The political economy of tenancy contract law – towards holistic housing law

Abstract

Europe’s aggravating housing crisis lies in the blind spots of law. While central in constructing housing both as a home and as an asset, law bears the task of mediating between housing’s multiple – social, economic, and cultural – dimensions. However, inner-legal fragmentation and a legal imaginary of property, the nation state, and its welfare system have depoliticized, deflected and rendered inaccessible the ‘housing question’. Turning to tenancy contract law in particular, this article argues that the ‘social’ orientation of this early example of a ‘materialised’ field of contract law is not only ill-suited to reflect the recent structural shifts in the housing market brought about through financialisation. Tenancy contract law has effectively taken a conservative drift by claiming to adequately administer the bilateral landlord–tenant relation while being insensitive to macro-level developments. Tenancy contract law reindividualises tenant responsibility in the eye of hardships whose roots lie outside the contractual sphere and thereby furthers, rather than curtails, neoliberal housing policies. As a reaction, the article proposes political economy as a conceptual vantage point from which to develop a ‘holistic housing law’. Such a perspective combines a concern for democratic and collective agency with careful attention to law’s tacit and technical role in shaping the flow of finance and the techniques of landlords’ governmentality. Part of this is a ‘transformative tenancy law’, to be reformulated to protect not against landlord bargaining power in the first place but against a hegemonic and expansive market rationality that structurally corrupts the social and material meaning of housing.

1. Introduction: contemporary dimensions of the ‘housing question’

Housing markets in bigger European cities have seen structural shifts over the past two decades. Despite considerable local differences, stark price increases, shortage of adequate housing and increases in evictions, displacement and homelessness across the board mark the return of the ‘housing question’ in a new guise.¹ In his early formulation when reflecting on precarious worker housing in Manchester, Friedrich Engels had identified the state of housing as reflective of social order more broadly. He claimed that in a capitalistic society, housing shortage is no coincidence, but a necessary occurrence.² During the 20^th century and under the compromises of the welfare State, housing policies gradually lost some of their pressing undertone and bracketed more foundational questions of political economy. Frequent changes and readjustments in housing policies suggested tight public scrutiny of the housing market, and an array of legal mechanisms contributed to the impression of the ‘housing question’ being somewhat tamed and well-administered.³ This overlooked, first, how the most extreme forms of housing shortage had by no means ceded to exist but were relegated to more marginalised groups in society, such as to migrants and undocumented persons.⁴ Second, it concealed how the social substratum of housing policies has been gradually undermined by broader fiscal developments, exacerbated especially since the Financial Crisis of 2008/9. In Piketty’s account, rising housing prices make housing wealth a prominent example of the increasing capital/income ratio and a motor of inequality.⁵ While the façade of welfarist housing policies remained intact; its interior began to erode. Strains on public households have led to waves of privatisation,⁶ while private capital relocated investment streams from bonds to real estate as a reaction to near-zero interest rates. The bundle of policies and ideologies referred to as neoliberalism⁷ has deeply penetrated the housing market structure and distributive arrangement. To take only one example, the rise of transnational real estate investors exposes how housing markets are not merely local – but driven by global-local connections, and are not merely composed of bilateral relations – but display systemic effects of complex multi-actor relations. Yet, the local nature and composition of interpersonal relations were the essence of existing key mechanisms of social embeddedness of housing markets, such as the provision of social housing and the protective provisions of tenancy law.

This article argues that asking the ‘housing question’ today, ie interrogating the complex dynamics, interests and ideologies that openly and tacitly govern access to affordable and decent housing, requires sets of answers that depart from the local and interpersonal imaginary of housing markets to reflect the interconnections between local and global actors, dynamics and regulatory layers. Before turning to law as a possible solution to the housing question, its role in the emergence of a housing crisis and in shaping the way the housing question can be confronted today needs to be explored. Levers to the housing question are dispersed and scattered across multiple legal fields and levels of competence. The resulting range, in the current debate, of progressive policy proposals and legal reconceptualisations challenging the status quo is remarkable. From pricing and rental caps, decommodification and reconceptualising property, and discrimination in the private sphere to forms of collective enforcement – housing has become an exemplary laboratory for fundamental discussions on the legal constitution of markets. It would be illusory to expect single and comprehensive policy ‘solutions’ to emerge from this laboratory. Rather – and it is these perspectives that this article addresses and wishes to further – this suggests working on our cognitive frames with which to think about housing in its multiple dimensions.

One institution that is tasked with mediating between these different dimensions while being constitutive for the housing market is law.⁸ Law is centrally involved in the two principal and antagonistic understandings of housing: on the one hand, housing as a shelter, basic need, human right and a protected political space,⁹ and on the other hand, housing as a property asset. Housing appears as being hybrid from a legal perspective, located at the intersection of ‘socially’ programmed and ‘economically’ programmed legal regimes alike. Each of these legal regimes is insufficiently receptive towards the other and generates a partial imaginary of the many dimensions of housing. This article reads law’s involvement in the (re-)production of the schism between the two tropes of ‘housing as right’ and ‘housing as an asset’ as the epitome of the ambivalent and constitutive function of law for housing markets and, more broadly, housing realities. Law is integral to both axes, as it engages with housing in different frameworks of social meaning, including but not limited to the economic system.¹⁰ As the housing bubbles ahead of the Financial Crisis 2008/9 show, the housing market self-generates a level of fragility which has spill-over effects on the exercise of the right to housing.¹¹ This prompts us to identify a vantage point from which both axes can be put in perspective – a framework that can render visible the path dependencies that each axis inherits from established legal categories around which they are built. These loosely follow the old and porous public/private distinction, with the basic institutions of property and contract on the one hand (‘housing as an asset’) and the institutions of human rights and various mechanisms of the welfare State on the other (‘housing as right’).

One promising candidate to gain a critical and comprehensive perspective on the real-world effects of inner legal fragmentation comes from approaches around Law and Political Economy (LPE).¹² This line of legal thought that gains renewed traction on both sides of the Atlantic quickly reveals both axes as incomplete. Conceptualising housing as an asset misses the exclusionary dynamics and relational nature of property and its effects on and beyond the urban fabric. The tactics of institutional investors is precisely to decontextualise and reject any socio-cultural peculiarity of property in housing that would hinder their construction as a financial asset.¹³ Perspectives on housing as a basic need, on the other hand, have gained shape and support in various institutionalised and more loose formats in recent years,¹⁴ but must apprehend economic dynamics and actors structuring housing markets, even if only to alter them. The biggest obstacle to claims of housing as a human right is not normative, pertaining to its status as a human right, but material, pertaining to how such claims are deflected and watered down in market realities.¹⁵ Approaches from LPE help expose how basic legal concepts of contract and property give a certain orientation to those market realities. The malleability of the legal infrastructure allows turning the human right to housing from an external normative claim into a distributional mechanism intrinsic to the administration and provision of housing as a public good.¹⁶ LPE’s legal realist¹⁷ and institutionalist¹⁸ heritage challenges law’s methodological individualism with structural perspectives. In particular, this calls for a political economy analysis that goes one tier deeper to include the dynamics of the real estate industry.¹⁹ But law is not only implicated in the economic dimension of housing, but also the personal, cultural and spatialised experience around it, through discrimination, surveillance and displacement practices.²⁰ The question then is not merely how law constructs markets, but how law shapes social structures which in turn construct markets.²¹ Moreover, LPE’s renewed attention to the way the law insulates the economy from democratic contestation and invisibilises the stakes underlying an allegedly naturalistic market order²² points towards further complications of the distributive patterns of housing markets. Housing affects and operates at different scales (from local to transnational) which are detached from one another in the legal framework. This fragmentation limits the political agency of city dwellers and urban strategies to social transformation that Henri Lefebvre famously invoked.²³ And housing policies have large spill-over effects on third parties and general society, as illustrated by the carbon footprint of the construction sector²⁴ and the effect of such policies on neighbourhood quality and general social resilience.²⁵ The social sustainability of the current housing policies in the mid- and long-term is questionable and, as a realm with notorious boom-bust cycles,²⁶ one can read housing as approaching a possible social ‘tipping point’ for the social order,²⁷ just as climate has become an ecological tipping point.

The article seeks to carve out a space and provide a vernacular to address the contemporary ‘housing question’ in its multiple dimensions in law. To do so, I will first argue that law plays a central role in parcellating the debate around housing into different legal and policy regimes. This gives rise to a multi-layered arrangement that – in the abstractions of the liberal architecture of law – purports to serve diverse interests, but in practice has depoliticised, deflected and rendered inaccessible the ‘housing question’ (Section 2). I will then turn to private law institutions and tenancy contract law more specifically to show that the social guarantees of a ‘materialized’ private law are increasingly undermined by the logic of finance that penetrates the tenancy relation. The aspiration towards justice between contracting parties is not perceptive towards macro-level shifts in housing markets and hence today rather serves to reindividualise responsibility in the eye of structural developments and furthers, rather than curtails, neoliberal housing policies (Section 3). I take this point to press us to explore how the social substratum of tenancy law can be reinforced and elevated into other legal regimes. Some thoughts on future directions of a ‘transformative housing law’ conclude (Section 4).

2. Blind spots in the legal constitution of housing

Why is it that the housing crisis puts legal discourse, especially in private law, at unease, catches it by surprise and struggling to find adequate conceptual language? I will argue that this is because relevant developments in housing markets have remained in the blind spots of legal debates around housing and only become a topic once their manifestations (such as price peaks) have become undeniable. The working assumption of adequate social embeddedness of housing markets has been unbreakable over the past decades, creating a guise of stability that has made invisible drastic shifts that occurred in this time span.

Several legal fields intuitively come to mind when thinking of how law affects housing. Those comprise private law realms of contract, property, and investment next to rules on construction, zoning, and urban planning. These stand in a systematic context to one another; they are no eclectic collection, no ‘law of the horse’ in Llewellyn’s famous formulation,²⁸ but reflect a specific division of labour between legal regimes. The division between those legal regimes furthering housing as a marketised commodity to be sold and rented on the ‘free’ market (‘housing as an asset’) and those legal regimes that embed these market procedures in the individual and societal context (‘housing as a right’) echoes the dichotomies of liberal legality. Here is not the place to rehearse at length some of the conceptual and practical challenges brought forward against the self-portrayed neatness of the liberal legal architecture.²⁹ Seeing the individual as Archimedean point and ontological basic unit rather than as socially embedded and prefigured in many ways essentialises individual autonomy and structurally underexposes law’s implication in sustaining existing inequalities,³⁰ both domestically and in a global political economy.³¹ The abstractions of a liberal legal architecture generate a system of rights and recourse that assigns responsibility for every legitimate individual and collective interest to specific legal regimes or institutions. Every such interest, so the idea goes, has a legal regime, an entitlement, a procedure, a level of competence, a clerk, a form, a legal professional etc to address it. This comprehensive nature and purported social inclusivity is a central pillar of its legitimacy. It is however built on a number of preconceptions on agency, power and social structure as reflected in law and politics. If one legal regime fails to satisfy its assigned role, in most cases, its task cannot and will not be covered by other regimes. Welfare law has ample illustrations of how its existence exerts legitimising effects on socially straining economic policies – even in the eye of the many constellations where welfare law fails its addressees and is hollowed out by global competitive pressures.³²

Traditionally, the different interests related to housing have been processed by separate legal mechanisms. Those were largely unconnected from one another conceptually, systematically, and in the level of regulatory competence. Legal regimes from economic law vs social law, from the national vs the local and transnational level, even different conceptions of markets (a ‘free’ market as opposed to one for social or subsidised housing) created a differentiated legal landscape. It was however calibrated on implicit underlying premises on the pace, scale, actors, and regulatory levers in the housing market, many of which became anachronistic through decades of deregulation. Three examples shall illustrate how legal regimes and debates missed developing an ‘evolving’ concept of housing and its market.

A. Financialisation and the imaginary of property

Across many European countries, albeit with considerable geographic diversity, homeownership has risen to become the dominant form of tenure. Political discourses on housing have widely adopted the liberal promise of property³³ and portrayed homeownership as the superior form of tenure, often placing a certain stigma on renting.³⁴ By ‘imaginary of property’³⁵ I shall denote here a set of implicit background assumptions that become operational when looking at the social world through the lens of property, in other words that mark the ‘invisible. . . power of property’.³⁶ Property, as a central institution of the liberal state, relies on its depoliticising impetus that places certain questions front and centre while relegating others to a realm outside of legal debate.³⁷ Three illustrations for this come to mind. First, property thinking has privileged questions of access to property over concerns for non-owners. Countries with a particularly vehement promulgation of homeownership (such as under the UK’s right-to-buy agenda³⁸) have discontinued or scaled down their policies on social housing and rent caps. For families who did not reach the ‘property ladder’, the increase of housing prices considerably above inflation meant that inequalities in homeownership exacerbated general wealth inequalities. Property has been conceptualised in unitary terms, detached from local cultural and historical trajectories. As a result, existing differences in homeownership rates among EU countries have remained puzzling. While Anglophone countries traditionally have a high ownership rate, only exceeded by Southern and Eastern European countries, German-speaking countries in the EU are among the lowest.³⁹ For long, these differences were explained in economic terms and based on universal conceptions of property alone, rather than as reflecting diversity in the socio-political perspectives on housing and ‘varieties of tenure’ in the EU.⁴⁰ These abstractions from context are particularly deplorable and to some extent surprising as the street-level urban space is generally rich in informal and bottom-up understandings of ownership, both in public and private space, and lends itself to a realist and pluralistic conception of property.⁴¹

Thinking through the lens of private property has, second, obscured the many ways in which housing markets diverge from neo-classical assumptions of perfectly competitive markets.⁴² This reinforced the perspective of a ‘natural order’ of housing markets in which law ‘intervenes’,⁴³ rather than being an integral part of it at the outset. Housing markets have porous geographical and temporal configurations – think of how housing serves current residents but can also attract newcomers. Increasing the housing supply through additional construction is a lengthy process. Lastly, housing prices cannot be regarded as the ‘natural’ outcome of market dynamics, but are subject to deliberate corporate strategies and culturally engrained practices of valuation.⁴⁴ For instance, the geographical location of a house contributes in large part to its valuation, illustrating the centrality of social context.⁴⁵

The third and most far-reaching effect of adopting a property lens has been to embrace the dominant normative and methodological individualism surrounding it. By consequence, the entry of financial actors and speculators with its depersonalisng and cascading effects on markets, emblematised by the rise of Blackstone Group L.P. as the world’s biggest landlord,⁴⁶ has remained conceptually under the radar. Housing is an example for the catalytic effect of finance on all sectors of the economy and into ‘everyday life’.⁴⁷ Financialisation can generally be defined as ‘the increasing dominance of financial actors, markets, practices, measurements, and narratives, at various scales, resulting in a structural transformation of economies, firms (including financial institutions), states, and households’.⁴⁸ In the realm of housing, it leaves a mark on the materiality of the built environment, as it manifests itself in design and geographies of cities. Finance values real estate that generates consumer desires over one satisfying housing needs.⁴⁹ Thereby, it adds to existing inequalities in the affordability and stability of housing. Using a typology by David Harvey,⁵⁰ it can be said that legal institutions spurred the transition from valuing houses at their use value to their exchange value, and from there on, the speculative value. Once financialised, a house becomes a financial asset as much as it is a material asset, affecting the pace of urban development as it comes with its own temporalities of return on investment.⁵¹ The cultural and material peculiarities of housing as a commodity – stressed in philosophical accounts that suggest specific distributive principles different from universal principles of justice⁵² – are stripped away. What began with luxury homes in capital cities has quickly expanded and today targets single-family homes, student housing, elder care facilities and refugee accommodation, including in peripheral localities.⁵³ The animating impetus is to identify ‘rent gaps’,⁵⁴ ie gaps between the actual ‘capitalised’ and the ‘potential’ ground rent. Asset managers, insurance funds, pension funds and hedge funds, as well as commercial banks, acquire real estate ownership through different investment structures. They replace traditional landlord–rentier capitalism with the logic of finance. In countries with high financialisation, the increases in rents are most strikingly decoupled from the development of income.⁵⁵ Finance increasingly sees its traditional function of lending credit to other economic activities supplanted by aspirations of geo-economics and wealth preservation.⁵⁶ It is important to add that financial actors do not simply take the role of landlords or individual savers but build a ‘chain’ of intermediaries that channel and bundle financial flows.⁵⁷ Integrating financial actors in the conception of housing markets hence requires integrating intermediaries – analysts, realtors, rating agencies, accountants, asset managers, developing companies,. .. – with their respective interpretations and expert practices.⁵⁸ Marginalised in neoclassical economics and political debates around housing, intermediaries are key to tracing finance’s flow and underlying logic.

B. Globalisation, multi-level regulation and the imaginary of proximity

The local materiality of housing and the absence of explicit EU competencies have long led to an underestimation of the transnational economic and regulatory entanglements.⁵⁹ A key contributor is legal analysis’s difficulty in thinking and connecting transversally and across scales of regulation.⁶⁰ In policy and academic debates, housing markets are mostly conceived of as locally situated and subject to national regulations, driving a host of comparative cross-country studies.⁶¹ This ‘imaginary of proximity’ concealed the gradual weakening of local and national policy levers. In law, it manifests itself in the idea of subsidiarity or ‘home rule’⁶² as the central concept of local government law. Such a concept grants municipalities the power to regulate matters of mere ‘local’ nature out of their own right. Urban scholars and international political economists have long pointed out that globalisation draws the world’s largest cities into an economic and regulatory competition to attract different forms of capital.⁶³ Financial flows, as we have seen, permeate city walls and give housing markets a ‘glocal’ dynamic⁶⁴ – manifesting themselves locally but shaped by the integration of metropolitan cities into the global economy. While the interplay between the national level and local housing regulations has long dominated our thinking about housing, the ‘glocal’ nature draws attention to the rules and processes that bridge regulatory scales, what might be called ‘connectivity norms’,⁶⁵ ie the mechanisms that expose housing markets to transnational buyers and financial market rationalities.

One of the most impactful ‘connectivity mechanisms’ has been EU law. Despite – or rather because of – the absence of explicit competencies in the field of housing, instruments and legislation at the EU level were insufficiently scrutinised in their effects on housing.⁶⁶ The deeper reason behind this is that the inherent tensions between ‘housing as an asset’ and ‘housing as a right’ and the different levels of competence are ‘irritants’⁶⁷ from the perspective of EU law, falling through the cracks between the EU’s economic and social goals. As such, EU law has taken steps of negative integration in the Internal Market by cutting back restrictions on the movement of capital and labour and distortions of competition. EU fiscal policies have had restrictive effects on public spending for social housing. Next to this, instruments of positive integration have made the housing market operate at a higher pace and subject to non-local influences. Rules on travelling and tourism, such as the Timeshare Directive⁶⁸ and the Package Travel Directive,⁶⁹ as well as rules on consumer finances like the Mortgage Credit Directive⁷⁰ have – each through a specific perspective tied to the Internal Market – altered the demand-side of housing markets and indirectly affected price levels. These implications of EU law could only, to a limited extent, be counterbalanced at the national level, and those national reactions are subject to EU law.

A prominent illustration comes from the ECJ’s Libert ⁷¹ case. The Flemish Region had issued a Decree according to which in certain communes, authorisation for land development and real estate purchase was granted only to persons with a ‘sufficient connection’ with the communes in question. Such a connection could be established through six years of continuous residency, activities in the commune or other professional or personal ties of long duration. In addition, the Decree placed a ‘social obligation’ on the purchaser or developer to guarantee a certain percentage of social housing units. The stated motivation behind the Decree was to curb the gradual displacement of low-income residents through gentrification. Testing the rules in such a Decree against the Four Freedoms, the ECJ concludes a violation of each. It criticised that the chosen criterion of a ‘sufficient connection’ did not per se protect low-income residents and left considerable discretion to the provincial assessment committee that evaluates if such requirements are being met. The case reflects a known tension between the liberalising rationality of EU law and its local and culturally loaded instantiations and groundings.⁷² The proportionality test that the Court resorts to takes EU free movement as a default and places the onus of justification on locally motivated restrictions. This limits the scope of actions by the local level where shifts in housing markets are most noticeable and where a need to react is felt most imminently. A similar effect is reached in the realm of short-term rentals. Following the ECJ decisions in Airbnb Ireland ⁷³ and Cali Apartments,⁷⁴ delocalised platform activities are subjected to the liberal framework of the E-Commerce Directive while the Four Freedoms bind municipal authorities.⁷⁵

Together, these factors gave EU law an inconspicuous role in facilitating a financialisation of housing markets while simultaneously limiting local reactions to it. The changes occurred largely unacknowledged and outside of consultations involving the local level. Only in the past few years, different EU initiatives have called for a multi-level understanding of housing regulation. As part of the EU Urban Agenda launched in 2016 with the Pact of Amsterdam, the European Commission initiated a ‘Housing Partnership’⁷⁶ as a multi-level working method involving Member States, cities, the EU COM and other stakeholders. Some years later, the ‘New European Bauhaus’ initiative seeks to give an aesthetic and cultural grounding to the European Green Deal within the built environment.⁷⁷ Most recently and importantly, a European Parliament resolution of 2021 developed a broad panoramic view of housing-related policy goals anchored in an understanding of housing as human right.⁷⁸

C. Neoliberalism and the imaginary of the state

A third blind spot that has impeded law’s ability to capture and thematise changes in housing markets stems from a static imaginary of the State, both concerning its role vis-à-vis markets and the power of its welfare regime. Homeownership and housing affordability are intrinsically linked to broader welfare policies and political economy, especially in Western Europe where homeownership is the central asset of the middle-class. In the account of Colin Crouch, the drive towards private homeownership as ‘asset-backed welfare’ can be understood as ‘privatized Keynesianism’, wherein, unlike traditional Keynesianism, it is not the State that incurs the debt for stimulating the economy, but rather private households.⁷⁹ Some see mortgaged homeowners become a vehicle for capital interests on the search for additional investments. Mortgage – just like debt regarding other basic services and provisions like energy or education – emerges as new legally constituted relation of inequality in a model that advocates for homeownership as chief form of tenure.⁸⁰ This model can become circular and self-reinforcing: Rising housing prices affect homeowners’ political preferences, making them less supportive of redistributive or welfare policies as the increased property value operates as self-supplied social insurance. By consequence, political parties on the right will propose spending cuts on social policies during housing booms and further exacerbate neoliberal housing and urban policies.⁸¹

It was a rather seamless step for legal analysis to endorse the neoliberal narrative of individual responsibility⁸² at the expense of a more contextual understanding of the underlying political economy. The imaginary of the (welfare) State as a guarantor of minimum needs remained in place while legislative and bureaucratic practices gradually cut back its effectiveness. While welfare States were traditionally both providers of public housing and of public capital to support housing construction, these functions are now limited to enabling privatised housing transactions.⁸³ Legal analysis has contributed to a façade of continuity by developing self-regulatory paradigms which propelled market logic into an increasing number of social fields.⁸⁴ In the realm of housing more specifically, law has made intuitive the commodification and economic valuation of housing by normalising such cognitive frames. This is reflected in discourses on the power of markets to incentivise construction of new buildings, the alleged objectivity of the price mechanism and the rise of intermediaries such as realtors and mortgage consultants who, at the fringes of the housing market set the tone for a market-friendly framing.⁸⁵ This framing in turn has effectively delayed the argument for housing as a human right and replaced a perspective of public planning (‘seeing like a State’)⁸⁶ by one of market logic itself (‘seeing like a market’).⁸⁷

This section has argued that the housing question is invisibilised and thereby depoliticised through at least three cognitive frames that are rooted in the legal imaginary in the European legal tradition (which, for that purpose, is not and should not be understood as a rigid and shared set of legal principles but rather alludes to an epistemological meta-perspective). These frames have contributed to the late and conceptually eclectic reception, within law, of the changing parameters of the housing question and law’s implication in it.

3. Situating tenancy contract law within its political economy

For anyone but homeowners, tenancy contract law is the most immediate legal connection to decent and affordable housing. Nonetheless, it has been at the margins of academic and political attention,⁸⁸ especially in countries which set strong incentives for homeownership. Here, tenancy contract rules have often been less protective, with flexible options for the landlord to opt for a temporary duration. When the Financial Crisis of 2008/9 pushed families who would otherwise have been expected to become homeowners in such countries into tenancy (‘generation rent’), these countries’ tenancy laws were improperly prepared for long-term tenants.⁸⁹ In other words, the policy-driven differences in the legal and economic framework between homeownership and rental made tenure inequality a root cause of housing wealth inequality.⁹⁰ In what follows, I shall argue that tenancy contract law provides an illustration of how a ‘materialised’ field of contract law reacts to some of the structural shifts underlying today’s housing crisis. Through decades of relative academic neglect, tenancy law has been cut off from debates that have stirred up contract law and theory. It seems timely and necessary to pull tenancy contract law (back) into these debates in order to develop a critical vocabulary that transcends its status quo. To do so, I will use the German legal system as illustration.

A. The rise and conservative drift of ‘social’ tenancy contract law: the example of the German BGB

The development of tenancy law since the German Civil Code (Bürgerliches Gesetzbuch – BGB) came into force is closely linked to the crises and economic conditions in the 20^th century.⁹¹ The deliberations on the BGB took place at a time of housing shortage triggered by industrialisation and urbanisation,⁹² in particular a lack of affordable housing for low-income classes of the population and a lack of security of tenure after transfer of ownership.⁹³ This made tenancy law a focal point in the controversy over a ‘social’ orientation of the codification and the metaphorical ‘drop of socialist oil’ that Otto von Gierke famously advocated for.⁹⁴ Next to its legal-political significance, tenancy contract law has also been a field of doctrinal-conceptual innovation, eg on third-party rights, standard-form contracts and coordination between different contractual relationships.⁹⁵

Despite its obvious societal relevance and its centrality for many aspects around housing, including access, affordability, safety and security of tenure, tenancy law has been largely absent in major debates in private law in Europe. In the post-war period, tenancy law developed a highly specialised discourse, essentially limited to national perspectives, with a strong role for legal practitioners and little attention to the interfaces with other areas of law.⁹⁶

The early encapsulation of tenancy law as a ‘materialized’ or ‘special’ private law field has arguably been a key factor here – contributing to a cut-off from general private law principles and debates. The origins of tenancy contract law as a specialised contract regime with particular concern for tenant protection goes back to war-time emergency legislation. For the first time in 1917, newly established ‘Rent settlement offices’ (Mieteinigungsämter) were entitled to reverse terminations and determine an appropriate rent level.⁹⁷ These regulations were popular and remained in force after World War I. The destruction and displacement after World War II again led to a dramatic housing shortage and anew to ad hoc regulations on tenant protection which lasted until the 1950s.⁹⁸ Those regulations comprised rules on rent control, an obligation to contract as well as protection against eviction. Large parts of the tenant-friendly orientation of tenancy law hence stem from emergency regulations outside the BGB and were only incorporated permanently in the BGB in retrospect, through a 1960 law that sought to ‘finally transfer the housing stock to the social market economy’.⁹⁹ Tenancy contract law today diverges from the general contract law of the BGB through procedural, temporal and formal rules concerning the contract’s substance, its termination regime and protection against evictions.¹⁰⁰

By the 1960s at the latest, ‘social’ had become a consistent attribute of tenancy contract law, suggesting that the field had adequately resolved its basic normative conflicts and pacified the tense relationship between tenant and landlord. ‘Social tenancy law’ became a standing and metaphorically highly suggestive titulation used routinely in case law¹⁰¹ and academic debates. The attribute ‘social’ designated it as ‘materialised’ private law avant la lettre – referring to the emergence of the topos of the ‘social’ in early 20^th-century legal thought that became shorthand for realist contextualisations of private autonomy and, as such, spread globally.¹⁰² The exact meaning of this attribute in the tenancy law context remained however vague. Core debates and trajectories of private law over the past decades, such as those around constitutionalisation,¹⁰³ Europeanisation,¹⁰⁴ competing regulatory paradigms¹⁰⁵ or different economic models¹⁰⁶ have left little mark on tenancy law. When the ‘materialisation’ of contract law sparked controversy towards the end of the century, tenancy law was treated as an outlier, long excluded from the aspiration towards a ‘unity of private law’ and hence of little generalist conceptual interest.¹⁰⁷ Singling out tenancy law from the general law of contract not only moved it into a niche, shielded from conceptual innovation, but also contributed to the myth of general private law being ‘alleviated’ from political considerations.¹⁰⁸

A telling example for a certain conservative drift in the way ‘social tenancy law’ operates and is invoked in legal debates concerns the Berlin ‘rent cap’ (Mietendeckel),¹⁰⁹ enacted by the state legislature of Berlin in early 2020 and invalidated by the German Constitutional Court in March 2021¹¹⁰ for lack of legislative competence. The legislation comprised three independent mechanisms on rent control: a moratorium freezing rents in existing tenancy contracts on a given cut-off date, a maximum rent level introduced for new tenancy relations, and an actual ‘capping’ mechanism to be activated two years after the entry into force of the legislation. This ‘capping’ mechanism would reduce the rents due in existing contracts as far as they exceed this upper limit. Challenged by a phalanx of liberal-conservative political parties and representatives of the real estate lobby on both formal and substantive grounds, the rent cap was brought before the Constitutional Court. The Court’s decision revolved exclusively around the state of Berlin’s legislative competence. In the differentiated federal system of competences between the federal and the state level, the federal level has the primary competence for ‘civil law’.¹¹¹ Ironically, in order to avoid the rent cap to qualify as mechanism of ‘civil law’, the Land of Berlin presented it as public law mechanism that would affect private law relations from the outside – a view that identified private law with a realm governed by ‘freedom of contract, free price formation and the idea of market value’¹¹² and constructed a neat antagonism between private and public law uncommon in progressive legal debates.¹¹³ The Court however adopts a broad understanding of ‘civil law’ and classifies the rent cap as part of it. Importantly, the Court’s reasoning essentialises the concept of ‘social tenancy law’ and argues that related rules would in their entirety qualify as ‘civil law’.¹¹⁴ This suggests a timeless and uniform understanding of the ‘social’ impetus of tenancy law whose authority of interpretation is monopolised with the federal legislator. The historical trajectory of ‘social’ tenancy law lends it a retrospective orientation and centres it around a historicised understanding of the landlord/tenant relation allegedly pacified in the past and hence administered along these lines. Missing is a reimagining of what normative direction and regulatory mechanisms would be necessary to translate past ‘social’ guarantees into the future.

B. ‘Social’ tenancy law as shell: responsibilising tenants

A retrospectively oriented tenancy law is a mere shell vis-à-vis financialised landlords. Drawing on economies of scale, such landlords pursue strategies of cost-optimisation driven by economic rationalities that stem from outside the (eroding) interpersonal relation upon which tenancy contract law is calibrated. Issues such as the systematic delay of maintenance work, the lack of contact options for tenants, and the refusal of out-of-court settlement raise structural barriers for tenants to invoke and enforce their rights, all while remaining in an informal terrain that is hardly attained by contractual remedies.¹¹⁵ Operating as a filter between macroeconomic shifts in a financialised housing market and the bilateral micro-level, tenancy law upholds the ethos of individual responsibility and effectively serves to hold tenants accountable. As Atiyah notes in his famous anthology on contract law: ‘The whole essence of this form of individualism was that a man was left free to choose, but he paid the ‘natural’ penalty if he chose wrongly. It was a splendid, simple and cheap way of imposing social discipline, or rather of encouraging the people to discipline themselves.’¹¹⁶ The individual tenant is acting within a framework portrayed as ‘social’ tenancy law, complemented by welfare provisions, and can hence be made responsible for any difficulty they encounter despite these cushioning legal mechanisms. In such a climate especially, tenants are made to comply with informal disciplining powers of landlords, ranging from screening procedures and nominations,¹¹⁷ being pushed into black markets devoid of legal protection,¹¹⁸ seeing their rent payments and tenancy relation monitored through impersonal ‘property tech’ tools,¹¹⁹ and controls of deviant behaviour out of fear of evictions.¹²⁰ Landlords exercise authority by making tenants act upon themselves and tenancy contract law legitimises this by tapping into the vernacular of personal freedom.¹²¹ Consent alone is no sufficient justification for contracts which parties enter looking for substantive qualities brought about by extra-contractual dynamics.¹²² Such substantive qualities like affordability and liveability are directly impacted by rationales of political economy which tenancy contract law locates outside the realm of the contract. To be sure, certain limitations of contract’s epistemology are inherent in the very working and appeal of contract.¹²³ Several concerns might be better addressed by legal instruments other than contract. However, the centrality of contract for neoliberal policies stems precisely from its micro-level conception of justice inter partes that made the contractualisation of social life a proxy for its subjection to market rationality. Tenancy contract law, by remaining – as we have seen – largely indifferent to and unaffected by the shift to post-welfare housing policies and the rise of financial actors, sends a signal of continuity that validates the hardships of many tenants. Aside from the established adjustments to differences in ‘bargaining power’ between landlord/tenant, tenancy contract law appears aligned with the decontextualising and pre-realist gist of (neo-)formalist contract law.¹²⁴ A such tenancy contract law runs the risk of exposing tenants to structural and objectifying domination within the justificatory framework of contract.

C. From status to a market-based transactions: bringing market context back into tenancy law

The stasis of tenancy contract law, caught in the antinomies of individual freedom, has made it difficult to absorb changing market structures within the bilateral relation of contract. Just like other status-based contractual regimes – consumer contract,¹²⁵ employment contract,¹²⁶.. . – tenancy contract law is confronted with a growing fluidity of the social roles (landlord/tenant) it is built around. The critique of a certain coarseness of the stereotypical attributions of ‘materialized’ private law that cannot do justice to individual levels of autonomy and vulnerability has been raised early on¹²⁷ and continues to be virulent in tenancy law. In particular, tenancy law is indifferent to the natural or legal personhood of the landlord and the financial or corporate structure surrounding it, as well as to the degree of individual need and dependence of the tenant.¹²⁸ What is more, the bilateral configuration around landlord/tenant seems ill-attuned to third-party or general welfare concerns such as environmental requirements. Tenancy law lacks the conceptual grammar to process conflicts between social and environmental dimensions of sustainability.¹²⁹

Given the broad brush with which tenancy law paints landlords/tenants, a recent development towards an internal pluralisation of tenancy law provisions merits attention. Special tenancy law regimes are increasingly emerging whose applicability is tied to certain characteristics of the local housing market. Examples from the German BGB concern inter alia: (1.) the rent price regime that takes into consideration the rent level in local surroundings,¹³⁰ (2.) the rules on non-discrimination in the private sphere that exceptionally allow justifying a tenant selection otherwise qualified as discriminatory if it serves to maintain a social mix of tenants and is formalised in a housing policy concept;¹³¹ (3.) a certain rent cap (‘rent brake’) applies in ‘areas with a tense housing market’ designated by the state government.¹³² These rules fine-tune their scope not via status-related application criteria, but via geographical and housing-market related – in other words: institutional – application criteria. Tenancy contract law becomes locally pluralised, leaving room for municipal intervention and local difference and echoing v. Gierke’s early demand for more ‘leeway (in the) consideration for local customs and needs’.¹³³ A contract law regime triggered by strained market conditions seems a suitable proxy for embedding contractual rules in their local economic context, the latter being understood as an amalgam of local and global dynamics.¹³⁴ Most importantly, such rules acknowledge tenancy law as part of urban governance and require it to confront its (changing) real-world context which transcends the bilateral micro-level perspective taken by contract law. Not least, an effective allocation of private claim rights can be used for legal mobilisation and fostering of public interests, curbing the power of financialised real estate.¹³⁵

4. Conclusions: trajectories for a transformative tenancy contract law

This article has argued that the aggravating housing crisis lies in the blind spots of law’s conceptual sensorium. Inner-legal fragmentation and a tunnel vision created through existing legal imaginaries of property, levels of regulation and the State have kept structural shifts of the housing market under the radar. With each legal domain taking a peculiar and necessarily partial perspective on housing, none can apprehend the social dynamics of housing more comprehensively. The schism between ‘housing as an asset’ and ‘housing as a right’ has materialised in plural and unconnected discourses on housing. As it stands, these discourses have developed in isolation so that it is no longer enough to recalibrate normatively between the two. A critical perspective on today’s housing question requires the tools necessary to make such a recalibration practical. This points to the necessity to develop a ‘holistic housing law’ that explores doctrines, conceptual vantage points and legal-political practices that bridge, translate and create ‘productive irritation’ between presently secluded debates. In legal terms, this requires bringing into the picture those fields of law that, despite lacking a specific housing imprint, are central building blocks of housing markets, ie the economic areas of property, investment, capital markets and services law (and their respective EU law influence) as well as fiscal and monetary rules. This draws attention, for example, to the inclusion of housing in the EU’s Social and Environmental Taxonomy.¹³⁶

As a conceptual umbrella for such an endeavour, this article proposes to situate the different legal domains that shape housing firmly within the political economy – a framework that takes a genuinely transversal perspective at inner-legal categories and, even more importantly, is sensitive towards the political conflict lines between generations, urban and rural space, different metropolises, levels of regulation and finally between social and ecological aspects of sustainability. Inspired by the breadth of recent scholarship on Law & Political Economy, the path towards a ‘holistic housing law’ will combine a concern for democratic and collective agency¹³⁷ with careful attention to law’s tacit and technical role in shaping the flow of finance and the means of landlord power.¹³⁸ Such a perspective inscribes to a shift ‘from norms to practices’¹³⁹ that complements the analysis of the justifiability of norms by tracing the everyday lives of legal provisions in guiding social practice. For tenancy law, this has two implications. First, the assumption of a general power imbalance between landlord and tenant that gave the field its ‘social’ character is too general and should not be assumed to provide an adequate safeguard for tenants in the housing crisis.¹⁴⁰ Second, rather than expanding rules around the protection of private autonomy of tenants as in ‘materialised’ private law,¹⁴¹‘social’ tenancy law today requires safeguards against the commodifying market rationality and the way it enables more subtle forms of landlord domination. Detecting and tracing them will require a bottom-up, often ethnographic analysis of landlord practices and the role of contract in shaping them formally and informally.¹⁴² A ‘transformative tenancy law’ – and similarly the human right to housing¹⁴³ – would need to be reformulated to protect not merely against an individual actor’s power but against a hegemonic and expansive market rationality that structurally ‘corrupts’ the social and need-based meaning of a ‘home’. This offers a straight connection between tenancy law and rules on valuation and decommodification (such as rent caps, ‘socialisation’, property register etc.). ‘Transformative tenancy law’ would hence zoom into ‘where the action is’ and bring to the fore the question of justice in private law, understood as both interpersonal and societal and as being shaped both at the micro and the macro level.