SOAS Research Online

Abstract

This dissertation charts a novel path in urban political economy by tracing the profits and the process of turnover of property developers in the United States. I refer to these developers as realtor’s capital and argue for treating them as a peculiar type of merchant. The fundamental theoretical point established in the thesis is that realtor’s capital earns the average rate of profit in return for offering intermediary services. The concept of realtor’s capital aids in understanding the fundamental intermediary activity of commercial real estate firms, which is the development of new real estate. The rest of their intermediary services offered by them grow out of this and depend on it. There can be no trading of secondhand stock of commercial property if it had not been developed in the first place. Realtor’s capital as an idea, therefore, also forms a bridge between property development and other services offered by commercial real estate firms. I begin the analysis by arguing that there is no landed class in the U.S.A. This corresponds to the crucial fact that the dominant form of land tenure is freehold, and owner occupation of commercial property is the norm. The lack of a landed class provides the necessary social conditions for realtor’s capital to be able to specialize in the intermediation of real estate transactions. A fresh line of analytical inquiry is thereby opened, which leads to conclusions that are distinctly different from the classical political economy of ground rent as well as from the contemporary literature on urban rent. There are two important parts to the subsequent theoretical analysis. In the first part, I demonstrate how realtor’s capital makes an average profit through intermediating commercial real estate transactions. Commercial real estate is composed of two parts - buildings and land. However, while buildings are produced commodities, land is traded as a commodity without being produced. Consequently, I show how the sources of realtor’s profit are very different in each case. Realtor’s profits from the sale and lending of buildings are akin to profits derived from trading commodities. Building rent emerges as remuneration for the temporary advance of buildings by their owners, similarly to interest received for the lending of money capital. Then I show that, given freehold tenure, land acquires a price through the flow of capital into the real estate market rather than through the blockage of capital from investment in land, as commonly assumed in urban political economy. Moreover, proximity to urban centers confers economic advantages to productive and commercial enterprises. Urban land price thus results from the divergence of the rate of profit from its mean according to geographical distance from urban centers. A land price gradient emerges that is directly associated with a profit rate gradient. I build on these strong conclusions to demonstrate that realtor’s capital makes a unique form of commercial profit through the process of land redevelopment. In the second part of the analysis, I examine in detail the turnover of realtor’s capital through which it carries out its essential functions. The turnover process is composed of four stages, namely land acquisition, the commissioning of design, the commissioning of construction and, finally, the vending of new developments. Detailed analysis of each stage of this process substantiates my theoretical claim that realtor’s capital is a special type of commodity dealer receiving the average rate of profit.