Magnolia Street and the Vienna Model
This story cut a path between impeachment fatigue and the coronavirus right into the California governor’s office and the international media. Four homeless mothers moved with their children into an abandoned house on Magnolia Street in Oakland, California. They cleaned it, connected the utilities, decorated for the holidays. Before long, of course, the owner, a southern California real estate corporation, threatened to evict them. Although public support was growing, a local court ruled against the mothers. County sheriff’s deputies in riot gear promptly staged a dawn raid on the house, complete with drones, tanks, robots, and AR-15’s. The sheriff declared himself well-satisfied with the timing and efficiency of the operation.
Meanwhile, sympathy for the mothers was feeding outrage against real estate speculators profiting at the expense of local tenants and the homeless. Some 6,000 vacant houses have been tallied in the city, while homeless encampments are everywhere–under freeway overpasses, on sidewalk strips, in public parks, at busy intersections.
As homelessness spreads globally, it overlaps with the migration crisis and gross income gaps, euphemized as inequality. Today’s Germany, with its generous welfare provisions, attracts not only masses of refugees, but investors looking to take advantage of both the housing shortage and government subsidies of skyrocketing rents. The German government spends about 4 billion euros on public housing projects and subsidies each year, and covers some 15 billion more in rent for social welfare recipients. One economist noted drily that the government program could be described as an “economic stimulus package” for property-owning landlords. In Berlin protesters have succeeded in extracting a five-year rent freeze from the government. Landlords and developers say they will simply move their operations to other German cities. Meanwhile, another economist estimated that given the current rate of construction, it would take another 185 years for Germany to provide housing for those in need.
The VIENNA Model
Just across the border in Austria, Vienna is often rated the most livable city in the world. 60% of the population live in social housing, mostly by preference. Large, well-designed housing estates are built and managed to attract and maintain tenants with a broad spectrum of income. The daughter of a former president was on a wait list for one of the most desirable projects.
When I was in Vienna as a student, three of us shared a large bedroom in the apartment of an impoverished baron and his family, just a block from the State Opera House. At the end of the Habsburg empire, not much had been left for the Austrian aristocracy. The staff of our institute included an overworked countess, and our landlord, the baron, could not have been happy to rent part of his home to a gaggle of American girls. Our room had high ceilings and tall, glass-windowed doors that rattled when the Frau came with our breakfast tray, laden with milchkaffee and precisely measured tiles of butter with just enough apricot jam for each of the fat kaiser rolls. After all, the Frau had managed to feed her family through the postwar shortages.
Much earlier, after the First World War, having exiled the troublesome emperor, the new Austrian republic did not sell off land to private bidders, but created a series of housing estates. Under the social democratic government, from 1919 to 1934, in so-called Red Vienna, the projects and their fittings were designed by world-famous artists and architects. And after the Second World War, the Austrian government resumed building and restoration. In today’s Vienna, residents live in some 420,000 apartments in assorted social housing projects owned and managed either by the government or by selected nonprofits.
In America, housing projects are often poorly-maintained and crime-ridden, a form of ghettoization that people want to escape. In Vienna the projects (Gemeindegebau) are where people want to live. But this network is expensive to build and maintain, and given the influx of asylum seekers needing housing, the city’s housing blueprint may be changing. While all profits from rents are ploughed back into new construction, the system relies on heavy taxation that Americans have historically resisted.
Wedgewood, Inc. was founded in 1985 in Redondo Beach, California. Its corporate headquarters inhabits some 50,000 square feet in this pleasant beach community. The company describes itself as “an integrated network of companies concentrating on real estate opportunities.”
Redondo Beach was until recently also the corporate home of Northrop Grumman, the second-largest defense contractor in the USA. Northrop’s highly diversified operations included in 2003 a $48 million contract to train the Iraqi army, and more recently, the design of the Global Hawk drone downed last year by Iran. The US has only three remaining of this $200 million aircraft, but replacement should be simple given the $718 billion budgeted for defense in 2020. This same budget apportions $44.1 billion for Housing, which is a fairly clear illustration of national priorities.
Northrop recently moved its headquarters to Washington D.C. to be near its main client. But Wedgewood, Inc.remains in Redondo Beach–as does a great deal of discretionary income. Real estate investments reap historically high profits. The current ROI (Return on Investment) for so-called fix and flip investments often exceed 100% of the original investment, although the current ROI (Return On Investment) clocks in at a relatively low 40%.
Wedgewood owns around 120 other Bay Area properties besides 2628 Magnolia Street. In the agreement negotiated by Oakland mayor Libby Schaaf and Governor Gavin Newsom’s office, Wedgewood agreed to sell the Magnolia Street house to the Oakland Community Land Trust–and to offer their other properties as well to the tenants before putting them on the open market. This “right of first refusal” has been a successful principle of tenant activism in other progressive cities. This is a serious victory for the local branch of housing activists in the Alliance for Community Empowerment, and a cautionary development for real estate speculators.
Wedgewood does not own the Oakland apartment complexes where residents have been withholding rent because of poor maintenance, and even organizing to buy the building. These tenants will welcome the breaking news that the Alameda County district attorney’s office has withdrawn all charges against the Moms4Housing collective and their supporters.