Housing as a speculative financial asset: introducing REITS (Real Estate Investment Trusts)

MEET THE NEW LANDLORD – REITS: WHAT ARE THEY?
Real Estate Investment Trusts – a tool of asset accumulation as an escalation of the division of wealth and class separation in Britain and across the world:

REITs are trusts that buy commercial properties, such as apartments, office buildings, and shopping centres which produce income. When a person buys shares in a REIT, they become a part owner in all of the property holdings of the REIT. REITs are traded like stocks on the major stock exchanges, so they provide the liquidity of stocks with the diversification and income of commercial real estate. REITs first appeared in the US, after being approved by Congress in 1960 to offer small investors a chance to participate in the commercial real estate market. As of 2016, are were 224 REITs on the FTSE (London Stock-Exchange). The Internal Revenue Service shows that there are about 1,100 U.S. REITs that have filed tax returns in the USA, including more than 225 REITs in the U.S. registered with the Securities and Exchange Commission that trade on one of the major stock exchanges — the majority on the NYSE.

AGAINST REAL ESTATE INVESTMENT TRUSTS (REITs):
Throughout the world, Real Estate Investment Trust (REITs) are playing a rapidly increasing role in organising private financial investments in housing and cities. Real Estate Investments Trusts (REITs) are joint stock companies that primarily derive their income from real estate. They are free from corporate tax and they are legally forced to pay out high parts of their profits.

After a longer period of development in Northern America disastrous consequences on social housing are evident:

– Buying out of social, public and low-cost housing

– Rent increase and increase of heating costs, service charges etc.

– Demolishing of affordable complexes and replacement by more profitable buildings

– Disinvestments, neglect of/worse maintenance of the housing stock

– Pressure to leave on financially disfavoured tenants, replacements by wealthy residents

– the ending of social neighbourhoods programmes, participation process etc

– Construction on public spaces, privatization of public spaces

– Lobbying governments for weakening legal standards

– Exit to private funds

The large U.S. REIT AIMCO gave a shocking example how these investors

treat tenants.

* Video on forced evictions by AIMCO at Lincoln Place

Although negative consequences in the USA, Canada and elsewhere are obvious, the introduction of REITs in most of the countries took place without protests and even without critical debate. They just happened in the extra-democratic spaces where financial lobbyists make their deals with governments.

HOW DO REITS WORK?

Lots of small investors can take part by owning shares in the Trust which owns the buildings. This means they can buy or sell their shares in the trust easily whenever they like exposing homes to the volatility of speculative markets. No tax is paid by the Trust; tax is only paid by the shareholder, with their dividend income return added to their annual taxable income. If the shareholder is a charity (such as a housing association which has a charitable arm), the shareholder may be exempt from paying any tax at all.

‘In the United States and France, REITs have lead to higher rents and to asset stripping; where the most profitable housing has been enhanced at increased rents, whilst the rest has been left to decay or emptied for redevelopment or demolition.’ From London Tenants.org

There are several different types of REITs available on the market:

[1] Equity REITs own and operate income producing real estate, such as apartments, warehouses, office buildings, hotels, and shopping centres.

[2] Specialized REITs focus on a particular type of property, such as shopping centres or health care facilities.

[3] Geographically-focused REITs specialize in a single region or metropolitan area, while others try to acquire properties throughout the country. Mortgage REITs lend money to real estate owners and operators, and raise income from the interest payments on the mortgages.

4] Hybrid REITs own properties and provide loans to real estate owners.

FINANCIAL MARKETS: ASYLUM FOR CAPITAL

Taken from FROM CRISIS TO CRASH

Ref: www.beigewum.at
The financial markets prove to be an ideal place of refuge for anxious owners of capital. They are flexible and global. An IBM stock can be exchanged in a few moments for a Yen credit or a government bond. For big customers, the expenses are trifling. State incursions like taxes and restrictions tend to zero.

Profits were and are now gained from shares (dividend distributions based on business profits), national debts (compound interest financed by taxes), credits (interest payments from private or state debtors), organisation of firm takeovers or the purchase and sale of securities at the right moment. The latter is a very popular option since it requires the least waiting-time. Through deregulation and internationalisation, getting into and out of investments as fast as lightning is increasingly possible.

With this flexibility, pressure is exerted on everything that does not bow to the desires of investors. This structure is the central lever for the restructuring and realisation of better profit conditions for capital in general, not only the much reviled ‘speculators’.

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