Buying a House: Debt
I’m in the process of buying a house for the first time. This is exciting and strange. I first started looking for a house the same week that I was teaching John Locke’s Second Treatise on Government. I realized even more forcefully this time around how much social contract theory’s claims to belonging are tied up in relations to private property. Witness the ongoing opposition between owners and renters documented in San Francisco in the wake of the tech boom. Then last week, as we were signing the purchase agreement, I was explaining Marx’s analysis of capitalism to students, that wealth is produced by labor. Fine, work harder. But in the capitalist mode of production based as it is on private property, the worker never sees the fruit of her labor. Private property gives the owner license to recoup the surplus value of labor, while the worker only has the right to the compensation that is socially determined is sufficient to return her to work again. I realized I was living smack dab in the center of the contradiction between ideology and economic mode of production that Marx maintains will be the end of capital. So being a good member of the typing left (per Jodi Dean), I decided the best mode of resistance is surely to blog about it. This will then be the first in a series of blogs about house buying, private property, home-owning, home repair and remodeling, and town vs. country.
I have tens of thousands of dollars in student loan debt, even though I had tuition remission and a stipend from my graduate program. I definitely made decisions in college based on money rather than on what I wanted to do because I was paying for college by myself and I couldn’t afford not to work during summers and winter breaks (like I didn’t think I could afford study abroad, and was never told otherwise, and I just didn’t know that I could take my loans to off-campus housing which could have been cheaper and things like that). I thought Occupy’s efforts to take on debt and organize for debt forgiveness were a good idea, but not at the top of list of efforts to join. So yeah, I read David Graeber’s Debt: The First 5,000 Years and I know debt is a burden and a historical rather than an intrinsic social relation, but I don’t think I ever realized how much a racket the debt industry is until this morning when I had to read through the 70-something pages related to my mortgage agreement. Even though intellectually I know better, I thought debt was just the price you have to pay to be in the middle class. By the end of the life of my loan, 69% of what I will have paid back will be interest on the principle. 69%! What I realized in reading my mortgage agreement is that this situation is not just an economic necessity, borrowing with an interest rate that has 69% of what you pay back going to interest (i.e., to the bank, and I have a great rate!) could not happen without the institutional support of the government which makes the penalty for failing to pay, not just financially costly, but dire for families who are foreclosed on. Government officials–sheriffs!–do the bank’s work of putting people who cannot pay on the street.
The only reason the house I am buying can cost what it does is because everyone is expected to take on hundreds of thousands of dollars in debt. The value of the house is directly related to this assumption (value under capitalism being socially determined rather than based on use value). The expectation that everyone will take on debt makes the house cost so much that everyone has to take on debt and the sellers and buyers don’t actually get that extra money that forces the borrowing, since the seller will have to go on to borrow somewhere else. And if you think the tax incentives that allow you to write off the interest on the mortgage make it worthwhile, that too gets factored in by banks who realize you can borrow more because of what you can write off.
This is not unlike the student loan situation, where skyrocketing college costs don’t benefit colleges, who heavily discount tuition at their discretion, or students, who have to take out loans at the edge of affordability. It benefits banks who make loans guaranteed by the federal government. Recently, my youngest sister defaulted on her student loans because she took time off from school and was just having a hard time figuring life out and so just didn’t think about her loans for awhile. In the span of six months, from when her debts became due and she started following up on repaying, they ballooned from $1000 to $1600. To go back to school, she would have to make nine regular payments. This requirement keeps a lot of people from returning to school, not just because that’s hard to do, but because just thinking about it saps the energy from students who are already having a hard time finishing school.
In both these situations, the loans become a way of regulating people. So while there have been thinkpieces in the last several years about how private debt is bad for the economy, it’s good for keeping you in your place. You must keep working, you must be invested in the property value of your neighborhood (which means supporting racialized housing policies and resisting income diversity), you must pay back that student loan so you can go back to school and borrow more. Whatever the ideas you have about what your politics are, you are captured by bourgeois interests that keep your actual interests in maintaining the status quo–more so for housing than for student debt, I’d say. So, yeah, debt is the price you have to pay to be in the middle class. It’s also the price you pay to be invested in a system you don’t want.
Now, off to sign those mortgage papers.
Great article putting it all so simply. Just a minor nitpick – earlier economists (eg Ricardo, Adam Smith, I think) proposed the Labour Theory of Value. Marx’s contribution was his demonstration of the capitalist appropriation of surplus value.
Think on this now. The real economy is about things like the stuff we have, the work we do and the services we provide for each other, not (directly) about money which has no absolute value. For all their trillions the stuff the 0.001% have amounts to a planet they’re ever more rapidly trashing through unsustainable resource depletion, pollution, war, etc. There’s less and less of it that’s safe and comfortable and beautiful for eve themselves to enjoy – let alone the rest of us. Why are they as well as we stuck in this ridiculous rut? How do we (and they) get out of it?
Enjoy your new home!