Economic Theory

Classics revisited: “The Housing Question” by Friedrich Engels (1872)

“A multimillion-pound luxury penthouse flat named after the revolutionary socialist thinker Friedrich Engels is the latest example of Manchester repurposing its radical history for profit, local people have said”,

an indignant Guardian reported the other day.

I understand their frustration. If an organisation that I fundamentally disapprove of – say, a company that runs “Unconscious Bias Training” seminars, or some such woke grift – decided to name its office building “The Hayek”, on the grounds that Friedrich Hayek once used to live in the area, I would have some misgivings too. It seems, indeed, unlikely that the namegiver of “The Engels” would have approved of seeing his name used in that way. (Although I suspect it would irritate him even more that in the 2020s, his philosophy has become a fashion statement for trendy hipsters, rather than a movement of factory workers.)

Friedrich Engels is mostly remembered for The Communist Manifesto, which he coauthored with Karl Marx, for his slightly less famous companion book Socialism: Utopian and Scientific, and for his book Condition of the Working Class in England. What is less well remembered is that he also wrote about housing-related issues. In 1872, he wrote a short book called Zur Wohnungsfrage, later published in English as The Housing Question. It retains some relevance to this day – not because he got things right (he didn’t), but because it continues to affect our current-day housing debates.

But more on this in a minute. Let’s talk about our current-day debates first.

In recent years, Britain saw the emergence of a small but vocal “YIMBY” movement, a countermovement to the all-powerful NIMBY lobby. YIMBYism is a cross-ideological coalition, which is rare in these politically tribal times, in which political opinions tend to come as set menus rather than pick-and-choose buffets. You can find YIMBYs on the centre-left, the centre, the centre-right, and among free-market libertarians.

But while the YIMBY coalition is broad, it is not unbounded. I have yet to see a socialist YIMBY. The Corbynite Left – which has lost most of influence in the Labour Party, but which continues to dominate social media and social movements – is often bizarrely hostile to YIMBYism.

This may seem surprising at first, because you could make an excellent left-wing case for YIMBYism. Britain’s current planning system is highly regressive in its effects. It leads to a colossal upwards redistribution of wealth. As my former colleague Ryan Bourne pointed out many years ago, in the British case, almost all of the increase in wealth inequality that Thomas Piketty laments in Capital in the Twenty-First Century is really an increase in property wealth.

Should Corbynistas not have some sympathy for people who try to remedy that? Even if they consider them “cringe”, and cannot find it in themselves to make common cause with them?

To see why they have no such sympathies, we need to go all the way back to Engels.

In The Housing Question, Engels discusses various proposals to improve the housing conditions of working-class people, and ends up rejecting every single one of them.

Engels believed that in a capitalist economy, working-class living standards cannot rise above subsistence levels for long. Even if workers make some savings somewhere, the capitalist class will just cut their wages, thus pushing them back to subsistence levels again:

“Let us assume that in a certain area a general introduction of consumers’ co-operatives succeeds in reducing the cost of foodstuffs for the workers by 20 per cent; in the long run wages would fall in that area […] in the same proportion as the foodstuffs in question enter into the means of subsistence of the workers. If the worker, for example, spends three-quarters of his weekly wage on these foodstuffs, then wages would finally fall by three-quarters of 20 = 15 per cent. In short, as soon as any such savings reform has become general, the worker receives in the same proportion less wages, as his savings permit him to live cheaper. Give every worker a saved, independent income of 52 talers a year and his weekly wage must finally fall by one taler. Therefore: the more he saves the less he will receive in wages.”

He applies the same logic to housing costs:

“Let us assume that in a given industrial area it has become the rule that […] the working class of that area lives rent free […]

[E]very permanent price reduction in the worker’s necessities of life […] will […] result in a corresponding fall in wages. Wages would fall on an average corresponding to the average sum saved on rent”.

The housing problem is therefore not a problem in its own right, but a downstream problem:

“The housing shortage from which the workers and part of the petty bourgeoisie suffer in our modern big cities is one of the numerous smaller, secondary evils which result from the present-day capitalist mode of production.”

The upstream problem is capitalism itself, and the housing situation cannot be improved within the capitalist system:

“As long as the capitalist mode of production continues to exist, it is folly to hope for an isolated solution of the housing question or of any other social question affecting the fate of the workers. The solution lies in the abolition of the capitalist mode of production and the appropriation of all the means of life and labor by the working class itself.”

And elsewhere:

“Whence then comes the housing shortage? […] [I]t is a necessary product of the bourgeois social order; […] it cannot fail to be present in a society in which the great masses of the workers are exclusively dependent upon wages […]

In such a society the housing shortage is no accident; it is a necessary institution and it can be abolished together with all its effects […] only if the whole social order from which it springs is fundamentally refashioned.”

In short, there is no hope of a solution this side of the socialist revolution. But what happens after the revolution?

“How is the housing question to be solved then? […]

[T]here are already in existence sufficient buildings for dwellings in the big towns to remedy immediately any real “housing shortage,” given rational utilization of them. This can naturally only take place by the expropriation of the present owners and by quartering in their houses the homeless or those workers excessively overcrowded in their former houses. Immediately the proletariat has conquered political power such a measure dictated in the public interests will be just as easy to carry out as other expropriations and billetings are by the existing state.”

Here, we have the template for every other article ever written in Jacobin, Tribune, Current Affairs etc:

“XY is a problem. Some people want to solve XY this way. Some people want to solve XY that way. But these proposals are all laughably superficial and inadequate, because they leave the class power structure of capitalism untouched. XY is not a problem in its own right. XY is just another consequence of capitalism. The real problem is capitalism. The only solution is to overthrow capitalism altogether.”

You can see the appeal of this style of thinking. It makes you feel like Morpheus from The Matrix. Lesser minds than you are still trying to reform the Matrix from within, not realising that they are trapped in a system designed by their oppressors, in which everything is futile. You, however, are one of the enlightened few, who have broken out of the Matrix. And now your job is to help the sheeple develop a “Matrix consciousness”.

It is therefore unsurprising that Jacobin and Tribune still quote The Housing Question today, claiming that “[t]he century and a half of housing crises since have proved Engels correct.”

But they have proven no such thing. Engels was wrong. Far from being in any way intrinsic to capitalism, the housing problems he observed really were quite specific to his time and place. As Samuel Waling explains, in the late 18th and for most of the 19th century, agglomeration effects played an increasingly important role in economic life, leading to rapid urbanisation, while the potential to expand urban areas upwards or outwards was still very limited:

“Cities were already at their maximum practical height – roughly six storeys before the invention of the lift and the steel frame in the 1880s. […] [B]uilding new [railway] networks inside now established cities required large scale tunneling, which had to be excavated manually using pickaxes. As a result they were expensive to build and the relatively few lines that were viable were immediately overcrowded.”

But there very much were solutions within capitalism, and they were already being deployed within Engels’s lifetime:

“Electric trams made it much cheaper to add new neighborhoods within commuting distance of jobs. And electrifying London’s tubes and suburban railways compounded this. […]

This continued after the First World War with rail electrification across the country and the foundation of motorized bus networks allowing expansion outwards. New technologies such as lifts and steel frames made it cheaper to build up. Britain had the largest housing boom in its history. The old ‘urban problem’ of inadequate housing appeared to be near a solution.”

Quite so. When Engels wrote The Housing Question, average houses prices in the UK were almost 10 times average incomes. Towards the end of his life, that ratio had fallen to less than eight. By the end of the 1930s building boom, it had fallen to about four.

In more YIMBY-minded places, we can still find such ratios today. Post-war Britain, however, made a peculiar policy choice. As our ability to overcome physical and logistical constraints improved, we imposed political and regulatory constraints instead, halting the huge progress on housing that had been made, and even reversing some of it again. This is the cause of today’s housing crisis.

Actually Existing Socialism had a poor record on housing. For example, in 1989, two thirds of East German housing units still did not have central heating, and a fifth did not have an indoor bathroom. They were also, on average, only three quarters of the size of a West German housing unit.

Socialists are wrong, and YIMBYs are right. We do not live in the Matrix, and we do not need to smash everything and start from scratch again. Capitalism is fine. We just need to build some houses.


Head of Political Economy

Dr Kristian Niemietz is the IEA's Editorial Director, and Head of Political Economy. Kristian studied Economics at the Humboldt Universität zu Berlin and the Universidad de Salamanca, graduating in 2007 as Diplom-Volkswirt (≈MSc in Economics). During his studies, he interned at the Central Bank of Bolivia (2004), the National Statistics Office of Paraguay (2005), and at the IEA (2006). He also studied Political Economy at King's College London, graduating in 2013 with a PhD. Kristian previously worked as a Research Fellow at the Berlin-based Institute for Free Enterprise (IUF), and taught Economics at King's College London. He is the author of the books "Socialism: The Failed Idea That Never Dies" (2019), "Universal Healthcare Without The NHS" (2016), "Redefining The Poverty Debate" (2012) and "A New Understanding of Poverty" (2011).

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