First off, as I’ve addressed before on here, housing “demand” is already a distortion of what housing is. To speak of demand is to relegate housing (or “shelter”, or whatever) to the status of a durable consumer good. There are several key differences that plague housing when it comes to accounting for it as such a consumer good, which again, I’ve gotten in to in Realm of Kevin before. But the important issue for developmentalist types is not necessarily even worrying about supply/demand, because these metrics can only be guessed (or really, imagined) at. Thus we are told there is a perpetual housing supply problem where demand is hopelessly, vastly larger, and there are various rheostatic reasons why demand does not rise to the challenge. Again, the image here conjured is one of an army of ready and able would-be consumers of housing goods waiting in the wings with their money ready to spend.
It’s important to establish this view prior to turning it on its head (or rather pushing it off the cliff). This view, shared in lightly modified forms by both psycho libertarians and “rational socialists”, depends fundamentally on a Keynesian notion of production for consumption as the purpose of capitalist production and furthermore on the particular ways this dovetails with effective demand. Consumption for Keynes was a two-headed creature, in which consumption (of housing) could be viewed as the chosen consumption level of the mass of the population – that is, as a reflection of a psychological need acted out via market activity. This Keynes takes from Malthus, namely his theory of accumulation, which more or less hinges around an anxiety that workers’ demands (appearing as consumers) would be insufficient to enable capitalists to reliably realize profits on their consumption goods (for Malthus, this was “solved” by the existence of the feudal landlord class which bolstered consumption to tolerable levels).
So, to return to Keynes (who sees himself as exhuming Malthus in an anti-Ricardian mode), there is an issue of chosen consumption level, and this may or may not (doesn’t) reflect actual needs for consumption socially or individually. This is, for the sake of this post at least, irrelevant. The only demand is actionable demand, or effective demand – demand backed by the purchasing power to realize that demand as economic activity. But it’s not just for consumption goods; production goods are also in the picture here, and the demand for both (from consumers who may elsewhere be labeled workers and other capitalists) constitutes effective demand as a whole. To fix this problem is, essentially, to balance the books, so to speak, but moreso to provide assurances to capitals that their investments will see the reward of profits in the market, and thereby to create a suitable environment for investment. For Keynes these profits were rewards for investment as a risk behavior – opposing what he called “liquidity-preference” on the part of capitalists (think here of liquidity as fungible, uninvested capital accrued through previous profit gains; what Keynes wanted to assure was that entrepreneurial capitalists did not become maudlin at future investment prospects and thus keep their money liquid instead of “fixing it” in investment and rendering it immobile”.
Liquidity-preference and effective demand are the two main concepts here. The former is to be combatted, the latter eroded, both by the promotion of investment, either through the “artificial” promotion of such practices or the creation of a need (such as the total industrial mobilization associated with war or large-scale destruction of existing capital stock). In his The General Theory of Employment, Interest, and Money, he gives these examples of practices to increase wealth as “pyramid-building, earthquakes, even wars”. Here we arrive at Keynes’ Law, a modification of Sey’s with recourse to Malthus, that “demand creates its own supply”.
This necessitates that the salvation for capitalist crisis is shunted off exogenously to the state. The state here, then, is rather stripped of its political activities and thus appears as a value-neutral capitalist firm which is required to invest at scale to make up for shortfalls in investment not already covered by capitalists acting in accordance to their profit interests. Put another way, the capitalist state, for Keynes, is a firm of last resort, one which has the peculiar power of being able to invest without the requirement for suitable profits to be gained from the process of capital accumulation and formation. Thus what Paul Mattick Sr. (who much of the preceding analysis is, uh, “gently lifted” from) calls the “mixed economy” of state capitalism in which the state makes regular, intensive economic interventions via direct investment. Of course, when it comes to housing, this does not mean HUD is raising its own labor force, retaining construction managers, designers &c. in the way a capitalist firm does – rather, it provides a duplicate set of construction managers which dictate the forms the state’s invested capital will take to private contractors, and thus remains profoundly limited as far as any type of “socialism” is concerned. Directing the flow of capital is all well and good, but the revolutionary horizon of Keynesian state capitalism tightly regulates state direction on a project by project, site by site basis – not, by any means, the conscious organization of social production, which would require, first and foremost, the total expropriation of private capital, as this confers an exceedingly narrow, and profoundly anti-social, set of harsh guidelines on the form this organization can take.
Reliance on the state, then, proceeds from a misplaced belief in what the state (US or otherwise) can and is willing to actually accomplish in its activity as a capitalist firm. Of course, there’s about as much a chance of the state moving against private capital ownership as there is of the sun rising in the West, if for no other reason then the preservation of such is essentially its entire reason for existence. At bottom, the animating belief of state-built public housing proposes that it is possible to disaggregate the state’s basic functions, or that it is possible that the same entity which assures the continuity of private capital ownership may on the other hand fulfill its role as The Great Subsidizer to such a degree that the latter activity overwhelms the former.