environments attracted an unprecedented volume of financial capital into European cities; this process was facilitated by the global financial markets. The stock market crash of 2000 and the growing distrust in the previously favored IT stocks pushed investors towards the supposedly safe real estate market. At the same time, interest rates were substantially reduced by the central banks, which wanted to prevent a recession[iii].
The cheap capital that flooded international markets found an easy way into real estate. In Berlin, international capital created a new situation: while in the 1990s, investment in Berlin properties was mainly coming from German investment firms, they were joined in the early 2000s by large international firms. The presence of cheap money prompted investors into real estate development projects that corresponded to no real demand. This speculative real estate boom had a strong impact on cities and their spaces. While international investment capital generated new development in the center of Warsaw, in other Central European capitals, investment capital focused mostly on the existing urban tissue, buying up apartments in historical buildings and benefiting from rising property values as well as growing tourism and the increasing demand for short-term accommodation.
In the meanwhile, after waves of privatization, corruption and the misuse of public properties, many citizens and communities in the region felt that public assets are no longer depositories of public values, citizen activities, and community access. Disappointed by the public sector’s complicity in prioritizing private and corporate profit over public interest, many community groups and civic initiatives have begun mobilizing to revive the idea of the commons in order to secure public and community use beyond the exploitative logic of the public and private domains.
Emerging in various parts of Europe and beyond in the past decade, these initiatives began to explore alternatives to publicly offered spaces and services to establish new forms of property ownership and use; those which would be more resilient to the oscillations of the market and immune to the impulses of speculation and private profit-seeking.
Among the strategies to consolidate civic spaces and secure long-term community access and use, shared and cooperative ownership has proved to be a valuable framework. In the field of housing, shared ownership has been an emerging model since the 1970s in Berlin and Vienna, though the potential for tenants willing to take the risk of becoming owners of non-residential spaces was only first demonstrated in Berlin by the ExRotaprint initiative only in the 2010s. When their building complex was put up for sale by the Berlin Municipality’s Real Estate Fund, tenants began to look into the possibility of buying the area. Teaming up with two anti-speculation foundations, the non-profit company established by the tenants became the owner of the 10,000 m2 complex, setting a precedent in Berlin that inspired many experiments in cooperative ownership and a campaign to change the city’s privatization policy.
The existence of such organizations that can help shared ownership with their financial resources and legal experience is of key importance. One of the foundations that made this transaction possible, Stiftung trias, works on taking land off the market by separating the ownership of land and buildings: supported initiatives lease the land from the foundation in the form of a long-term Heritable Building Right (Erbbaurecht), and their lease fee is collected in a mutual fund run by trias where the accumulated capital is then used for further property purchases in support of like-minded initiatives. In recent years, trias has also been working with public administrations, securing functions for properties that municipalities are obliged to sell under austerity laws.
ExRotaprint’s model of ownership shared with anti-speculation organizations offered responses to the dilemmas of gentrification, speculation, and risk and has since been replicated by many other organizations becoming an inspiration for initiatives aimed at changing the general policies of privatization. The strategy to turn privatization into an advantage for a civic space has been proven feasible for many initiatives in Berlin as they were facing similar threats from the side of the municipality’s real estate policy and large institutional investors and developers. Alternatively, long-term land lease allowed many initiatives like the Zentrum für Kunst und Urbanistik, a cultural collective, to create community venues on publicly owned land; these contracts – some as long as 25 years – allow and encourage participants to invest significant funds in the development of their sites.
Although many civic initiatives across Europe were able to follow the example of ExRotaprint and began contemplating cooperation with anti-speculation foundations and ethical finance organizations in order to buy their buildings, the model cannot simply be implemented anywhere. Its adaptability depends on the ideal combination of low real estate prices, relatively transparent public real estate management, stable and suitable legal environment, and high purchasing power. In other settings across Central Europe, the lack of appropriate legal forms and the post-socialist suspicion related to collective ownership and shared assets make alternative models of ownership difficult to conceive. When asked about helping community initiatives in the more eastern regions of Central Europe, representatives of Stiftung trias are usually cautious: the differences in the legal systems make this transfer rather complicated and risky.
In many cities of Central Europe, the hegemony of private homeownership, realized at the expense of the rental market, created a norm that does not leave much space for experiments in shared and collective ownership. As members of the Budapest-based Rákóczi Kollektíva experienced, there are a number of socio-economic circumstances that created obstacles for their co-housing initiative: the absence of public awareness (policy tools), financial mechanisms (non-individual loans), and legal frameworks (shared ownership formats) make the transfer of existing co-housing models to Visegrad Group very complicated.
By the time the ExRotaprint model became internationally known and began inspiring citizen initiatives across Europe, the possibilities opened in the real estate market as the crisis was coming to a close. At least concerning the availability of financial capital, the real estate markets began to return to their pre-crisis dynamics. While this recovery signaled the end of a missed opportunity in some cities to exploit weaker demand and lower prices to build a more accessible property system, the return of investment capital brought about a housing crisis and a return to the classic, investor-driven development mechanisms in most Central European cities.
In this context, instead of shared ownership models, most initiatives in eastern Central Europe have looked into other means of securing long-term tenure and assure community profit. In Warsaw, the Open Jazdów[iv] initiative relied on massive citizen mobilization and protests to put pressure on the municipality and prevent the demolition of an entire neighborhood of post-war wooden buildings. In this case, community power has been turned into political leverage to create a particular form of participatory governance that enables dozens of NGOs to use the buildings and engage with local communities.
In Bratislava, the Old Market Hall Alliance[v], an NGO formed to revitalize the city’s abandoned central market hall, has conceived of a model that allows the organization to be economically sustainable and financially separated from the Municipality, with no public subsidies involved. The 15-year (initial 10 years + a 5-year extension) contract signed between the Alliance and the Municipality states that the Alliance pays a symbolic 1 euro rent per year to the Municipality and has to invest 10.000 euros per month in the renovation of the market hall for the entire duration of the contract: this amounts to 120.000 euros per year and almost 2 million euros by the end of the contract. This sum is covered by the revenues generated by short- and long-term rental arrangements and the contract assures that the building remains in public ownership but is managed by an NGO that gradually renovates it by reinvesting its profit into the building.
Likewise, the theatre organization FÜGE took over an abandoned school building in Budapest and turned it into a cultural incubator house for theatre-related groups and other cultural and creative producers. Similar to the Old Market Hall Alliance, FÜGE has a 5+5 year contract and its investments into the building are accepted as part of the rent. These long-term contracts, although not challenging traditional property relationships, can allow organizations to invest in the building and encourage the development of more sustainable business plans.
Although the real estate market’s return to “normal” after the economic crisis endangered numerous civic initiatives, many of them were equipped with the tools and skills that enabled them to take the next step towards stability. The end of the crisis and the returning real estate boom in many cities brought up the question of autonomy and ownership even stronger: how can initiatives without much capital move beyond the vulnerability of short-term tenancies and changing prices?
The public and the civic city
This question inevitably generated important discussions about the role of various sectors in the public city that is, a disposition that offers similar opportunities to all social groups: can civic actors or communities better manage spaces and services that traditionally belonged to the public domain? Or is the involvement of civic actors in providing public services just another way of privatizing services and dismantling the public domain and its welfare services according to the “Big Society” model of the UK Tory government? Are civic spaces a competition for public spaces or an extension to them?
In some contexts where alternative finance is available through ethical banks, social investors, or anti-speculation foundations, shared ownership can be a solution to assure long-term tenures. In other circumstances, where such funding sources are missing, communities may look into the possibilities of long-term leaseholds or new public policies securing the commons for community use.
The extension of the public realm towards speculation-free spaces provided by private-civic cooperation should be joined, but not overwhelmed, by public administrations and public funds. If regulations of public-civic cooperation in the context of traditionally strong public administrations have been limited to the right of use and have not yet created applicable shared ownership models, shared administration, as a way to share public responsibilities and resources with community organizations, citizen groups and public-minded private developers may prove to be an important model in creating community co-ownership over local assets and keeping profits to benefit local residents and services to ensure more resilient neighborhoods and more autonomous civic spaces in Central European cities.
Levente Polyak – Urban planner, researcher, community advocate and policy adviser. He is editor of Cooperative City, co-founder of Eutropian Research & Action (Vienna-Rome) and member of the KÉK – Hungarian Contemporary Architecture Centre (Budapest).
[i] See: Reprivatisation: How Hindsight Helps Us Move Forward. Magazyn Miasta: Cities Magazine #1, 2017, https://www.sharedcities.eu/material/shared-cities-magazine-117/.
[ii] Rossi, U. (2013). On Life aas a Fictitious Commodity: Cities and the Biopolitics of Late Neoliberalism. International Journal of Urban and Regional Research, 37(3) pp.1067–74.
[iii] Uffer, S. (2013). The Uneven Development of Berlin’s Housing Provision. Institutional Investment and Its Consequences on the City and Its Tenants. In M. Bernt,B. Grell and A. Holm (eds.) Berlin Reader: A Compendium on Urban Change and Activism. Bielefeld: Transcript Verlag.
[iv] See: Magazyn Miasta: Cities Magazine #2, 2018, https://www.sharedcities.eu/material/magazynmiastacities-magazine-vol-2/.
[v] See: Magazyn Miasta: Cities Magazine #1, 2017 and #2, 2018.