The History of Real Estate II: The Middle Ages

Sep 28, 2021

Although last time we talked about the Roman Empire and the birth of a fledgling real estate industry, the reality is that our real estate industry was not born from the glory and power of Rome, but from the dark bowels of the Middle Ages.

The Dark Ages and the Return to the Basics. 

The sense of ownership is almost as ancient as humanity itself. Since the humans lived in caves we knew how important it was to have a place of our own that would make us feel safe.
Thus, the domain of an area acquired a great sense of value, seen as a symbol of power. In the first civilizations, the possession of the land began to be controlled, becoming the basis of the economic structure.
With Rome, this became the element of citizen power and consequently, the worst punishment that could be imposed was the confiscation of their property and then auction them off.

With the fall of the Roman Empire, the situation in Europe changed drastically. Many cities were abandoned and small rural private estates gave way to large feudal estates. As an example, Rome went from one million inhabitants to less than fifty-thousand and cities like Legio (now Leon) or London lost their entire population.

They’re also changes or paradigm in who owns the land, the nobleman became the owner of most of the lands, which gave him great power. The problem was compounded when these same nobles and high ecclesiastical dignitaries also became owners of most of the urban estates, which greatly impeded the development of the real estate market. But even so, within those impoverished and unsanitary cities, there were lots of lands more valuable than others. The power of a good location was still very much present.

New Cities and New Forms of Business.

The fall of Rome was not a quick process, the Empire took two centuries to cement its own fall. In the same way, the slow but inevitable depopulation of the cities and the change of the previous power structures was also a slow and gradual process. In the cities, where we will focus, the wealth of aristocrats, bourgeoisie and merchants was replaced by the church that managed to stay out of the wars and calamities that ravaged Europe from the 5th century AD until 11 AD. Many people, in order to earn their way to heaven, donated their goods to the church, of course, included their houses and property, making the church control a good part of the property in some cities. At first, due to the depopulation of the cities, the value of these properties was negligible. The Catholic Church could create monasteries, crops and other things in the absence of an incentive to create housing in these places.

Everything begins to change towards the 9th century AD. The cities begin to develop again, and the concept of "Boroughs" appears. Today boroughs refer to a district but in the Middle Ages, it referred to a free city controlled by an economic bourgeoisie. Outside the cities, the land belongs to the nobility, but within these "boroughs" private activity and an incipient real estate industry would begin. And curiously, it would be the Church who would lead the way along with the first banks.

Rebirth, Rebuilt, Rethinking.

It is the 11th century AD, Europe is in a relatively calm situation, commerce has been reborn and with it, life in the cities. William the Conqueror sits on the throne of England, the one he has just conquered. He has replaced all the Saxon nobility with members of his Franco-Norman entourage, but he has a problem, England’s tax system is in chaos, and the war has been expensive. The nobility who run the land has disappeared and they need to fill their coffers. With the previous system, it would not be possible to get money, people pay in kind, or worse, in manual labour. However, in the year 1070 people have started to use the coin again, and William needs to get as much milk from this new Cow called England as he can. The idea is clear, the creation of the Real Estate Tax, The Domesday Book (also known as the Domesday, Doomsday, or Winchester Book). 

King William I needed information about the country he had just conquered, in order to better manage them. In 1085 William had an exhaustive conversation with his advisers and they devised the idea of making every landowner pay for the ownership of the land in relation to what they actually had. One of the main purposes of the registry was to know who owned assets that could pay taxes, so the judgment of the assessors was decisive, since what was recorded in the book (the properties and their value) was the law, and there was no appeal possible. This is huge, but not unique. Other countries had begun to have similar plans, to put property taxes on real estate, but this has an immediate consequence on the population. Overnight, owning a property started to cost money. Before, owning one or two properties didn’t mean a drain on the owner’s pockets, but with a real estate tax, homeowners had two options, sell or rent.

The two largest non-noble property owners were the Catholic Church and the banks and debt houses. If you think that a King is going to have some trouble in collecting tithes from God, you are very wrong. The Catholic Church was forced to pay the same tax, and for this, it had to start renting the houses it owned in the cities. The Catholic Church could not sell these properties but found a lucrative business in renting them, making entire neighbourhoods belong to it. In the case of banks and debtors’ houses, mostly run by Jews, most of the houses had been acquired due to unpaid debts. Although these banks already decided to sell these properties, the new tax and business reality in the cities made real estate speculation one of the most lucrative businesses of the Jewish community in Europe, which was prohibited from doing any manual work or owning land.
Real estate became the base endorsement of all economic adventures in the Mediterranean and the North Sea, and for the Jewish community in Europe, an important power base and shield against the anti-Semitism of the time.

With the birth of this new Real Estate Industry, other things are also born. The houses that used to be made up of a single room, begin to be divided to have more tenants and families, also to grow in size. Industries such as construction, create specialized unions (called “guilds”) in the construction of housing and the property of a house means being able to survive old age with economic means. In the following centuries, we will see how large properties began to decline in favour of small owners, a process that accelerated with the French Revolution and with the liberalism of the 19th century, but all this and our concept of the Real Estate Industry lies here, in the mists of the Middle Ages.

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