David Harvey and Lata Chatterjee

Johns Hopkins University Livingstone College, Rutgers University

I n t h i s paper we sketch the answers t o two questions: (1) How do the macro and micro
features o f housing markets r e l a t e t o each o t h e r i n theory and i n p r a c t i c e ? (2) How i s ab-
s o l u t e r e n t r e a l i z e d i n t h e housing markets of l a r g e metropolitan areas? We can a f f o r d the
l u x u r y o f two questions because t h e same materials s u f f i c e t o answer both.

I. The Macro and Micro Feature8 of Housing Markets

There i s a considerable body o f theory and a mass o f empirical information on t h e macro-
economic aspects o f housing markets. The same can be s a i d w i t h respect t o t h e micro-econo-
mic model1 i n g o f housing choices - i n c l u d i n g l o c a t i o n a l choices through which r e s i d e n t i a l
d i f f e r e n t i a t i o n o f metropolitan areas i s thought t o be achieved. But there i s l i t t l e theory
o r i n f o r m a t i o n on t h e r e l a t i o n s h i p between these two aspects of housing markets. What there
i s u s u a l l y gets l o s t i n the formalism o f aggregation theory i n which i t i s assumed t h a t the
r e l a t i o n s h i p between n a t i o n a l aggregates and l o c a l i n d i v i d u a l behaviours i s a technical pro-
blem t h a t has a formal ( u s u a l l y mathematical) solution. I n t h e face o f problems o f t h i s
kind. We b e l i e v e t h a t i t i s imperative t o i n v e s t i g a t e human practice, f o r t h a t p r a c t i c e w i l l
l i k e l y reveal what formal analysis seems helpless t o resolve. Economies do n o t stop working
because o f t h e aggregation problem and there are innumerable procedures i n p r a c t i c e which
serve t o l i n k decisions made a t the n a t i o n a l l e v e l t o decisions made a t lower l e v e l s . Ela-
borate devices e x i s t t o i n t e g r a t e t h e n a t i o n a l and l o c a l aspects of economies. These de-
vices a r e t o a l a r g e degree embedded i n the s t r u c t u r e o f governmental and f i n a n c i a l i n s t i t u -
t i o n s . I n order, therefore, t o understand the l i n k s between the n a t i o n a l and the l o c a l , we
have t o examine i n d e t a i l the s t r u c t u r e o f these i n s t i t u t i o n s .
I t i s important t o e s t a b l i s h a t the outset an appropriate methodological stance f o r such
an i n v e s t i g a t i o n . We r e q u i r e a methodology capable o f dealing w i t h t h e r e l a t i o n s h i p between
t h e i n d i v i d u a l and s o c i e t y viewed as a t o t a l i t y o f some s o r t . The methodology appropriate
t o t h i s purpose has been generally neglected i n t h e s o c i a l sciences and much of our i n a b i l i -
ty t o deal w i t h t h e "aggregation problem" must be traced t o t h a t e c l e c t i c i s m and methodologi-
c a l myopia o f which Barnbrockl speaks, which i n s i s t s t h a t we have t o understand phenomena
through conventional f i l t e r s o f cause-and-effect, functionalism and the l i k e . The r e l a t i o n s
which we need t o understand are, however, contextual r e l a t i o n s or, as Ollman and others have
proposed, i n t e r n a l r e l a t i o n s through which the s o c i a l t o t a l i t y i s s t r u c t u r e d and transformed
by i n d i v i d u a l s o r e n t i t i e s (such as corporations) s i m i l taneously e x h i b i t i n g both ''learning"
behaviours which s u s t a i n the s o c i a l s t r u c t u r e as a whole and " i n s t r u c t i n g " behaviours
through which t h e s o c i a l s t r u c t u r e i s i t s e l f transformed.* This conception of things i s
n e i t h e r widely accepted nor even understood. But from i t we gain an imnediate object for
enquiry - v i z , the processes o f s t r u c t u r i n g and transformation together w i t h the determinate
s t r u c t u r e s t h a t mediate these processes.3 We w i l l now adopt such a methodological stance
w i t h respect t o the housing market.
Typical concerns o f housing p o l i c y a t t h e n a t i o n a l l e v e l are:
(1) t h e r e l a t i o n s h i p between construction, economic growth, and new household formation
(population growth);
( 2 ) the behaviour o f the construction i n d u s t r y and the housing sector as a Keynesian re-
g u l a t o r through which c y c l i c a l swings i n the economy a t l a r g e are ironed out;
( 3 ) the r e l a t i o n s h i p between housing p r o v i s i o n and the d i s t r i b u t i o n of income (welfare)
i n society.

22
 Since the 1930s, these concerns have generated aims t h a t have, by and large, been success-
f u l l y met.4 Economic growth has been accompanied and t o some degree accomplished by r a p i d
-
suburbanization a process t h a t has been f a c i l i t a t e d by n a t i o n a l housing p o l i c i e s . Much o f
the growth i n GNP (both absolute and per capita) since t h e 1930s i s wrapped up i n the sub-
urbanization process ( t a k i n g i n t o account t h e c o n s t r u c t i o n of highways and u t i l i t i e s , hous-
ing, the effective demand generated by t h e automobile, etc.). C y c l i c a l swings have been
broadly contained since the 1930s and t h e c o n s t r u c t i o n i n d u s t r y appears t o have functioned
effectively as one of several major counter-cyclical t o o l s . The evident s o c i a l discontent
of the 1930s has t o some e x t e n t been successfully defused by a government p o l i c y t h a t has
created a l a r g e wedge of middle income people who a r e "debt encumbered homeowners" and who
are u n l i k e l y t o rock the boat because they are both debt-encumbered and reasonably w e l l sat-
i s f i e d w i t h t h e i r housing. The discontent o f the 1960s e x h i b i t e d by blacks and the poor
provoked a s i m i l a r p o l i t i c a l response t o t h a t o f the 1930s i n t h e housing s e c t o r a' re-
sponse t h a t has n o t been p a r t i c u l a r l y successful i n o b t a i n i n g "a decent house i n a decent
l i v i n g environment" f o r many o f t h e poor and t h e black, although s o c i a l i n s t a b i l i t y o f the
1960s appears t o have been defused. A t t h e n a t i o n a l l e v e l , then, p o l i c i e s are designed t o
maintain an e x i s t i n g s t r u c t u r e o f s o c i e t y i n t a c t i n i t s basic configurations, w h i l e f a c i l i -
t a t i n g economic growth and c a p i t a l i s t accumulation, e l i m i n a t i n g c y c l i c a l influences, and
defusing s o c i a l discontent. Housing provides a v i t a l and e f f e c t i v e t o o l f o r s t a b i l i z i n g and
perpetuating t h e s o c i a l s t r u c t u r e of a market-based, c a p i t a l i s t system.
How are these general programs and p o l i c i e s transmitted t o t h e l o c a l l e v e l and u l t i m a t e l y
t o i n d i v i d u a l s making choices with respect t o housfng services i n d i f f e r e n t l o c a t i o n s ? The
mechanisms are very complex and we can do no more than sketch-in some o f t h e b a s i c r e l a t i o n s
between f i n a n c i a l and governmental i n s t i t u t i o n s , through which p o l i c i e s are f i l t e r e d and
transmitted t o the l o c a l l e v e l , S t a t e Savings and Loans, Federal Savings and Loans, mort-
gage bankers, savings banks and commercial banks a l l operate i n the housing market. The
operations of State and Federal S&Ls are confined t o housing and these i n s t i t u t i o n s are de-
signed t o "promote the t h r i f t o f t h e people J o c a l l y t o finance t h e i r own homes and the homes
o f t h e i r neighbors."5 The r u l e s and r e g u l a t i o n s vary b u t i n general S t a t e S&Ls tend t o be
small scale, community based and depositor c o n t r o l l e d , whereas t h e l a r g e r Federal S&Ls tend
t o be " p r o f e s s i o n a l l y " managed.6 But Federal S&Ls are u s u a l l y r e s t r i c t e d t o f i n a n c i a l oper-
ations w i t h i n 100 miles o f t h e i r head o f f i c e . Import and export o f funds f o r housing from
one market t o another cannot occur through these i n s t i t u t i o n s unless depositors s h i f t t h e i r
funds. The Federal S&Ls are, f o r t h e most p a r t , under the c o n t r o l and guidance of the Fed-
e r a l Home Loan Bank Board which has tended i n t h e past t o regulate the flow o f funds i n t o
the mortgage market i n a c o u n t e r - c y c l i c a l fashion with respect t o t h e economy as a whole.
FNMA and GNMA ( t h e government i n s t i t u t i o n s t h a t buy up mortgages from the f i n a n c i a l i n s t i t u -
tions t o provide the l a t t e r w i t h t h e l i q u i d i t y f o r f u r t h e r investment i n housing) on the oth-
e r hand, operate u s u a l l y t o dampen cycles i n housing c o n s t r u c t i o n which means t h a t two sets
o f governmental i n s t i t u t i o n s tend t o f o l l o w c o n t r a d i c t o r y p o l i c i e s . 7
Other i n s t i t u t i o n s such as mortgage bankers, savings banks, and commerical banks also
vary i n the way they operate i n the housing market. None o f these i n s t i t u t i o n s , however,
are confined t o housing. Mortgage bankers have complete freedom i n t h e geographic t r a n s f e r
o f mortgage funds, whereas t h e o t h e r i n s t i t u t i o n s are, t o some degree o r other, more re-
s t r i c t e d by Federal o r State r e g u l a t i o n . I n these i n s t i t u t i o n s i t i s t h e competition f o r
funds which d i c t a t e s t h e flow i n t o the housing market; housing finance i s best regarded as
a r e s i d u a l t h a t i s l e f t over a f t e r basic corporate needs are met. The counter-cyclical flow ,
t h a t t h i s generates i s emphasized by State and Federal p o l i c i e s t h a t p u t i n t e r e s t - r a t e c e i l -
ings on housing mortgages. I f there i s a heavy demand f o r c r e d i t and the i n t e r e s t r a t e
r i s e s (to, say, 10 per cent) then FHA o r State i n t e r e s t c e i l i n g s o f 8 per cent e f f e c t i v e l y
dry up the f l o w of funds i n t o housing (although a "points" system e x i s t s t o o f f s e t t h i s ) .
This d r y i n g up may be o f f s e t by the release o f more funds through FNMA, GNMA o r even through
the Home Loan Bank Board. Depositors are l i k e w i s e s e n s i t i v e t o i n t e r e s t r a t e s and are l i k e -
l y t o move t h e i r funds o u t o f , f o r example, a savings bank (with, say, a 5 per cent i n t e r e s t
r a t e c e i l i n g ) t o h i g h e r - y i e l d i n g investments.
How do a l l o f these f i n a n c i a l and governmental complexities r e l a t e t o the i n d i v i d u a l ? I n
the t y p i c a l micro-economic models o f r e s i d e n t i a l d i f f e r e n t i a t i o n and housing markets , i t I S
assumed t h a t income i s t h e r e l e v a n t determinant o f housing choice.8 I n f a c t , i t i s the a b i l -
i t y t o o b t a i n c r e d i t and a mortgage t h a t i s , f o r most people, t h e immediate determinant.

23
This a b i l i t y i s income-related, of course, b u t the a b i l i t y t o obtain a mortgage under s u i t -
able terms i s also a function of the p o l i c i e s of financial and governmental i n s t i t u t i o n s .
Because s e r v i c i n g costs are constant no matter what the p r i c e of a house, f i n a n c i a l i n s t i t u -
tions ( p a r t i c u l a r l y those geared t o profit-making) p r e f e r t o finance the more expensive hous-
ing. I n Baltimore, f o r example, savings banks r a r e l y finance transactions i n the p r i c e range
below $20,000. Mortgage bankers have n o t gone below $7,000 very often and have recently de-
cided as a matter o f p o l i c y t o try and stay above the $15,000 mark. Different i n s t i t u t i o n s
have d i s t i n c t i v e p o l i c i e s w i t h respect t o downpayments, credit-worthiness, and the l i k e ,
while government p o l i c i e s ( p a r t i c u l a r l y those o f the FHA) also intervene i n these respects
and play a major r o l e i n those sectors of the population w i t h moderate t o marginal incomes
o r slender resources f o r downpayment. There are also d i s t i n c t i v e p o l i c i e s w i t h respect t o
the nature o f t h e housing stock which financial i n s t i t u t i o n s a r e w i l l i n g t o finance (above
and beyond the general operating r u l e , t h a t appears t o have held good f o r the l a s t decade
o r so, t h a t "new means b e t t e r and safer" investment). There i s also no question t h a t d i f -
f e r e n t i n s t i t u t i o n s , both financial and government, e x h i b i t strong "neighborhood biases"
(both pro and con) over and beyond t h a t inherent i n the comnunity basis found i n the State
and some Federal S&Ls.
We w l l l now describe some o f the ways i n which a l l o f these factors coalesce i n the Bal-
timore housing market. Consider f i r s t of a l l the behaviour o f the d i f f e r e n t i n s t i t u t i o n s
w i t h respect t o house sales i n different p r i c e categories (Table 1). There i s c l e a r l y a
structured r e l a t i o n s h i p t h a t leads the "comnercial' i n s t i t u t i o n s t o operate i n the higher
p r i c e ranges w h i l e the State S&Ls, which tend n o t t o be very strongly p r o f i t oriented, take
up the housing i n the lower p r i c e categories. The health o f the housing market i n t h i s low-
e r p r i c e category appears t o be attached e n t i r e l y t o the f a t e o f the State S&Ls and a per-
petuation o f t h e i r community-based n o n - p r o f i t orientation. Should these i n s t i t u t i o n s c o l l -
apse, o r come t o have a strong p r o f i t o r i e n t a t i o n (as seems t o be happening), then the
housing market i n the below $15,000 p r i c e range w i l l s u f f e r irreparable damage, p a r t i c u l a r -
l y i f the mortgage bankers implement a p o l i c y o f a $15,000 minimum. There i s , clear1 , a
h i g h l y structured re1ationship between household c h a r a c t e r i s t i c s ( p a r t i c u l a r l y income7 and
the a v a i l a b i l i t y o f mortgage funds ( i n appropriate p r i c e categories) .9

TABLE I
DISTRIBUTION OF MORTGAGE ACTIVITY I N DIFFERENT PRICE CATEGORIES BY TYPE OF INSTITUTION
BALTIMORE CITY, 1972*
under $7,000- $10,000- $12,000- over
$7,000 $9,999 $11,999 $14,999 $15,000
Private 39 16 13 7 7
State S&Ls 42 33 21 21 20

Federal S&Ls 10 22 30 31 35
Mortgage Banks 7 24 29 23 12

Savings Banks - 3 5 15 19
Comnerci a1 Banks 1 1 2 3 7
Per cent o f C i t y ' s trans- 21 19 15 20 24
actions i n category
*Source: "Homeownership and the Baltimore Mortgage Market", D r a f t Report o f the Home Owner-
ship Development Program, Department o f Housing and Comnuni ty Development, Baltimore City,
1973.

24
 This structured relationship has a geographical manifestation.10 To demonstrate this
we have divided the housing market i n Baltimore City i n t o 13 sub-markets which can be fur-
ther aggregated to eight primary sub-market types (see Figure l ) . W e have tabulated data
concernfng the ffnancfng of housfng f n each of these sub-markets (see Table 2). W e have
also tabulated some informatlon on house prices and socio-economic composition i n the sub-
markets. I t is plain that the housing market i n Baltimore City is highly structured geo-
graphically i n terms of institutional involvement and FHA insured mortgage activity. The
main features In this structuring are:
(1) The inner city is dominated by cash and private transactions (with scarcely a ves-
tige of fnstitutfonal or governmental involvement) accompanied by a low purchase price, low
incorns and a high proportion of tenants and blacks;
(2) The ethnic areas are dominated by small comnunity and neighborhood State S&Ls which
circulate money w i t h i n the community and i n some cases finance migration to, f a r example,
the middle income sub-market of Northeast Baltimore;
(3) Black residential areas are serviced mainly by mortgage bankers operating under FHA
guarantees (a response t o the social discontent of the 1960s). Comnunity-based State S&Ls
are absent and without a strong sense of comnunity will be difficult t o b r i n g i n t o being.
The Federal S&Ls apparently are reluctant to become involved i n financing black home owner-
ship.
(4) Mortgage bankers using the FHA guarantees (often of the no-downpayment sort) are
the predominant source of finance i n areas of h i g h turnover and racial change.
(5) The white middle class, largely brought i n t o homeownership through the FHA programs
of the 1930s. occupies a s o l i d area of northeast and southwest Baltimore as well as much of
Baltimore County (which surrounds much of the City). Federal S&Ls here dominate w i t h FHA
guarantees supporting the market ifi traditional fashion.
(6) The more affluent groups make greater use of savings banks and comnercial banks and
rarely make use of FHA guarantees.
This geographical structure forms a "decision environment" i n the context of which in-
dividual households make housing choices. These choices are likely, by and large, to con-
form t o the structure and t o reinforce it. The structure i t s e l f i s a product of history.
Attempts t o change the structure can i n fact generate considerable social conflict. For
example, middle-income buyers, disillusioned w i t h the suburban dream, have t o f i g h t the i n -
stitutional policies of the lending industry and the FHA i f they wish to renovate an inner-
city neighborhood.11 Likewise, low-income blacks cannot be turned into "debt encumbered
homeowners" painlessly. By struggles of this sort the structure can be transformed. In
practice, therefore, we f i n d that the geographic structure i s continuously being transformed
by the ebb and flow of market forces, the operations of speculators and realtors, the chang-
i n g potential for homeownership, the changing profitability of landlordism, the pressures
emanating from comnuni t y action, the interventions and disruptions brought about by chang-
i n g governmental and institutional policies, and the like. I t is this process of transfor-
mation of and w i t h i n a structure that must be the focus for understanding residential d i f -
ferentiation and, as we will l at e r show, provides the basis for understanding how absolute
rent i s realized i n the housing market. W e will examine two facets of this transformation
process in Ba 1t f more very briefly .

i l ) The FHA i n Baltimore City1*

Since the 1930s the Federal Housing Administration has administered a variety of programs
designed t o faci l i t at e homeownership by making institutional investment i n housing risk-free.
Until the 1960s these programs serviced the needs of middle-income buyers and were instru-
mental i n financing the suburbanization process. During the 1960s various programs w i t h
"social" objectives were initiated as the government attempted t o create a debt-encumbered,
socially stable class of homeowners amongst the poor and the black. A mix of old and new
programs were applied for this purpose and these- together w i t h administrative directives
t o end, for example, the discriminatory "red-lining" of low-income and black neighborhoods-
led t o the creation of FHA-insured black and low-income housing sub-markets during the 1960s.
The main tool i n Baltimore was the 221 (d) ( 2 ) program (D2s) which permits the financing of
home purchase for moderate- or low-income people of housing below $18,000 w i t h negligible
or no downpayment. A map of FHA insured mortgages (Figure 2) indicates areas of h i g h con-

25
.:.y Non-residential lard use
::.-'

=
- Special residential areas
A Charles Village
Bolton
B Vernon
Hill-Mt
C E.Jefferson
\ Census Tracts w i t h l i t t l e
or no private
A housing or subject t o urban renewsl
Unallocated Census Tracts (mixed housing
v,stock and mixed financing)

26
 TABLE 2 (i)

HOUSING SUB-MARKETS - BALTIMORE CITY I 1970

sales % transactions by source o f funds:

t o t a l p e r 100 % sales Average
houses proper- cash p v t Fed State Mtge Comn Savngs insured sale
sold ties S&L S&L Bank Bank Bank Other* FHA VA price($)**
INNER CITY 1,199 1.86 -
65.7 15.0 3.0 12.0 2.2 0.5 0.2 1.7 2.9 1.1 3,498
1. East 646 2.33 64.7 15.0 2.2 14.3 2.2 0.5 0.1 1.2 3.4 1.4 3,437
2. West 553 1.51 67.0 5.1 4.0 9.2 2.3 0.4 0.4 2.2 2.3 0.6 3,568

ETHNIC 760 3.34 39.9 5.5 6.1 -

43.2 2.0 0.8 0.9 2.2 2.6 0.7 6,372
1. E. Baltimore 579 3.40 39.7 4.8 5.5 -
43.7 2.4 1.0 1.2 2.2 3.2 0.7 6,769
2. S. Baltimore 181 3.20 40.3 7.7 7.7 41.4 0.6 2.2 0.6 0.6 ‘5,102

HAMPDEN 99 2.40 40.4 8.1 18.2 26.3 4.0 3.0 14.1 2.0 7,059

WEST BALTIMORE 497 2.32 30.6 12.5 12.1 11.7 22.3 1.6 3.1 6.0 25.8 4.2 8,664

SOUTH BALTIMORE 322 3.16 28.3 7.4 22.7 13.4 13.4 1.9 4.0 9.0 22.7 10.6 8,751

HIGH TURNOVER 2,072 5.28 19.1 6.1 13.6 14.9 32.8 1.2 5.7 6.2 38.2 9.5 9,902
1. Northwest 1,071 5.42 20.0 7.2 9.7 13.8 40.9 1.1 2.9 4.5 46.8 7.4 9,312
2. Northeast 693 5.07 20.6 6.4 14.4 16.5 29.0 1.4 5.6 5.9 34.5 10.2 9,779
3. North 308 5.35 12.7 1.4 25.3 18.1 13.3 0.7 15.9 12.7 31.5 15.5 12,330

MIDDLE, INCOME 1,077 3.15 20.8 4.4 29.8 17.0 8.6 1.9 8.7 9.0 17.7 11.1 12,760
1. Southwest 212 3.46 17.0 6.6 29.2 8.5 15.1 1.0 10.8 11.7 30.2 17.0 12,848
2. Northeast 865 3.09 21.7 3.8 30.0 19.2 7.0 2.0 8.2 8.2 14.7 9.7 12,751

UPPER INCOME 361 3.84 19.4 6.9 i(3.5 10.5 8.6 7.2 -
21.1 2.8 11.9 3.6 27,413

*assumed mortgages and subject t o mortgage.

**ground r e n t i s sometimes included i n the sales p r i c e and t h i s d i s t o r t s the averages i n
c e r t a i n respects. The r e l a t i v e d i f f e r e n t i a l s between the sub-markets are of the r i g h t
order however.
Source:
- City Planning Department Tabulations from Lusk Reports.

27
 TABLE 2 (ii)

HOUSING SUB-MARKETS - BALTIMORE CITY, 1970 (CENSUS DATA)

% black 41 u n i t s mean $ mean

median occupied owner value o f % renter monthly
income* d.u. ' s occupied own. occ. occupied rent

INNER CITY 6,259 72.2 28.5 6,259 71.5 77.5

1. East 6,201 65.1 29.3 6,380 70.7 75.2
2. West 6,297 76.9 27.9 6,963 72.1 78.9

ETHNIC 8,822 1.o 66.0 8,005 34.0 76.8

1. E. Baltimore 8,836 1.2 66.3 8,368 33.7 78.7
2. S. Baltimore 8,785 0.2 64.7 6,504 35.3 69.6

HAMPDEN 8,730 0.3 58.8 7,860 41.2 7E.8

WEST BALTIMORE 9,566 84.1 50.0 13,842 50.0 103.7

SOUTH BALTIMORE 8,941 0.1 56.9 9,741 43.1 82.0

HIGH TURNOVER 10,413 34.3 53.5 11,886 46.5 113.8

1. Northwest 9,483 55.4 49.3 11,867 50.7 110.6
2. Northeast 10,753 30.4 58.5 11,533 41.5 111.5

3. North 11,510 1.3 49.0 12,726 51 .O 125.1

MIDDLE INCOME 10,639 2.8 62.6 13,221 37.5 104.1

1. Southwest 10,655 4.4' 48.8 13,470 51.2 108.1

2. Northeast 10,634 2.3 66.2 13,174 33.8 103.0

UPPER INCOME 17,577 1.7 50.8 27,097 49.2 141.4

*weighted average o f median incomes f o r census t r a c t s i n sub-market

Source: 1970 Census

28
IRED MORTGAGES

OUSING SUB-MARKETS

Baltimore 1970

29
c e n t r a t i o n w i t h i n Baltimore City i n 1970, w h i l e Table 2 i n d i c a t e s the e x t e n t o f FHA involve-
ment i n t h e d i f f e r e n t sub-markets.

The c r e a t i o n of such a housing sub-market has n o t been w i t h o u t i t s problems, although

Baltimore has n o t s u f f e r e d from the speculative i n t e r v e n t i o n t h a t proved so disasterous i n
D e t r o i t (where r e d i s t r i b u t i v e rent, i n t h e sense t h a t Walker argues f o r i t , I 3 was extracted
w i t h a vengeance). Foreclosure r a t e s have been low i n Baltimore compared t o D e t r o i t . The
main problems I n Baltimore have a r i s e n from supporting the movement o f a low-income and pre-
dominantly black population i n t o middle class white neighborhoods, from forming a specific
geographical sub-market w i t h i n which a s p e c i f i c k i n d o f financing and population are con-
fined, and from risk-aversion practices, designed t o prevent a h i g h r a t e o f foreclosure,
which e f f e c t i v e l y deny government insurance t o i n n e r - c i t y neighborhoods. These problems
a r i s e f o r a v a r i e t y o f reasons. The FHA programs, p a r t i c u l a r l y t h e D2s are a " l a s t r e s o r t "
for housing finance - they are only made use of when conventional sources o f f f n a n c i n are
unavailable. The FHA has t o "draw a l i n e " somewhere i n administering these programs fa l i n e
s e t up i n terms o f c r e d i t c h a r a c t e r i s t i c s of t h e purchaser, t h e nature o f the housing and
i t s physical condition, etc.). This "drawing of the l i n e somewhere" i n f a c t means a l i n e be-
tween mortgage finance and cash transactions which becomes, by design o r accident, a "red-
l i n e " on t h e map o f housing market a c t i v i t y . Within t h i s l i n e , i n the i n n e r c i t y , mrtgages
cannot be obtained and imnediately outside o f i t t h e FHA supports the market. The jump o f
housing p r i c e s across t h i s l i n e i s c l e a r l y evident (see Table 2). A s i m i l a r d i s c o n t i n u i t y
emerges a t t h e boundary between the 02 market and t h e middle-income sub-market. Middle-in-
come whites, nervous a t the growing e f f e c t i v e demand of predominantly low-income blacks, move
under the perceived t h r e a t of a " d e c l i n i n g neighborhood" w h i l e conventional sources of mort-
gage finance r e a c t s i m i l a r l y t o t h i s perceived danger and withdraw support from t h a t neigh-
borhood. A vaccuum may form i n t o which t h e c o a l i t i o n o f mortgage banker and FHA insurance
moves i f t h e speculator does n o t g e t t h e i r f i r s t . This amounts t o a s e l f - f u l f i l l i n g pro-
phecy o f neighborhood change. I f a vaccuum does n o t form, pressure may b u i l d up a t the
boundary between the middle income and the D2 sub-markets and s o c i a l c o n f l i c t may r e s u l t .
Something a k i n t o blockbusting takes place. For example, on one block o f a s t r e e t i n north-
west Baltimore, on t h e edge o f the 02 sub-market, there were 19 houses s o l d i n 1970, 17 o f
which were insured by t h e FHA (13 w i t h no downpayment) and 14 o f which were financed by
mortgage bankers. The combination o f mortgage banker and the FHA programs appears t o a c t
l i k e a blow-torch peeling back the middle-income sub-market as t h e D2 sub-market expands.
Across t h i s boundary there i s a market d i s c o n t i n u i t y o f house prices, w i t h p r i c e s higher i n
the middle income areas compared w i t h the 02 market, and considerable confusion and specul-
a t i v e a c t i v i t y a t the i n t e r f a c e between them.
The n e t e f f e c t i s t h a t FHA programs and p o l i c i e s create a plateau c f house p r i c e s between
the "disinvestment sink" o f the i n n e r c i t y and the s t a b l e middle income areas. On t h i s pla-
teau we f i n d a mixture o f low-income and predominantly black honieownership and landlordism.
A t the edges o f the plateau we f i n d s o c i a l c o n f l i c t as processes o f " f i l t e r - d o w n " and "blow-
out" erode the geographical s t r u c t u r e of housing sub-markets.14

(2) Landlordism and the Baltimore City Housing Market15

There are many d i f f e r e n t types o f l a n d l o r d varying from the i n d i v i d u a l who has one house
t o t h e professional who owns a l a r g e number, uses professional management techniques, and i s
very s e n s i t i v e t o p r o f i t s , losses and the r a t e o f r e t u r n on c a p i t a l . We w i l l ignore the
complexities and confine a t t e n t i o n t o professional landlords who own and manage about a quar-
t e r o f Bal timore C i t y ' s r e n t a l inventory. These professional landlords make t h e i r decisions
i n terms o f a s t r u c t u r e d decision environment and c l o s e l y gear t h e i r operations t o the char-
a c t e r i s t i c s o f sub-markets as they perceive and experience them.
We asked f o u r landlords t o d i s t i n g u i s h areas i n the c i t y which they regarded as "good,"
"moderately good," "moderately bad," o r "bad" f o r investment. We aggregated t h e i r maps of
perceived investment opportunity t o form a composite map (Figure 3) and analyzed t h e i r costs,
expend4 tures, r a t e s o f r e t u r n , etc. across these d i f f e r e n t perceived investment s i t u a t i o n s .
I t was found t h a t there was a r a t i o n a l adjustment o f l a n d l o r d operations t o sub-market char-'
a c t e r i s t i cs and t h a t t h i s adjustment had c e r t a i n important consequences f o r the maintenance
o f the housing stock, r e n t levels, and the l i k e . We w i l l n o t discuss the d e t a i l s here, but

30
Investment Qua1

FIGURE 3

AGGREGATE PERCEPTIONS OF FOUR PROFESSIONAL LANDLORDS CONCERNING AREAS

OF INVESTMENT OPPORTUNITY I N HOUSING I N BALTIMORE CITY (1970)

31
the most important element i n the landlord's decision i s the availability or non-availability
of landlord finance. In areas where the landlords can obtain mortgage funds they work on
the basis of "leverage" which works as follows. A $10,000 house is purchased w i t h a $1,000
downpayment and a $9,000 mortgage a t , say, a 6 per cent interest rate. The landlord manages
the property t o yield an overall 8 per cent rate of return on the $10,000 (which i s $800),
pays off the interest of $540, which leaves $260 t o be applied to the landlord's investment
of $1,000 which yields an effective return of 26 per cent on the landlord's part of the capi-
t a l . T h i s calculation i s more complicated when worked out over the lifetime of the mortgage,
of course, b u t the principle of leverage operates over each round and the average rate of
return is much higher for the landlord ( i t usually comes t o between 15 and 18 per cent) than
i s indicated by t h e - r a t e of return calculated against the total value of the house. The
tenant is also advantaged by this, for the tenant lives i n a $10,000 house for a rent that
yields only 8 per cent on that value, while the landlord, interested i n capital accumulation
i n the physical form of the house, will keep i t well maintained.
If the landlord cannot obtain mortgage finance, the story becomes rather different. The
landlord has t o obtain a "satisfactory" yield on the total value of the house. What i s
meant by a "satisfactory" yield is set by convention on the part of professional landlords
b u t i t i s obviously sensitive t o the rate of return possible i n the capital market i n gener-
a1.16 Professional landlords i n Baltimore, i n fact, look for a 20 per cent rate of return
on their capital, regard 15 per cent as "normal" and will s t i l l stay i n operation a t 11-12
per cent (this is after a l l expenses are met including interest payments and an imputed man-
agerial wage t o t h e d l o r d as manager). Using leverage, landlords can g n a 15 per cent
rate of return for themselves by t a k i n g , say, an 8 per cent rate of return on the total value
of the property. Without leverage they have to take a 15 per cent rate of return directly.
Leverage is not possible i n the inner city because mortgage funds are not generally avail-
able; so tenants here have t o pay a much greater rent relative t o the total value of the
property than would be the case i f mortgage finance were available. B u t the inner city i s
the worst sub-market i n terms of quality of housing stock, etc.. Landlords therefore find i t
d i f f i c u l t t o dispose of their properties i n this sub-market, except through urban renewal
schemes (which landlords frequently actively promote as a means of bailing o u t of the worst
sub-market). If profit levels f a l l or i f there is even an expectation that they will f a l l
below the limit of, say, 11-12 per cent (because of oversupply of poor housing, rising
management costs, vandalism, and the l i k e ) , then landlords will seek t o get their money out
through a disinvestment process (economizing on maintenance, milking properties, etc.).
Hence there arises a housing sub-market characterized by landlord disinvestment, housing
abandonment, and severe neighborhood decay. Landlords will s t i l l , on occasion, purchase
in this sub-market, b u t i f they do so, i t i s a t a very low market price (note the prices i n
Table 2 ) for a good quality dwelling which they operate t o regain their outlay over a short
t ime-hori zon.
I t i s evident that landlords "structure" their behaviour according t o their decision en-
vironment. There is a "rational" (profit maximizing) adjustment of landlord behaviour t o
sub-market characteristics. This behaviour, i n turn, structures outcomes w i t h respect to
the renter, the maintenance of the housing stock, reinvestment and disinvestment, neighbor-
hood decay and the like. This structuring activity i s not w i t h o u t i t s implications for
the way i n which financial institutions and government institutions together formulate, i n
turn, rationales for investment and intervention.

II. The Realization of Absolute Rent

The category of absolute rent has been completely ignored i n locational analysis until
recently.17 We will n o t discuss i t s theoretical aspects here, b u t will attempt t o explain
the actual processes whereby i t i s realized i n the housing markets o f a large urban area.
I t i s important t o realize, however, that rent essentially represents a transfer payment
between individuals, interest groups or classes and t h a t i t does not represent any increas
i n value through production.
Absolute rent implies class monopoly power of some sort. By 3 "class monopoly" we mean
a class o f producers (or consumers) who have power over a class of consumers (or producers
i n a situation of structured scarcity.18 We have f i r s t t o define the basis for such class

32
monopoly power i n t h e housing market. The m a t e r i a l s we have assembled i n P a r t I o f t h i s pa-
per i n f a c t provide a d e s c r i p t i o n of t h i s necessary basis. Through t h e s t r u c t u r i n g a c t i v i t y
o f governmental and f i n a n c i a l i n s t i t u t i o n s , urban space i s d i f f e r e n t i a t e d i n t o s p e c i f i c sub-
markets. I f absolute r e n t i s t o be r e a l i z e d we have t o show t h a t there are absolute l i m i t s
o f some s o r t operating over d i f f e r e n t segments of t h e housing market. These absolute l i m i t s
can be s e t by t h e j o i n t a t t r i b u t e s o f housing, o f financeers, of housing suppliers and o f
consumers. To become a low-income Owner of a $5,000 house i n Baltimore, f o r example, means
e i t h e r a cash t r a n s a c t i o n o r access t o a comnunity based State SBL. A low o r moderate i n -
come black w i l l purchase a $10,000 house through a mortgage banker operating under an FHA
guarantee. An upper-income person w i l l t y p i c a l l y go through a savings bank o r a Federal S&L
and purchase a house p r i c e d above $25,000. I n each o f these cases, t h e opportunities are
r e s t r i c t e d i n terms of t h e s t r u c t u r e . But the absolute l i m i t s are a l s o s e t geographically
through the s t r u c t u r e d p a t t e r n of housing sub-markets w i t h i n which speci f i c conditions hold.
"Absolute l i m i t s " means i n t h i s case the c r e a t i o n o f absolute urban spaces within which prod-
ucers and consumers o f housing services face each o t h e r as classes i n c o n f l i c t . ~ g What
transpires w i t h i n each sub-market depends (1) on t h e i n t e r n a l conditions w i t h i n t h a t sub-
market and (2) on the i n t e r a c t i o n between sub-markets. We w i l l consider these separately
and make the l i n k t o t h e r e a l i z a t i o n of absolute rent.

Consider f i r s t a s i t u a t i o n i n which a sub-market i s completely i s o l a t e d from a l l other

sub-markets so t h a t consumers and providers of housing a r e a l l locked i n t o a s p e c i f i c s i t u a -
tion. Suppose, for t h e sake of s i m p l i c i t y , t h a t we are dealing w i t h an i n n e r c i t y sub-market
where low-fncome tenants cannot possibly f i n d a l t e r n a t i v e accomodation and from which land-
lords cannot p o s s i b l y e x t r a c t themselves. Suppose no leverage i s possible because f i n a n c i a l
i n s t i t u t i o n s and government i n t e r v e n t i o n play no r o l e . I n such a sub-market r e n t l e v e l s w i l l
be s e t by the r e l a t i v e power of the l a n d l o r d apd t h e tenant. Ift h e l a n d l o r d dominates, high
rates o f r e t u r n w i l l be e x t r a c t e d w h i l e tenants w i l l be forced t o spend a l a r g e p r o p o r t i o n
o f t h e i r already low disposable income on rent, l e a v i n g l i t t l e over f o r food and o t h e r needs.
The o n l y way i n which tenants can adapt t o t h i s s i t u a t i o n i s t o "double up" i n d w e l l i n g
u n i t s t o save on r e n t . I f we assume a f i x e d population, t h i s doubling up w i l l create vacan-
cies, r e n t s w i l l f a l l and eventually an e q u i l i b r i u m w i l l be achieved i n which e x a c t l y t h a t
r e n t i s charged which e x t r a c t s t h e maximum r a t e o f r e t u r n on c a p i t a l w i t h o u t generating over-
crowding through doubling up. With an increasing population and f i x e d housing supply r e n t s
w i l l r i s e even higher w i t h doubling up and overcrowding. I n a l l of these cases r e n t has t o
be conceived of as an absolute r e n t which accrues t o t h e monopoly power o f landlords as a
class vis-a-vis t h e c o l l e c t i v e power and c o n d i t i o n o f t h e tenantry. I t i s set, i n s h o r t ,
by a "class" c o n f l i c t w i t h i n a r e s t r i c t e d geographical area ( w i t h i n an absolute space).
I f we now r e l a x some of the r e s t r i c t i o n s , the s i t u a t i o n becomes somewhat more complex.
Landlords can p u l l o u t t h e i r c a p i t a l and place i t elsewhere e i t h e r i n another sub-market
(where, f o r example, leverage i s possible) o r on the c a p i t a l market i n general. I f tenant
power r i s e s t o the p o i n t where r a t e s o f r e t u r n f a l l below, say, 11 o r 12 per cent, the land-
l o r d w i l l simply take steps t o withdraw c a p i t a l from t h i s p a r t i c u l a r sub-market. Tenants
have a counter-power. They can, through the exercise o f s o c i a l pressure, expand t h e i r own
sub-market and increase the supply o f housing a v a i l a b l e t o them, they can seek a l t e r n a t i v e
accomodation i n o t h e r sub-markets, or they can, by the exercise o f p o l i t i c a l muscle, p u t
r e s t r a i n t s on l a n d l o r d p r o f i t s by such means as r e n t c o n t r o l l e g i s l a t i o n . But there are
l i m i t s t o both l a n d l o r d and tenant power. Landlords o f t e n experience d i f f i c u l t y i n g e t t i n g
t h e i r c a p i t a l o u t o f the i n n e r c i t y housing sub-market. Tenants have v i r t u a l l y no opportun-
i t y t o o b t a i n accomodation i n other sub-markets i f they are poor and uncreditworthy by the
standards o f the FHA programs. Expanding the sub-market can help t o reduce rents, and dur-
i n g the 1960s s o c i a l unrest e f f e c t i v e l y d i d j u s t that. But i n t h e process l a n d l o r d p r o f i t s
began t o f a l l . Professional landlords began t o d i s i n v e s t as r a t e s o f r e t u r n dipped t o the
11-12 per cent l e v e l and non-professional landlords, l a c k i n g e f f i c i e n t management and ad-
vantages o f economies o f scale, g o t i n t o deep f i n a n c i a l trouble. Abandonment became wide-
spread as a r e s u l t . The housing stock has consequently begun t o shrink t o l e v e l s a t which
landlords can once more o b t a i n an e f f e c t i v e r a t e o f r e t u r n on t h e i r c a p i t a l invested.
The processes are e v i d e n t l y complex when we take i n t o account the r e l a t i o n s h i p s both w i t h -
i n and between sub-markets, and as we introduce more actors i n t o the housing drama (finan-
c i a l and governmental i n s t i t u t i o n s , t h e construction industry, and so on). But the p r i n c i p l e
remains the same. The geographical and s o c i a l s t r u c t u r e creates conditions w i t h i n which ab-

33
solute rents can be realized t o varying degrees depending upon the relative power of those
supplying housin and those consuming i t , as that relative power i s mediated by institu-
tional policies !legal, political, financial, governmental, etc.).
I t i s possible to document these relative powers w i t h respect to sub-markets i n parti-
cular historical situations. The relative powers shift continuously. Consider, for ex-
ample, the matter of consumer preference. In the more privileged sub-markets the constraints
-
t o consumer choice are social consumers have a wide range of alternatives, b u t considera-
tions of prestige and status make i t unlikely that individuals will consider a l l potential
choices. If these social constraints are strongly developed, then i t i s possible for produ-
cers of housing to gain considerable absolute rent as high-income consumers vie w i t h each
other for prestigious housing i n the " r i g h t " neighborhoods. The same considerations per-
mit absolute rent t o be extracted from suburban construction. In the inner city, on the
other hand, we find a low-income and uncreditworthy population confined to tenant occupancy
i n a situation where landlords cannot use leverage and must extract a h i g h rate of return
out of bad housing. Absolute rent i s here gained by the landlord from a population t h a t has
no other choice (unless, i n the Baltimore case, i t migrates back to the rural South). This
population i s trapped i n the structure of absolute space. On the next rung up the ladder,
i t is possible t o become either a low-income homeowner through the FHA 02 program or a low-
income b u t "reliable" tenant i n a situation where landlords can use leverage to provide
housing for a lower rent than would otherwise be the case. In this sub-market, absolute
rent accrues either t o the intermediary, who frequently buys cheap from the fleeing white
and s e l l s dear t o the incoming black, or t o the landlord- and i n both cases the financial
institutions take their interest.
In a l l of these situations - and we could specify the situation i n detail w i t h respect
t o each sub-market i f we so wished -the rates of return and the potential for obtaining ab-
solute rent are structured by the opposing forces w i t h i n each sub-market and the interac-
tions between sub-markets. Class conflict w i t h i n a sub-market i s tempered by class differ-
entials and class conflicts between sub-markets. And i t i s i n such a structured situation
that absolute rent is realized i n the housing market i n general.

111 A ConcZuding Comnent

We accept the view t h a t rent i s a transfer payment out of a social rate of return on
capital. We also accept the view t h a t rent accrues t o the inherent monopoly power of pri-
vate property.20 To understand how rent i s i n practice realized i s therefore t o understand
a l l of those situations and conditions which permit transfer payments t o occur and which
affect the actual amounts transferred. The categories of differential, absolute and mono-
poly rent, t o which Walker adds redistributive rent, provide generalized descriptions of
the theoretical circumstances which contribute t o the processes of transfer. The explana-
tory power o f these categories depends, however, on our ability t o specify i n practice
how actual transfer payments arise under the conditions theoretically specified f n each
category. In this paper we have shown that the category of absolute rent i s meaningful
i n the contemporary urban scene. We have shown that the conditions for i t s realization are
automatically generated by the way i n which institutional arrangements are structured t o
integrage national and local aspects of housing market behaviour.
The absolute spaces created by institutional arrangements form a geographical framework
w i t h i n which absolute rent can be realized. Within this geographical framework we f i n d
different interest groups facing each other as classes. The relative power of these clas-
ses w i t h respect t o each other, together w i t h the possibilities open for substitution in
other sub-markets, provides the social setting w i t h i n which the realization of absolute rent
becomes possible. The classes we identify here are not, of course, the classes relevant t o
understanding the production process, Rent is not, after a l l , inherent i n production b u t
arises only because the legal institution of private property i s a necessary feature i n the
capitalist mode of production and because i t proves difficult or impossible t o r e s t r i c t t h a t
legal r i g h t t o production solely. The classes we are here concerned with are, when s e t
against the broader class structure of society, perhaps best interpreted as sub-classes f n
conflict w i t h each other over the transfer payment that rent represents. The rich, for
example, may be forced t o yield a relatively h i g h transfer payment t o other members of their

34
 own general s o c i a l class ( t h e company d i r e c t o r may y i e l d up absolute r e n t t o t h e class mono-
poly power o f t h e developer). A low-income tenant may l i k e w i s e gain absolute r e n t by sub-
l e t t i n g . The general p a t t e r n o f t r a n s f e r payments i s , however, f a i r l y obvious -
groups y i e l d a n e t t r a n s f e r payment t o r i c h e r groups because the former have l i t t l e power
poorer
o r p o s s i b i l i t y f o r s u b s t i t u t i o n , w h i l e t h e l a t t e r have considerable class monopoly power
and a greater range o f choice.
We are n o t claiming t h a t r e n t i n an urban s i t u a t i o n has t o be t o t a l l y understood i n ab-
solute terms. D i f f e r e n t i a l , monopoly, absolute and r e d i s t r i b u t i v e r e n t a l l c o n t r i b u t e t o
the formation o f actual r e n t . But we b e l i e v e we have shown, q u i t e conclusively, t h a t ab-
solute r e n t can c o n t r i b u t e s u b s t a n t i a l l y t o actual r e n t i n l a r g e urban areas. We have also
shown t h a t t h i s c o n t r i b u t i o n i s made possible by t h e way i n which social, i n s t i t u t i o n a l and
geographical s t r u c t u r e s are created f o r t h e purpose o f i n t e g r a t i n g l o c a l and n a t i o n a l as-
pects o f economies. We b e l i e v e t h a t we have a l s o shown t h a t a great deal can be learned i f
we are prepared t o adopt a methodology appropriate f o r understanding s o c i e t y as a t o t a l i t y
fashioned through a s t r u c t u r e d s e t o f i n t e r n a l r e l a t i o n s .

FOOTNOTES

1'A prologomenon to a methodological debate on location theory - the case of von Thbnen',
Antipode, Vol. 6, No. 1.

2See Harvey, D., Social Justice and the City (Johns Hopkins University Press, Baltimore; 1973)
chapter 7; Ollman, B., Alienation: Marx's Conception of Man in Capitalist Society (Cambridge
University Press, London; 1971) and 'Marxism and political science: prologomenon to a de-
bate on Marx's method', (Department of Politics, New York University; 1972).
3The concept of structure which we adopt is set out in detail by Godelier, M., Rationality
and Irrationality in Economics (NLB, London; 1972). See also Piaget, J., Structuralism
(Harper, New York; 1970).
4The views set forth in this paragraph can be documented in detail from The Douglas Commission
Report, Building the American City (Government Printing Office, Washington, D.C.; 1968).
More detailed analyses of cyclical swings are collected together in Page, A.N. and Seyfried,
W.R., Urban Analysis (Scott Foresman, Glenview, Illinois; 1970).
SSee Homeownership and the Baltimore Mortgage Market (Draft Report of the Homeownership Devel-
opment Program, Department of Housing and Community Development, Baltimore City; 1973).
6The management characteristics of Federal S&Ls are documented in Rose, S., 'The S&Ls break
out of their shell', Fortune, 86, No. 3 , pp. 152-70.~
7The details can be documented from the Douglas Commission Report (op. cit.).

8For a general critical evaluation of these models see Harvey, D. (op. cit.) chapter 5.
9See Homeownership and the Baltimore Mortgage Market (op. cit.).
lOThis material is summarized from Harvey, D. , Chatterjee, L. , and Klugman, L., Effects of FHA
Policies on the Housing Market in Baltimore City (Draft Report to the Urban Observatory,
222 E. Saratoga St., Baltimore, Md.; 1973).
llA typical struggle of this sort is documented by the Citizens Planning and Housing Associa-
tion, FHA: an Unsatisfactory Status Quo (Baltimore, Md.; 1973).
% h i s material is summarized from Harvey, D., Chatterjee, L. and Klugman, L., (op. cit.).

13Walker, R.A., 'Urban ground rent - building a new conceptual framework', Antipode, Vol. 6,
No. 1.

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14The concepts of filter-down and blow-out a r e d i s c u s s e d i n d e t a i l i n Harvey, D., (op. c i t . )
and t h e i r relevance t o t h e Baltimore housing s i t u a t i o n i s discussed i n d e t a i l i n Harvey, D.,
C h a t t e r j e e , L., Wolman, M.G., Klugman, L. and Newman, J., The Housing Market and Code En-
forcement i n Baltimore (The Baltimore Urban Observatory, 222 E. Saratoga S t . , Baltimore
Md.; 1972).

15This m a t e r i a l i s d e r i v e d from C h a t t e r j e e , L., Real Estate Investment and D e t e r i o r a t i o 3

Housing i n Baltimore (Doctoral D i s s e r t a t i o n , Department of Geography and Environmental En-
g i n e e r i n g , The Johns Hopkins University; 1973).

16Exactly how a " s a t i s f a c t o r y " r a t e of r e t u r n on c a p i t a l is defined i n g e n e r a l i s , of course,

a s u b j e c t of dispute. We follow i n g e n e r a l t h e view p u t forward by Rhaduri, A , , 'Recent
c o n t r o v e r s i e s i n c a p i t a l theory: a Marxian view', Economic Journal, 79, 1969, pp. 532-9.

17See Harvey, D., (op. c i t . ) and Walker, R.A. (op. c i t . ) f o r r e c e n t a t t e m p t s t o e x p l i c a t e the

r e n t a l concept i n a contemporary c o n t e x t .

18The use of t h e word "class" h e r e may g e n e r a t e some confusion. W e use t h e word f l e x i b l y t o

mean any group of i n d i v i d u a l s who f i n d themselves c o l l e c t i v e l y i n o p p o s i t i o n t o any o t h e r
c o l l e c t i v i t y of i n d i v i d u a l s with r e s p e c t t o t h e t r a n s f e r payment t h a t r e n t r e p r e s e n t s . The
" c l a s s d i s t i n c t i o n s " which w e h e r e make use of a r e n o t , t h e r e f o r e , of t h e s o r t tha! stem
from t h e o r g a n i z a t i o n of production and t h e d i v i s i o n of labour ( f o r a modern examination
of t h e s e see Poulantzas, N . , "Marxism and s o c i a l c l a s s e s , " New L e f t Review, 78, 1973, pp.
27-55). W e do n o t b e l i e v e our use of t h e concept of c l a s s i n t h i s s p e c i a l s e n s e i s incon-
s i s t e n t w i t h Marx's r e l a t i o n a l d e f i n i t i o n and usage of t h e concept. C e r t a i n l y , t h e concept
of c l a s s monopoly power i s e x p l i c i t l y formulated i n Marx, K., C a p i t a l , Volume 3 ( I n t e r n a t i o n -
a l P u b l i s h e r s E d i t i o n , New York; 1967) pp. 194-5, w h i l e i t i s clear from Marx's v a r i o u s
a n a l y s e s of t h e r e n t a l concept t h a t d i s t i n c t i v e c l a s s e s (such as t h a t of t h e r e n t i e r ) may
emerge o u t s i d e of t h e process of production t o r e f l e c t t h e v a r i o u s t r a n s f e r s t h a t can occur
i n t h e c i r c u l a t i o n of t h e s u r p l u s .

19The concept of a b s o l u t e space i s f u r t h e r e l a b o r a t e d on i n Harvey, D . , (op. c i t . )

2oThis, of course, was Marx's main p o i n t -see Marx, K., (op. c i t . ) and The Poverty of Phil-
osophy ( I n t e r n a t i o n a l P u b l i s h e r s E d i t i o n , New York; 1963) pp. 154-66.

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