On 12 June 2014, Jadaliyya published an article by Bruno Marot, titled “The End of Rent Control in Lebanon: Another Boost to the ‘Growth Machine?’.” In this article, the author discusses the impact of a new Law on Rent that deals specifically with rent contracts signed prior to 1992.
Marot began his piece by placing this issue in a wider context, the real estate development in Beirut, stating that the real-estate sector is facing a severe setback due to the “political instability of the past three years,” however it is still booming. He continued by emphasizing the necessity for a reform to the Law on Rent. Then, he pointed to the flaws in the proposed Law, and he argued that this Law is in favor of a “Property-Led Urban Restructuring.” Marot concluded that “neither tenants nor landlords will benefit from this proposal, whose primary beneficiary seems to be the real-estate industry,” and on the way, he advanced four suggestions that can contribute to a “just and, in the long run, effective reform of the “old rents” system.”
Marot is a PhD candidate at McGill University – Montreal, Canada, and a Doctorant associé with the Institut Français du Proche-Orient (IFPO). He placed his “essay” in the framework of his doctoral studies, and that it builds on his presentation at IFPO on 23 April 2014 (in which, coincidentally i happened to be the discussant,) thus making his article sounds more as a valid scientific paper, rather than an opinion piece.
Marot’s article is rife with flaws. It contains many contradictions, lacks coherent argumentation, and presents distortion to current realities as well to potential consequences.
In what follows i will examine thoroughly this article. From its beginning, where i will demonstrate that the real-estate industry crisis in Lebanon has little to do with political instability, till the end of the article, where i will show that property owners are clearly the real beneficiaries of the new law.
Contrary to the hypothesis advanced by Marot, I will argue that the end of rent control is not a boost to the real-estate industry. I will also discuss other points, such as the contradictions and blindness in Marot’s article, and the use of some concepts and referencing. And i will end up by questioning the state of urban research on Beirut.
Since this is a long piece, below is a table of content with respective links to each section, allowing the reader to navigate through this piece easily:
1. A crisis due to capitalistic dynamics and not to political instability
Crisis: A real-estate bubble that exploded … but we don’t feel it
Narrative: Adopting the real-estate industry discourse as a fact
Boom: When research relies on appearances
2. A Law with little impact on the anticipated real-estate boom
The double standards of the Law on Rent
Law on the Old Rent and urban transformations in Beirut
Does the new Law really benefit real-estate industry?
3. The blindness of the article
Equating winners and losers
The adoption of the Law terminated the popular debate!
“The rolling back of the state from housing policy”
4. Advocating for a just reform through neoliberal recommendations
5. A scent of orientalism?
6. Notes on concepts and on referencing
On the liberalization of land exploitation ratio
On the Rent Gap in the case of Beirut
On the Law on Old Rent and gentrification in Beirut
Conclusion: On the state of urban research on Beirut
Final note: The misleading debate on rent
1. A crisis due to capitalistic dynamics and not to political instability [back to menu]
Marot’s article began with a statement. It associated the “sharp decrease in demand for upmarket property” in Lebanon, or what i will refer to as the real-estate crisis, with the “political instability of the past three years,” which is a clear reference to the uprisings in the region in 2011, and to their developments and consequences on Lebanon. Yet the article noticed that “giant construction cranes, and glass-and-steel towers continue to dominate the Beirut skyline—something that is unlikely to change anytime soon.”
In the following sentence, this paradox, or tension, is clearly showed: “In this context of decreased demand and continued supply.” Yet the article take it for granted that real-estate sector is facing at the same time a crisis and a boom.
In what follows, i will talk of the crisis, then on the narrative adopted by the author, and later i will address the alleged boom.
Crisis: A real-estate bubble that exploded … but we don’t feel it [back to menu]
Since the end of the Lebanese civil war in 1990, Beirut passed through two real-estate booms mainly based on upscale residential housing, and that in parallel to the reconstruction of its Central District. It is interesting to note that upscale real-estate boom is not a recent phenomenon in Lebanon, already in the 1970s, a real-estate bubble resulted in around “50,000 empty luxury apartments in Beirut alone” (Traboulsi, 2007).
The first post-war boom, or bubble, started around 1995, and bursted in 1999 (Achkar, 2011). As with any bubble, the indications for its bursts appeared before the burst itself. Witness to that the already existence in 1997, of around 40,000 upscale vacant apartment, while the estimation for housing demand was evaluated to half a million (Farah, 2011).
The second boom began in 2004, and showed signs of stagnation since 2010. The start of this boom coincided with the adoption of a new Law of Construction that allowed a higher construction exploitation of the land. An increase that can easily reach the 30%, nearly doubling the original exploitation ratio. Fears of a bubble, due to speculation, were formulated by the Banque du Liban as early as 2008. Paradoxically, Banque du Liban kept on issuing contradictory statements on the state of the real-estate sector, sometimes ruling out the existence of a bubble, and on others instances warning of the way the boom is developing, as it is shown in these two articles dated respectively 26 February 2010, and 7 October 2010.
To explain this boom, some researchers considered that with the political and security instability there were more investments in real estate since “the land value was considered the safest” (Catusse and Boissinot, 2011, in: Achkar, 2011). While i’m inclined to this opinion, other factors need to be considered too, some of which are hard to verify, such as the money laundry factor.
Nevertheless, and what is clear, the real estate supply was mainly directed towards Lebanese expats (Farah, 2011; Achkar, 2011). Moreover, and as it was explained by a prominent Lebanese architect, there is a tight web of relations that connects real-estate developers, investors, and a significant number of the real estate clientele, and on many instances they keep on buying from each other.
By 2011, this dynamic has outstretched and exhausted itself. The bubble has burst, and it is estimated that in 2014 there is more than 200,000 vacant apartments in Lebanon. However, this burst had little consequences, and property prices experienced a very slight decrease. This situation was considered a “stagnation,” and not a “regression.” Karim Makarem, of Ramco Real-Estate, explains that:
Supply, represented by land owners and property developers, is usually more distanced from economic realities and therefore sellers tend to over-value their properties.
However, there is a good reason for this disparity: the upscale real-estate sector has little to do with the internal Lebanese economy. Its main clientele are: Lebanese expats, wealthy foreigners, and Lebanese higher classes (including the real-estate investors and developers themselves.) And for a significant number of these buyers and sellers, housing is mainly a mean to circulate money and/or to make profit. When the sector is hit by a crisis, most of them can afford to sustain the shock and hold back pending the next boom.
This, in its turn, affected the other segments of the real-estate sector. It inflated the prices to an alarming level, and now it prevents their readjustments, and that in a near total absence of any public authorities’ actions.
Narrative: Adopting the real-estate industry discourse as a fact [back to menu]
Whenever hit by a crisis, or even a slight setback, the real-estate industry in Lebanon rushes to put blame on the political situation. Paradoxically, the latest real-estate boom flourished exactly at the same time when Lebanon was experiencing an increasing political and security instabilities.
The boom began in 2004. One year later, the former Prime Minister, Rafic Hariri, was assassinated, a starting point for a long period of instability, political assassinations, and civil unrest. The height of which came in May 2008, where a mini civil war erupted. For around two weeks, battles raged between gunmen affiliated to various political parties, from Beirut, to the North, to the mountains – even heavy artillery was used. Aside from the intermittent clashes, political and governmental deadlocks were the norm. Add to it a war with Israel in 2006, or the several other military clashes between the Lebanese Army and Islamists armed group.
In this period of instability and uncertainty between 2005-2009, the real-estate sector boomed, and property prices have risen around 150% on average.
Real-estate developers were always reluctant to point to the deficiencies of their industry, and the Lebanese or Regional political environment always presented them with the adequate excuses. In this context, it is very interesting to examine the change in the discourse of Elie Sawma, the head of Building Promoters Federation of Lebanon. In May 2011, Sawma blamed the political void -due to the collapse of Saad Hariri government- for the sale decline of large apartments. One month later, Sawma began to use the unrest in Syria as an excuse, claiming that it leads to a shortage in construction workers, which in its turn affected the industry. Since then the situation in Syria, along with a probable new tax on real-estate, were the favorite excuses advanced by Sawma. Interestingly, on some occasions Sawma do contradict himself by declaring that the Regional crisis had a positive impact on the Lebanese real-estate.
The use by real-estate industry of the political instability excuse, is a restructuring of the narrative. A restructured narrative that aims to blur the flaws of this industry, and to prepare for the next boom (and burst.)
Marot’s article not only adopted, selectively, the real-estate industry perspective, but it even stated it as a fact, in disregard to other factors. The article even considered it as an open secret. How can it be an open secret if it is continuously declared in public? (in order to quote other parties than Sawma, here’s a link to a Ramco report also blaming the “very poor local security and political situation and the quagmire of the Syrian conflict.”)
Marot’s selective reading has also an impact on the reasoning in his article, or on any work that takes this article as a reference. Since it will give the appearance that the real-estate industry is a failure-proof permanent growth machine, only hindered by the political situation.
Boom: When research relies on appearances [back to menu]
Yes, there will always be towering cranes above Beirut, or other cities in the world, and yes, there will always be a supply. However the point is the scale and nature of this supply. Marot’s article, and by putting in tension the “sharp decrease in demand” with the “continued supply,” in order to formulate a problematic, is not referring to a normal construction activity or housing supply, but rather to a continuous real-estate boom.
In order to confirm this continuous boom, Marot points out to the multiple construction sites, with an emphasis on their size (giant), their weight and impact on the city (dominate) and their persistence in time (unlikely to change anytime soon.)
However, appearances are deceptive.
Any initiate in construction procedures would know that a Construction is a process spanning over several years, and the cranes or the construction sites are just the final stage of this process.
For example, the construction of a high rise in Beirut starts with an idea, usually formulated by an investor or a developer. The next phase is finding the appropriate location. In case the plot of land is not owned by the investor, this requires negotiation with the property owner(s). If the land harbors an inhabited building, the next step will be the eviction of its residents, through negotiations, or legal procedures, or applying various pressure, or other means. Meanwhile, an architectural firm will be entrusted with the design, which is also a time consuming process involving several experts or technicians (architects, civil engineers, et al.) to produce a final design and the related technical documents. A dossier has to be compiled and submitted to obtain the construction permit. In case the high-rise exceeds 50 meters in height, the permit needs also the special approval of the High Council of Urban Planning. Moreover, obtaining a permit does not mean the commencing of the construction immediately, sometimes several years pass between these two actions.
All these, and other foreseen or unforeseen steps or obstacles will take in average no less than 5 years, and that before even starting to prepare for the construction phase. The construction, and finalization, of the high-rise will also take no less than 2 or 3 years.
Additionally, real-estate investors in Beirut attempt to sell their commodities (apartments, offices, stores, etc.) even before the beginning of the construction. With the result, that we can consider the construction phase as just the step to fulfill the already made contracts and market transactions. In several cases, the supply has already been consumed before the cranes were erected.
In case we have to identify a tangible indicator to measure real estate dynamics, construction permits will represent better the situation, than construction sites. (Although permits alone are not enough indicators.)
Therefore, and by no means ever, these construction sites do reflect the current situation. The cranes towering over Beirut do not indicate neither a present nor a future boom, but rather a boom that took place couple of years back.
2. A Law with little impact on the anticipated real-estate boom [back to menu]
In this section i will discuss Marot’s hypothesis that the law’s reform boosts the real-estate industry. I will show the contradiction and the weaknesses in these arguments, and i will argue that the proposed law will have no or little impact on the construction sector.
But first, i have to address the existing law(s) on rent, and to show their impact on urban development in Beirut.
The double standards of the Law on Rent [back to menu]
As Marot mentioned, the reform does not target the existing Law on Rent as a whole, but rather a section of it that “freez[es] all rental agreements signed prior to July 1992.” These contracts still follow the older Law on Rent. Which leave us in a situation of two Laws and of double standards. I’ll refer to the two laws as Law on Old Rent, and Law on New Rent respectively.
The Law on Old Rent was conceived to insure a significant protection to the tenant, and even to his/her descendant, since the contract can be inherited. For sure, rent prices were in Lebanese Pound and were subject to a very strict and controlled increase. This sort of power balance between property owner and tenant was broken in the mid-1980s with the sharp devaluation of the Lebanese currency. Thus creating a situation where tenants pay a rent far below current market prices.
The Law on New Rent came as a sharp contrast to the old one. It liberalized completely the rent, and contracts now are signed for a period of three years maximum, after which a new rent contract is negotiated. A situation clearly in favor of property owners, allowing them to keep on extracting an increasing financial profit from their properties.
The situation is far less favorable for property owners renting their properties according to the Old Law, and it severely affected those of them who were impoverished during the war years. So, in order for them to make profit, old contracts have to be abrogated. Law on Rent n° 160/1992 lists several cases for abrogating an old contract. However, the most practical option is Article 8-c: the upcoming demolition of the building and the reconstruction of a new one. In this case, the tenant will receive a financial compensation ranging from 25% to 50% of the apartment estimated price.
Landowners, seeking for profit and lacking the financial means to evict their tenants and to construct a new building, are faced with two options: either sell their properties, or go into a partnership with real-estate investors or developers. In the latter option, the landowner usually obtains one or two apartments in the new building.
The new law reform is basically a transitory phase to abrogate old contracts, after which all rent agreements in Lebanon will follow the existing Law on New Rent.
Law on the Old Rent and urban transformations in Beirut [back to menu]
No doubt this demolition-reconstruction exit tactic was highly beneficial for the real-estate industry, especially in Beirut given the scarcity of available land for development. However developers were confronted by two main obstacles: urban heritage and tenants.
Here it is essential to point that the Lebanese real-industry lobby has a great influence on Lebanese politicians. Moreover, the majority of the political elite invests heavily in real-estate (Achkar, 2011). To stay brief, nearly all of the actions, undertaken either by the Ministry of Culture or by heritage activists, were contained in one way or another (Ashkar, 2013).
As for the tenants, in general they were approached individually, and were offered different financial compensations. Some accepted the sum, and many were paid below the equitable amount, others went to court asking for a higher compensation (Ashkar, 2013). So, at the end it is a matter of a case by case, in some cases it was a quick process, in others it is still lingering till this date. Nevertheless, and in general, it was a successful operation for the real-estate industry, witness to that the high figure of demolition-reconstruction in Beirut in the last two decades.
The two figures below show the extent of this dynamic in the western part of Achrafieh for the first decade of this century. They were the result of a joint field survey conducted with Eléonore Boissinot in May-July 2011 (source: Les Carnets de l’IFPO):
Nevertheless, these maps do not show the number of evicted tenants according to the Law on Old Rent. To break down the information on the maps, we have first to distinguish between the vacant or inhabited plots that housed the new construction.
Two notes on this map: 1) This map only took in account demolitions and constructions. Eviction cases without a building demolition are not represented. 2) For the category “Previously constructed but uninhabited plot,” no residents were living in by the end of 1990s. Some of these buildings’ residents could have been evicted due to the mechanism we are discussing.
The category of the inhabited plots is more difficult to sub-categorize, since it represents a multitude of situations: from a simple case of a building owned by one person and rented according to the Old Law, to a more complex case of a building owned by several persons and inhabited by owners, tenants according to the old law, and tenants according to the new law. In the field survey, we could not manage to obtain in detail these information, nevertheless the many interviews, we conducted, confirmed that the overwhelming majority of the previous residents (or evicted people) were tenants according to the Old Law.
So it is safe to assume that buildings rented according to the New Law represent a slight portion of the demolished stock.
And here it is worthy to note that a building rented according to the New Law, does not refer to a newly constructed building. In many cases, and since the end of the Civil War, property owners were able to abrogate old contracts, and then rent their properties according to the New Law.
Does the new Law really benefit real-estate industry? [back to menu]
The central argument in Marot’s article is that the end of rent control will benefit real-estate developers, and boost the real-estate industry’s “growth machine.” Let us examine carefully this claim.
First, Marot considered that the Law on Old Rent “represents incentive for urban renewal as landlords are encouraged to sell their property to developers.” According to Marot (2012), property owners tend to sell because their “properties turn out to be unprofitable,” and although they “are deeply attached to their generation-owned family mansions, they would sell their assets in “sheer desperation”, participating in the progressive destruction of Beirut’s heritage.”
On the other hand, Marot considered that, in fine, the reform of the Law will benefit developers, since 1) it will increase the “availability of land for high-end developments” and 2) Old Rent residents “are usually a major obstacle to rapid demolition.”
In order to reach this end, he argues that “[t]he complex rules governing the evaluation of new rental values […] can moreover be interpreted as covert incentives for landlords to give in the developers’ calls in order to avoid these administrative and legal hassles.” Furthermore, he considered the Rent reform is complementary to a “liberalization” of construction exploitation ratio, as such the increase in in prime land availability combined with the “intensive use of land” will “provide another boost to the “growth machine”.” (Marot’s article’s claim on liberalization of the exploitation ratio is addressed further down in this piece.)
The first contradiction to arise from Marot’s argument is: if the Law on Old Rent forces property owners to sell their land for profit, now that the reform allows these property owners to increase significantly their profits from their properties, what is the incentive to sell?
And this increase of profit is not negligible. If an apartment rented according to the Old Rent generates US$50 per month, now it has the potential to be rented for US$1,000 per month. The only argument advanced by Marot, for property owners to sell, is the complexity of new rental values evaluation! So, property owners, who have been campaigning relentlessly for the past 30 year to gain a complete control over their properties, they will give up now and sell their properties because some sort of evaluation complexity.
All along this argumentation, Marot’s article disregarded the profit factor, referred to at the beginning of the article, as the main incentive for property owners to sell to developers. Thus turning property owners to a passive actor, whose role is to continuously sell its property regardless of the change in parameters.
Marot’s article depicts a truncated version of the equation real-estate investor/developer – property owner. It mainly represents a transaction with one active actor (real-estate developers), and with one variable, or obstacle to this active actor’s profit (tenants). As it is shown in this profit diagram:
However the situation is more complex. Property owners are not a passive actor. And usually they sell their properties for financial profit. The variables affecting the Balance of profitability are not restricted to the tenant obstacle. This includes variables such as the estimated costs, and the projected profit. The latter variable is the utmost important factor for investors/developers. In several cases, real-estate investors/developers withdrew from certain projects, simply because preliminary studies showed that the projected profit is less than four fold the initial investment.
400% profit is what many investors/developers are seeking to achieve.
Other factors also affect this equation, such as public actions (e.g. regulations, taxation) or private actions (e.g. social mobilization, heritage related actions.)
Just an restriction of this equation to the two actors, real-estate investor/developer and property owner, will lead to a more complex diagram:
Nearly all along the article’s analysis, property owners were reduced to a passive role, they even disappeared in the final assessment of the article:
[the reform] is intended primarily not to address the needs of Beirut’s residents but rather to provide prime land for urban renewal serving the interests of city builders.
In fact, the tenant was not an obstacle for the developer, as much as it was to the landlord, since it hindered the latter attempt to capitalise further on his property. This led property owners to sell to developers from a weak negotiating position. The removal of this obstacle will have two effects: 1) It will strengthen owners’ position in any sale negotiation, and 2) it will make property owners more reluctant to sell, since now their properties generate a significant profit.
Additionally, and in regard with Marot’s other argument, “the increased availability of land for high-end developments,” another contradiction arises. As we saw in the case of Achrafieh, the majority of demolition-reconstructions cases were related to the Old Law, and not to the New Law. So how can this reform, at the end of which all contracts will follow the New Law, will increase land availability? If that is the case, it means that current demolition-reconstruction have to be mostly based on New Law rented buildings, which is obviously not the case.
3. The blindness of the article [back to menu]
Additionally to what was mentioned, the article presents several blindnesses. I would like to point to three of them:
Equating winners and losers [back to menu]
Maybe the most excessive statement in Marot’s article is the opening sentence of the last paragraph:
Ultimately, neither tenants nor landlords will benefit from this proposal, whose primary beneficiary seems to be the real-estate industry.
As we saw earlier, property owners do benefit, and a lot, from the proposed reform. But the article’s disregard of any active role for property owners, leads to equating them with tenants as non-beneficiaries.
The same perspective was also put forward by a newspaper article as a probable scenario: “Real estate speculators to evict both tenants and landlords,” read the title of the article. However, the article fails to argument the basis leading to this scenario. It is a simplistic view to stress on the danger of real-estate industry. This industry does represent many dangers to the city of Beirut on many levels. However it is misleading to obscure the complexity of a situation, and that in order to form a large mobilisation front to face these dangers.
In this narrative depicting the real-estate industry as the main beneficiary, it is pertinent to review the discourse of this industry on this matter. The real-estate industry in Lebanon is not known to be shy in voicing its opinions, especially when it comes to its interests. However, real-estate developers are refraining to comment on this reform, “arguing that they could not comment until the law was validated by the presidential signature and published in the Official Gazette.”
It is also interesting to view the banking sector’s opinion, after all Lebanese banks invest significantly in real-estate, and many of these banks own real-estate companies (Achkar, 2011). On the impact of the reform, Nassib Ghobril, the chief economist of Byblos Bank Group, said:
It will certainly have an impact on the market because property owners will be able to generate real income from their property if they want to keep their tenants and agree with them. If they want to recuperate their property, they can decide to put it on the market or give it to their children, or some may want to refurbish it. It is an individual decision.
In sum, property owners are the main beneficiaries, since this reform allows them to have total control on their properties, and to maximize the capitalization on them. Tenants are the real losers, since they lost all their privileges, and most of them will be forced out of their homes. As for the real-estate investors/developers, they do not really benefit from this reform, since it strengthens property owners’ negotiation position, in a sector already characterized by the scarcity of its prime resource: land. A situation that will force investors/developers to compromise, to share a bigger part of the perceived profit with property owners, thus cutting down their own profit. So, how much are they willing to compromise will be a key factor in the upcoming urban transformation related to the end of rent control.
The adoption of the Law terminated the popular debate! [back to menu]
The blindness in Marot’s article is also shown in this statement that the Parliament adoption of the proposed Law “terminat[ed] the fierce battle that has raged between landlords and tenants for decades. Nevertheless, the issue of rent control has yet to be settled given that former Lebanese President Michel Sleiman refused to enact the new law, and instead brought it before the Constitutional Council.”
Marot’s article considered that the file is closed for popular debates, and now the legislative bodies are the only parties to deal with this issue.
It is a total disregard to the near daily fierce statements exchange between the tenants and property owners associations, since the parliamentary vote.The article also turned a blind eye to the several sit-ins or demonstrations organized by the tenants. The adoption of the Law did not terminate the battle, it exacerbated it.
“The rolling back of the state from housing policy” [back to menu]
Marot’s article concluded that among the intentions of the new law is “to organise and consolidate the rolling back of the state from housing policy.” However a “rolling back” means the existence of certain services, and then scaling their size down. Nowadays, the housing policy of the Lebanese State consists of housing loans provided by the semi-public institution Banque de L’Habitat. Housing loans with strict requirements, de facto, excluding low income population of its benefits. Additionally, and as far to my knowledge, the only public housing project constructed by the Lebanese State since it existed, was in the last decade, in the northern city of Tripoli, and that to accommodate families displaced by the Abu-Ali river flood of … 1955. So, unless the housing loan programme is abolished (or more restrictions added), i can not see how a “rolling back of the state from housing policy” can happen.
4. Advocating for a just reform through neoliberal recommendations [back to menu]
Marot’s article concluded that “[a]ny just and, in the long run, effective reform of the “old rents” system should rely on a comprehensive approach built around the state’s central role in meeting the challenges of housing provision, and urban development.” Then the article advanced four suggestions that can be included in that reform. For each suggestion a number or a letter was assigned:
1) the progressive termination of rent control through the end of contract transmission between family members,
2) the creation of an alternative supply of rental affordable housing units by creating incentives for developers, and providing financial aid to low-income households,
3) the limitation and/or transfer of development rights in Beirut to deter developers from systematically tearing down old urban areas,
d) the greater involvement of municipalities in order to further decentralize urban policy-making.
These are clearly pro-neoliberal recommendations. No security provided for the tenants, the “state’s central role” seems confined to few regulations and some financial aid, even the provision of affordable housing (in other terms, public housing) is relegated to the public sector, a public sector that can benefit from the transfer of development rights. While the article seemed to criticize liberalization earlier, it ended up with a neoliberal solution, or to be more accurate, an advocation for a neoliberal system with a “human face.”
Marot and his article have every right to choose which politico-economic system to advocate for. However, I do consider it essential to clarify the understanding of “just” and “effective,” and to whom, and in which way, the proposed reform will be “just” and “effective,” and not just to state them as universal truth.
5. A scent of orientalism? [back to menu]
I admit, i could not resist the choice of this title. But let us face it, many Western researchers working on the Middle East are orientalists. Is Marot’s writings fit within this description? I do not think that examining one article will be sufficient to formulate an opinion on this matter. However, I am intrigued by his phrase:
Despite its uncertain future, this proposed reform allows us to better understand the politics of pro-growth city-making in Beirut specifically, and in the Eastern Mediterranean more generally, since it lays the legal and operational foundations for further property-led redevelopment.
I would like to know how a reform to a law that is very specific to Lebanon, can help us understand pro-growth city-making in the Eastern Mediterranean, in general.
I guess the main point behind this understanding is the argument that this Law liberalizes the rent. Right, the Eastern Mediterranean is now in the neo-liberal era, but the dynamics of city-making in this region are not similar. They are subject to more important factors than neighboring influence, such as the world global economic system, or local specificities.
Rent control exists (or existed) in a multitude of countries around the world, and in most cases it was introduced between the 1910s and 1940s, as response to the social crisis due to the two world wars and to the Great Depression of the 1930s. It was one of the ways to contain the consequent social unrest, and to ease the housing crisis, by trying to protect the vulnerable party in the landowner-tenant equation. Wikipedia offers a brief overview on rent control in several Western Countries.
However, and since the 1980s, neoliberalism -in its various forms from Thatcherism to Reaganism, to other forms- began the process of undermining all social benefits acquired 50 years earlier, and among them the rent control. In some cases it took a brutal form of liberalization, as in the UK with the Housing Act 1980, while in other cases it is more mild, as in Berlin, where the rent control is still in force, but the Berlin State began to introduce minor amendments and to withdrew subventions to the most vulnerable tenants, a situation that triggered ongoing protests, especially at Kottbusser Tor since 2012.
In this sense, the liberalization of rent in Lebanon, or in the Eastern Mediterranean, is more in tune with a global trend, not a regional one.
Additionally, urban regulations and planning actions in the Eastern Mediterranean vary a lot from one State to another, and not to forget that among the various regime found in the region, from democratic to autocratic, Lebanon was the only country who did not experience keynesianism or some sort of a social welfare State system. Lebanon just moved from Economic Liberalism to Neoliberalism, who are basically the same with minor few differences.
So how understanding pro-growth city-making in Beirut can make us understand pro-growth city-making in the Eastern Mediterranean in general? To caricaturize a bit, it amounts to saying that, understanding the Currywurst, a very specific Berliner fast food sausage, will make us understand the sausage cuisine in Western Europe in general.
6. Notes on concepts and on referencing [back to menu]
In this section, I will comment on some of the concepts, as well on referencing, used in Marot’s article.
On the liberalization of land exploitation ratio [back to menu]
As mentioned earlier, Marot claimed that land exploitation factors are liberalized. That’s a totally false assumption.
Exploitation ratio determines, for every parcel, the allowed constructable square meters. What Marot was referring to is a proposed increase (25% increase in zones where height is limited to four floors, and one additional floor for other zones) to finance the salary adjustment and wage scale.
This increase does not represent a major change in the Law of Construction, but rather it is inscribed in decades long history of increasing exploitation ratios. As it was mentioned earlier, nowadays, the legally allowed exploitation can reach the double of the original figure.
For sure this proposed increase, as any previous increase, has grave consequences. But in no way this represents a liberalization. Very strict rules still govern exploitation ratios, and the Law of Construction. It is not the dynamics and forces of the Market that determines exploitation ratios. There is still exist a Construction Control.
Additionally, Marot’s reference did not claim such liberalization.
On the Rent Gap in the case of Beirut [back to menu]
In his piece, and in reference to another article in Jadaliyya written by another researcher, Marieke Krijnen, Marot points out that the Law on Old Rents creates a Rent Gap. Both Krijnen and Marot cite a 1987 article by Neil Smith.
While i agree that some sort of a Rent Gap is created (and not only due to the Law on Old Rent,) I am critical of the reasoning that led to this conclusion, and I do consider it as a simplistic reading, and inaccurate interpretation, of the Rent Gap hypothesis. This hypothesis was formulated by Neil Smith in 1979, and that in attempt towards theorizing gentrification. He defined the Rent Gap as follow:
The rent gap is the disparity between the potential ground rent level and the actual ground rent capitalized under the present land use.(Smith, 1979)
Smith identifies ground rent as “a claim made by landowners on users of their land,” or in a simpler term it is the “land value” (Smith, 1987). As for the capitalized ground rent it is “the actual quantity of ground rent that is appropriated by the landowner, given the present land use.” While the potential ground rent, it is “the amount that could be capitalized under the land’s ‘highest and best use’.” (Smith 1979)
In her piece, Krijnen writes:
According to the rent-gap theory (Smith, 1987) value (capital) becomes “trapped” in obsolete buildings occupying land that has a much higher potential value. A building’s value decreases over time while the value of the land increases.
First, she confounded between two different terms employed by Smith: value and capital. This difference is best illustrated in his 1979 article:
Undermaintenance gives way to more active disinvestment as capital depreciates further and the landlord’s stake diminishes; house value and capitalized ground rent fall, producing further decreases in sale price.
In other terms, Capital is the amount of money invested, while value is the worth of the land. Value can turn into Capital, however it is not the case here.
Furthermore, Smith (1979) never considered that value (nor Capital) gets “trapped,” but rather the value is purposely devaluated, and the capital invested is depreciated.
Moreover, he never claimed that “[a] building’s value decreases over time while the value of the land increases.” In a further explanation of the Rent Gap, Smith (1982) clearly stated that the “devalorization leads to physical decline, which in turn lowers the market price of the land on which the dilapidated buildings stand.” The decrease of land price can also be seen in his 1979 graph:
Additionally, Krijnen’s approach, to explain urban transformation in Beirut, holds in it a contradictory element, since it can not be applicable to a piece of land devoid of construction, which is the case for significant number of new constructions project as seen earlier.
It is worthy to note, that the reference to the Rent Gap in Krijnen’s article, was to a three pages commentary that Smith wrote in 1987 as a response to an article by David Ley. In this commentary, Smith wrote briefly on the Rent Gap, without any in-depth discussion or explanations.
What is interesting, is that Marot’s article not only adopts unquestionably Krijnen’s opinion, but also refers to the same commentary that Krijnen used.
The issue of the Rent Gap and its relevance in the case of Beirut is a much wider topic than to be addressed in this piece.
On the Law on Old Rent and gentrification in Beirut [back to menu]
Also in his article, Marot made reference to a previous article he wrote in Les Carnets de L’IFPO, under the title “The “Old Rent” Law in Beirut: an Incentive or Disincentive for Gentrification?” dated 19 October 2012. (A french version of this article was published earlier on 28 September 2012)
As far as i know, the first researcher to establish a link between the Law on Old Rent and gentrification in Beirut was Eléonore Boissinot, a French researcher. Boissinot presented her findings in a seminar at IFPO, Beirut, on 8 June 2011, then later in a Colloque at ENSA La Villette, Paris, on 19 November 2011. I used Boissinot’s arguments in my Master Thesis, December 2011, as well as in a seminar at IFPO, Beirut, on 8 March 2012, and in an article in Les Carnets de L’IFPO, published on 5 July 2012.
It is interesting to note that Marot, an urban researcher on Lebanon since 2009, and several times affiliated with IFPO (e.g. May-July, 2012: he was assistant researcher at IFPO), that he didn’t make reference to either works, Boissinot’s or mine. (i.e. the two previous works that dealt with the same subject as his, and were presented and/or published in the same institution he is affiliated with.)
Conclusion: On the state of urban research on Beirut [back to menu]
Maybe the importance of Marot’s article is to underline the deficiencies in urban research on Lebanon. Marot’s article is by no means an isolated case, It just happened to be the piece i chose to examine.
Research necessitates accurate information, different perspectives, precise terminology, solid argumentation, etc. It also needs time and money. But above all, research requires Research.
It is an open secret that urban research on Lebanon is in a lamentable state. And in this sense, it is correct to use the term open secret, since what i just stated is more or less known, but nearly never mentioned. I might be the first one to write about it.
Couple of years ago, and when addressing the issue of Wikileaks, Slavoj Žižek wrote: “This is the paradox of public space: even if everyone knows an unpleasant fact, saying it in public changes everything.” Nowadays the internet has become a public space, and i hope that what i wrote will be an opening for a change, a constructive change.
Final note: The misleading debate on rent [back to menu]
The debate on the Law on Old Rent and on the proposed reform is a misleading debate. For sure it is an important issue, and it affects gravely the life of around 100,000 families, a significant number of them are vulnerable. However the main issue is not the Old Law and the ways to abrogate it. The main issue is the Law on New Rent, which is THE Law on Rent, after all the Old Law is an exception, a special case.
While estimations exist for the number of contracts regulated according to the Old Law, there is nearly no information concerning the new one, but i guess the numbers are much much higher. If the Old Law insures a certain protection for a vulnerable segment of the Lebanese society, a greater part of vulnerable Lebanese and foreigners residing in Lebanon -workers and refugees- are totally exposed to the abuses of the neoliberal New Law.
The Law on New Rent is rarely discussed, in comparison to the old one. It is always in the shadows.
To address the issue of rent, to seek a just and effective reform, means to address the Law on New Rent. After all, the proposed reform is nothing but a transitory phase from the Old Law towards the New Law.
1. ↑ Hadifé, Charles. Architect. Personal Interview. 10 May 2013.
2. ↑ Abi Semaan, Tofy. Architect. Personal Interview. 26 April 2013.
3. ↑ The years preceding the adoption of the Law of Construction in 2004, can give us an example on the aggressive and combative discourse of this industry, in order to secure more profit and privileges (Achkar, 2011).
4. ↑ Byblos Bank is the 3rd largest bank in Lebanon, and the 470th in the world, as of 2012.
5. ↑ The used references fit within the time-frame of the period given by Marot, as a period of preparation of the article.
6. ↑ The displaced were temporarily housed in Khan el-’Askar. They stayed there for more than 50 years.
7. ↑ Wild estimations that varies between 60,000 and 180,000 contracts.
8. ↑ As they are interpreted by Henri Lefebvre, David Harvey and Neil Smith.
Printed sources and Conferences
Achkar H (2011) The role of the State in initiating gentrification: The case of the neighbourhood of Achrafieh in Beirut. Master Thesis. Lebanese University. (http://hishamashkar.org/node/57)
Ashkar H (2013) “Radical Gentrification in Beirut and the Changing Struggle for Urban Commons,” In: Urban commons: Moving beyond state and market. Conference. URG, GSZ, Humboldt-Universität zu Berlin, Berlin, Germany. September 28.
Farah J (2011) Différenciations sociospatiales et gouvernance municipale dans les banlieues de Beyrouth. Doctoral dissertation. Université de Liège.
Harvey D (2014) Seventeen Contradictions and the End of Capitalism. New York: Oxford University Press.
Smith N (1979) “Toward a Theory of Gentrification A Back to the City Movement by Capital, not People.” In: Journal of the American Planning Association 45(4). pp. 538-548.
Smith N (1982) “Gentrification and Uneven Development.” In: Economic Geography 58(2). pp. 139-155.
Smith N (1987) “Gentrification and the Rent Gap.” In: Annals of the Association of American Geographers 77(3). pp. 462-465.
Traboulsi F (2007) A History of Modern Lebanon. Ann Arbor: Pluto Press.
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