Changes in Housing and Property under the Austerity Regime in Greece

Challenges for Movements and the Left

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4. Restructurings affecting housing in fiscal adjustment programs

The crisis management period, since 2010, signifies a strategic turn from Greece’s previous land and housing model, with the state changing from a faciliator to an “enemy” of poor and working class people. Housing and real estate assets turned from a strategic resource into a burden for the vast majority of the population.

We can define three main fields of policy intervention within the fiscal adjustment programs directly or indirectly related to housing: (1) income and real estate property over-taxation as a key approach to increasing public revenues, (2) the management of private debt, both towards banks and the public sector, which targeted real estate assets as a main source for debt repayment, and (3) the “modernization” of the real estate sector, starting with public assets, but also targeting the private sector.

These policy lines advance in an interconnected way and are conditioned by the structural features of the housing market, calculations of political costs, and possibilities for managing social costs within the adopted austerity rational of the memorandums. The new reforms and measures are intensively debated in public discourses, both nationally and on a European level. Regardless of the speed of restructurings and their actual implementation, the legitimacy of imposed measures and new regulatory frame is based on a disciplinary mainstream discourse, which incriminates previous arrangements, moralizes debt, and naturalizes the causes of the crisis and its destructive social effects.

Within the adjustment programs and crisis debate, the high rate of real estate and land ownership, in Greece, but also in Southern Europe in general, has been targeted to be a main source of public revenue for debt repayment through excessive property taxation. High ownership rates (especially first residence) increase the total household wealth in Southern European countries, which results in the portrayal of Southern European households as “income-poor, but asset-rich” (ECB, 2013). Real estate property taxation increases the invoked shortcomings of the previous taxation system and was presented as a necessary reform for its “rationalization.” Nevertheless, the horizontal measures that were disproportionally introduced burdened low and medium-income households (Giannitsis & Zografakis, 2015), rendering the reform extremely unjust and, thus, strongly contested. Anti-social and punitive measures have been adopted, since 2010, to ensure revenues (e.g. electricity bills, high penalties and fines in case of non-payment, immediate confiscation of mobile and immobile assets). In the wider context of high unemployment and abrupt income reduction, taxpayers have reached the limits of their taxpaying capacity, resulting in a large and growing group of debtors towards the state, which added to the already high rate of household indebtedness towards banks.

The issue of household over-indebtedness has been at the top of the agenda for the governments managing the crisis, since they relate closely to banks’ balance sheets and the justification of the banks’ financial viability. Greece is considered to have a highly protective system against foreclosures due to the consecutive suspension of debt auctions for all properties worth up to 200,000 euros, since 2009, and the rigidity of legal proceedings. This protective framework prevented massive foreclosures and forced evictions. Banks, nevertheless, have been advancing the legal processes for property seizure in view of total liberalization.

The public debate revolves around the division between chronic non-payers or “bad” payers and the very needy and vulnerable. According to the troika policy makers, sustained protective measures create moral laxity and abuse, which also contributes to the stagnation of the real estate market. In 2014, a new ethical banking code was introduced, which distinguished between cooperating and non-cooperating debtors. Nevertheless, solutions provided to those that can no longer respond to their economic obligations are far from being viable or just. Furthermore, as was previously mentioned, private debt management does not only involve defaulted credit, but also debts towards the public, which are transferred to debt-collecting companies in many cases.

As in many countries, debt – both private and public – emerges as a dominant social factor in the current phase of globalized neoliberal capitalism. The condition of being indebted is politically constructed as a strategic governance technique; it becomes a means of social control, exploitation, and subordination, while emerging as a strategic field of social confrontation and competition (Lazzarato, 2011; for more mortgage bio-politics in Spain, see Lamarca & Kaika, 2014). People are expected to become the entrepreneurs and investors of their own lives, calculating benefits and costs as well as managing income cuts, unemployment, the curtailment of social provisions, etc. In the case of Greece, as previous social arrangements are collapsing, small-scale real estate property (housing or other) becomes collateral in the risk management of one’s own personal life.

These conditions place pressure on small ownership, since small land- and homeowners are unable to sustain real estate ownership and property. An extensive process of property reallocation and dispossession seems to be taking place, which also leads to an acute destruction of the capital invested in property. Despite the very low market prices of real estate assets, investors are mainly targeting high-value property, tourism assets, and public property (Hatdjimichalis, 2014). Processes of property concentration in the hands of real-estate investors anticipating profitable opportunities, which take place in various neighborhoods, cannot be easily measured. Scenarios of property conversion from privately owned housing to rental market investments – especially those owned by banks – are also often discussed in the media. It is still not obvious how this could happen, given the very fragmented and diversified property structure in Greece.

Within this context, the creation of a “safe environment” for real-estate investors has also been a top priority of the adjustment policies and discourse. As discussed in numerous real estate journals and the mainstream press, crises create real investment opportunities on very profitable terms. This is due to significant real estate market recession, public property sell-off programs, pressure on small-scale property owners, and broad deregulation of urban development processes. “Professional” investors are expected to mobilize stagnating capital in the non-commercial housing sector. For this purpose, a new modernizing toolbox, which introduces institutional investors into the housing sector and enables the implementation of innovative financial products and tools for the management of real estate property, is needed. Up to now, these include decreasing taxation of real estate property transactions and possession (for large properties), a new operational framework for real estate investment trusts (REITs) in the housing sector, the liberalization of rental contracts, and the decrease of rental income taxation for high revenues. This turn disregards the cultural and economic dimensions of housing and ownership in Greece and further alienates land and housing from local agents, while it follows speculative and profit-oriented goals, rather than ensuring housing as a basic human need.

On the other hand, the materialization of the previously mentioned strategic policy trends is stumbling over structural features of housing and property in Greece as well as the prolonged recession of the construction and housing market, which leads to constant devaluation11 and limited transactions.12 Furthermore, the pace of reform implementation has been restrained by massive political and social discontent. Massive housing and property losses would completely overturn the deeply rooted social contract linked to the post-war model of housing and property access. At the same time, it would produce dramatic social damage given the lack of alternatives for access to affordable and decent housing for many households. Nonetheless, the restructurings of the last decades and recent reforms, which adhere to neoliberal and austerity doctrine, have clearly laid the foundations for the further liberalization and financialization of the housing sector.

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