This is evidence I am submitting as a personal response to the draft new London Plan. I am also sending it direct to officers in City Hall in the hope that they will do some work on it in time for the hearings of the Examination in Public in the autumn of 2018.
This submission argues that policy D6 Optimising housing density is a dangerous mistake. It would remove all numerical controls or advisory upper limits on the density of new housing schemes and would instead regulate density using a ‘design-led’ approach. Developers would be expected to negotiate with planners in each of the boroughs.
Developers decide how much to bid for a site by residual valuation: estimating the disposal value of whatever they will be permitted to build and deducting their expected costs to reach their sensible bidding limit. The 2 main factors a London housing developer needs to anticipate are the density of the scheme and the percentage of social / ‘affordable’ housing which will be required. If the development plan is clear about both factors and these policies are expected to be enforced then developers will make sensible bids for sites. If the development plan is imprecise or flexible or if the planning authorities are known not to enforce its provisions then developers will tend to bid too much for sites in the expectation that they can recoup their profitability by negotiating relaxations, often citing ‘viability’ constraints. This will encourage land price escalation.
Elsewhere (in the context of affordable housing requirements) the draft Plan accepts the importance of discouraging developers from over-bidding and creating land price rises “based on hope value” (§ 4.6.13) but the same logic is not applied to density controls. This is inconsistent and a great mistake. It will lead to land price escalation and thus to worsening affordability problems in the entire London housing market and for non-profit producers when they buy sites. Upper limits on density should be retained and enforced.
Since the GLA was created in 2000, London Plans have used an innovative approach to controlling housing density for new housing across the city: density should be proportional to public transport accessibility. In this way most new residents are conveniently placed to use public transport and that, in turn, supports better and more frequent services. By contrast, in the areas which are a long walk from public transport or where services are infrequent, only very little new housing should be allowed. Developments in such places are more likely to generate car trips, so the fewer of them we have, the better. The combined effect of increased density (whether driven by policy or by market forces) with lots of other policies and investments, has been that London has managed the miracle of increasing the proportion of trips made by public transport, cycling and walking in this century. It is arguably London’s great achievement.
This very simple idea was embodied in an advisory matrix (a table) in which Public Transport Accessibility Level (PTAL) allows you to read off the range of recommended housing densities. Further refinements were added and the matrix was re-named “sustainable residential quality matrix”.
The market in housing land
With the high and rising prices and high rents of open-market housing in London, the speculative construction of housing has been extremely profitable for developers, whose quest for development sites has often been very competitive. This competition among land buyers tends to drive up the prices paid for land which is disastrous for councils and non-profit housing associations seeking to buy land cheaply to provide social housing, but also makes it harder to require private developers to provide a high proportion of social housing or other social benefits within their schemes (agreements under Section 106). Securing social housing and other social benefits in private developments has become much harder since the financial crisis of 2007/8 when a downturn in disposal prices (a brief downturn, as it turned out) enabled developers to claim that they could no longer afford to make such provisions on the same scale, or at all. They became adept at using confidential ‘viability’ studies to minimise such commitments and the Coalition government of 2010 strengthened their position in new guidance and regulations. The use of ‘viability’ studies has been fully explored by journalists (Turner) and by academic researchers (Colenutt and others 2015; Sayce and others 2016).
In calculating how much they can afford to bid for land, developers work backwards from what they can expect to realise from final sale or letting of the finished homes, deducting their estimated construction and other costs (plus a mark-up called ‘developer’s profit’) to arrive at a ‘residual valuation’ —the maximum it’s worth them paying. If maximum permitted density is specified in the city plan, then developers have clear limits on what they can build and that is therefore a main determinant of land prices. This is one of the key ways in which state action constitutes land markets —by defining precise development rights which can then be traded.
The London Plan density matrix has been very widely breached and ignored, however. That has been clear for years and in 2016 the GLA commissioned a study by an LSE team (Ian Gordon, Alan Mace and Christine Whitehead) which concluded that the matrix probably had very little effect: the densities of actual building projects could mostly —or better— be explained statistically by direct accessibility measures, neighbourhood density and other attributes. [see their report and Chart 3.2 below] The researchers were interested in how to improve forecasts of future built densities and proposed that the matrix be discontinued. They considered that the London Plan should specify minimum permitted densities but that any setting and negotiation of maximum levels should be a matter for the 33 London boroughs whose professional officers and elected politicians would best be able to know what would be accepted in each place.
The LSE study is notable, however, for having paid no attention to the effects of density regulation on land prices, so the consequences for the land market of their proposed de-regulation (or re-regulation) are not considered. On 30th October 2017 Prof Gordon confirmed:
"You’re clearly right that we did not actually assess the difference that specifying upper limits to local densities might have made in moderating land value inflation in London since 2004. And, though I understand little of land/housing economics, I too would assume that expectations that higher densities were likely to be permitted on particular types of site would increase expectations of its value."
If you, the GLA, have a planning policy which is only advisory and is being widely disregarded or over-ridden in actual decisions, there are two ways to go. You could scrap the policy in favour of an explicit devolution of the issue to local policymakers and negotiators. Or you could improve and tighten-up the policy, making it mandatory. My view is that the GLA is wrong to scrap the matrix because it will further encourage speculative land buyers to over-bid for sites, pushing prices up, confident that they can negotiate high enough densities with the boroughs to get their money back.
Case-by-case negotiation between developers and boroughs has already been responsible for squeezing down the level of social housing provided under Section 106. If the regulation of maximum density becomes even more relaxed than it already is, then I’m expecting land prices to be further pushed upwards.
What the GLA should be doing is trying to get much more certainty into the land market by tightening up and enforcing (i) upper density limits (ii) minimum percentages of homes to be let at social rents. (The draft Plan uses the term “affordable”. I regard that term as now bereft of meaning, but that’s not part of this submission.)
Can I prove I’m right? No. It’s based on my understanding of how markets work and is consistent with what practitioners (including many of my ex-students) tell me. It also fits with standard thinking in those countries which have zoning systems where it is a basic rule or axiom that any flexibility or relaxations in density must be strictly codified and only given at a high price —for example the incentive zoning debates in New York. I shall summarise international practice if called to the EiP.
It is significant that the Mayor implicitly accepts that greater certainty will be valuable in the operation of the land market in his new Threshold approach to affordable housing requirements (Policy H6) and explicitly in §4.6.13 where he accepts the importance of discouraging developers from over-bidding and creating land price rises “based on hope value”. However this logic is applied only to affordable housing percentages and only in Opportunity Areas. The same logic ought to apply to upper density limits and throughout London to minimise speculative land price escalation.
Policy D6 should be replaced by a new policy
A revised version of the 2016 density matrix has been proposed by Duncan Bowie in his submission and valuable work was done by GLA and TFL last year to refine the PTAL accessibility measures and take account of bus and train service capacity. The Just Space Community-led Plan proposes that density controls take account of social infrastructure capacity. If a more sophisticated version of the matrix cannot be brought forward in time for for the EiP I would support retention of the 2016 matrix for use in boroughs which have not yet completed acceptable Design Codes (policy H2B(2)) which in turn would have to include transparent density limits.
For the avoidance of doubt
1. Nothing in the density matrix prevents the good design which the draft Plan is so keen to encourage. Indeed it fosters the clustering of denser settlement in pedestrian-friendly configurations where accessibility is best. Architects and other designers can do brilliant work within density limits.
2. This submission is not an argument for any particular level of density.
3. Is this all I have to say about the draft Plan? No, but I am privileged to be able to contribute, along with colleagues and students, to other submissions on wider sets of topics, notably Just Space and the Highbury Group.
4. Biographical detail. Michael Edwards studied economics, then planning at UCL 1964-6. He worked in Nathaniel Lichfield’s practice, doing economic inputs to the Plan for Milton Keynes. He has enjoyed lecturing at the Bartlett School, UCL since 1969, founding and teaching on a Masters programme European Property Development and Planning which was centrally concerned with how planning constitutes and interacts with markets. He has been been involved in all the EiPs on London Plans since 2000, working with the network of community groups JustSpace.org.uk His publications are at michaeledwards.org.uk and he tweets as @michaellondonsf . His 2015 paper on The prospects for housing, rent and land over the next 45 years, commissioned by the Government Office for Science Foresight project on the future of UK cities is at http://bit.ly/1NvjmV7 He is now a semi-retired Honorary Professor at UCL.
References and support
Toby Lloyd at Shelter in his February blog post called for similar changes – not on density but on affordable housing proportions, space standards, viability tests, with good graphics. http://blog.shelter.org.uk/2017/02/time-to-look-again-at-viability
Colenutt, B, A Cochrane and M Field (2015) “The rise and rise of viability assessment” Town and Country Planning 64(10): 453-458
Gordon, I, A Mace and C Whitehead (2016) Defining, Measuring and Implementing Density Standards in London London Plan Density Research Project 1 London, LSE http://eprints.lse.ac.uk/68515
Just Space 2016 Towards a Community-led Plan for London, at Just Space A4 Community-Led London Plan
My correspondence with Ian Gordon is appended, with permission, to an earlier version of this document at https://michaeledwards.org.uk/2017/10/28/dont-dump-density-alarm/
Sayce, S, N Crosby, A Parsa, R Harris and P Garside (2016) Viability and the planning system: the relationship between economic viability testing, land values and affordable housing in London, University of Reading http://centaur.reading.ac.uk/68820/
Turner, George (2018), http://www.ourcity.london/financial-viability-in-planning/
Peter Bill (2018) in Property Week is spot on with a short article Khan’s heartless London Plan is good news for developers “‘Densification’ is the Big Idea. A prescription that will promptly jack up values on the right land.”
Jan 2018: This now includes an email exchange with Prof Ian Gordon at LSE. Later material is BELOW the original post.
Dec 2017: The draft plan is now out and comments are being gathered by Just Space at https://justspace.org.uk/2017/12/12/new-plan-first-impressions/.
Oct 2017: Rumours now abound (October 2017) that the draft London Plan, due out for consultation on 29 November, will have dropped the density matrix. It was being widely ignored and circumvented and some elements in City Hall wanted to scrap it, while others wanted to improve it and enforce it. If the rumours are correct the scrappers have won. That would be disastrous in my judgement, fuelling further rounds of land price escalation. This is the story and the criticism. Please comment and correct errors.
Since the GLA was created in 2000, London Plans have used an innovative approach to controlling housing density for new building across the city: density should be proportional to public transport accessibility. In this way most new residents are conveniently placed to use public transport and that, in turn, supports better and more frequent services. By contrast, in the areas which are a long walk from public transport or where services are infrequent, only very little new housing should be allowed. Developments in such places are more likely to generate car trips, so the fewer of them we have, the better. The combined effect of this density policy with lots of other policies and investments, has been that London has managed the miracle of increasing the proportion of trips made by public transport, cycling and walking in this century.
This very simple idea was embodied in an advisory matrix (a table) in which Public Transport Accessibility Level (PTAL) allows you to read off the range of permitted housing densities. Further refinements were added and the matrix was re-named “sustainable residential quality matrix”.
With the high and rising prices and rents of open-market housing in London, the speculative construction of housing has been extremely profitable for developers, whose quest for development sites has often been very competitive. This competition among land buyers tends to drive up the prices paid for land which is disastrous for councils and non-profit housing associations seeking to buy land cheaply to provide social housing, but also makes it harder to require private developers to provide a high proportion of social housing or other social benefits within their schemes (agreements under Section 106). Securing social housing and other social benefits in private developments has become much harder since the financial crisis of 2007/8 when a downturn in disposal prices (brief, as it turned out) enabled developers to claim that they could no longer afford to make such provisions on the same scale, or at all. They became adept at using confidential ‘viability’ studies to minimise such commitments and the Coalition government of 2010 strengthened their position in new guidance and regulations. The use of ‘viability’ studies has been fully explored by journalists (TBIJ) and by academic researchers (Colenutt and others 2015; Sayce and others 2016).
In calculating how much they can afford to bid for land, developers work backwards from what they can expect to realise from final sale of the finished homes, deducting their estimated construction and other costs (plus a mark-up called ‘developer’s profit’) to arrive at a ‘residual valuation’ —the maximum it’s worth them paying. If maximum permitted density is specified in the city plan, then developers have clear limits on what they can build and that is therefore a main determinant of land prices. This is one of the key ways in which state action constitutes land markets —by defining precise development rights which can then be traded.
The London Plan density matrix has been very widely breached. That has been clear for years and in 2016 the GLA commissioned a study by an LSE team (Ian Gordon, Alan Mace and Christine Whitehead) which concluded that the matrix probably had very little effect: the densities of actual building projects could mostly —and better— be explained statistically by direct accessibility measures, neighbourhood density and other attributes. [see their report and Chart 3.2 below] The researchers were interested in how to improve forecasts of future built densities and proposed that the matrix be discontinued. They considered that the London Plan should specify minimum permitted densities but that any setting and negotiation of maximum levels should be a matter for the 33 London boroughs whose professional officers and elected politicians would best be able to know what would be accepted in each place.
Until we see the draft London Plan at the end of November, and its supporting documents*, we shall not know exactly what the GLA has decided to do, and on what grounds. They may simply have followed the LSE team’s advice or they may have considered other factors.
The LSE study is notable, however, for having paid no attention to the effects of density regulation on land prices so the consequences for the land market of their proposed re-regulation are not considered.
If you have a planning policy which is only advisory and is being widely disregarded or over-ridden in actual decisions, there are two ways to go. You could scrap the policy in favour of an explicit devolution of the issue to local policymakers and negotiators. Or you could improve and tighten-up the policy, making it mandatory. My view is that the GLA is wrong if it has scrapped the matrix because it will further encourage speculative land buyers to over-bid for sites, pushing prices up, confident that they can negotiate high enough densities with the boroughs to get their money back.
Case-by-case negotiation between developers and boroughs has already been responsible for squeezing down the level of social housing provided under Section 106. If the regulation of maximum density becomes even more relaxed than it already is, then I’m expecting land prices to be further pushed upwards.
What the GLA should be doing is trying to get much more certainty into the land market by tightening up and enforcing (i) upper density limits (ii) minimum percentages of homes to be let at social rents.
Can I prove I’m right? No. It’s based on my understanding of how markets work and is consistent with what practitioners (including many of my ex-students) tell me. It also fits with standard thinking in those countries which have zoning systems where it is a basic rule or axiom that any flexibility or relaxations in density must be strictly codified and only given at a high price —for example the incentive zoning debates in New York.
Later – 1 November – Toby Lloyd at Shelter tweets a link to his February blog post calling for similar changes – not on density but on affordable housing proportions, space standards, viability tests, with nice graphics. http://blog.shelter.org.uk/2017/02/time-to-look-again-at-viability
Later – 12 December. The London Plan, now that we have it, does see the dangers of land prices being inflated by ‘hope value’, but only in the specific case of Opportunity Areas: “§4.6.13 In Opportunity Areas, boroughs may want to consider applying a localised affordable housing threshold for the Fast Track Route or fixed affordable housing requirements. This approach could help provide certainty to developers and land owners and help prevent land price rises based on hope value.”
Colenutt, B, A Cochrane and M Field (2015) “The rise and rise of viability assessment” Town and Country Planning 64(10): 453-458
Gordon, I, A Mace and C Whitehead (2016) Defining, Measuring and Implementing Density Standards in London London Plan Density Research Project 1 London, LSE http://eprints.lse.ac.uk/68515
Sayce, S, N Crosby, A Parsa, R Harris and P Garside (2016) Viability and the planning system: the relationship between economic viability testing, land values and affordable housing in London, University of Reading http://centaur.reading.ac.uk/68820/
* The main relevant supporting documents, due out with the draft London Plan, will probably be the Strategic Land Availability Assessment (SHLAA) which uses density forecasts to estimate the housing capacity of the sites it considers will be available and the Strategic Housing Market Assessment (SHMA) which predicts the housing needs of Londoners of various income levels. Both these controversial studies are termed ‘technical’ documents, not ‘policy’ documents so they are not subject to much public scrutiny. Just Space has good commentaries/critiques of them, however. The London Plan itself will appear on the GLA web site with all its associated papers.
Email exchange with Ian Gordon (LSE):
On 30 Oct 2017, at 15:55, Gordon,IR … wrote:
Thanks for the email and the link to your blog.
I’d heard just one echo of this rumour, and would naturally be pleased if the reviewed Plan does, in this respect, turn out to do what we proposed (a very rare occurrence in my experience).
You’re clearly right that we did not actually assess the difference that specifying upper limits to local densities might have made in moderating land value inflation in London since 2004.
And, though I understand little of land/housing economics I too would assume that expectations that higher densities were likely to be permitted on particular types of site would increase expectations of its value.
But, I take it that our inability to find evidence that the formally stated density maxima in successive versions of the Plan made a significant difference to achieved densities (or, it seems, to the effective policy of GLA, in terms of schemes it supported – though we did not look explicitly at this, or how the maxima actually became the norm in practice) means that we would not have found evidence of any significant restraining effect on land valuation from having these formal maxima .
Hence I don’t see reason to believe that removing the maxima would actually remove a real restraint on land price escalation.
(ME) I agree that your analysis and findings haven’t identified any restraining effect from the density maxima in the matrix. Since they were so widely disregarded that’s not surprising. My point is that the alternative of actually enforcing such limits (which has not been tried yet) would be valuable and would have a restraining effect. ONLY an enforced upper limit could be expected to have an effect.
As I see it, the force of the argument for removing this component of the (iconic) density matrix lies in two propositions:
- that it is simply wrong to make explicit statements of policy (and targets for conformity with these) that the relevant policy authorities have no clear expectation of pursuing in practice, with appropriate corrective action being taken when targets are clearly not being met (which has not been the case during the life of the GLA);
(ME) Agreed. GLA Decisions Unit clearly disregarded the policy, as did boroughs. That’s a “put up or shut up” kind of argument and could favour enforcement (with me) or scrapping (with you).
- that there is no good reason why the GLA, rather than boroughs, should determine maximum acceptable densities for specific categories of sites across London. Judgements about (socially) appropriate densities/development form should take account of two kinds of failure from an unguided interaction between market forces and local planners:
- One of these involves omission from consideration of important spatial externalities (across the city/city-region as a whole) particularly in relation to meeting housing needs and to reducing emissions from transport – there is a clear and legitimate role here for the GLA /Mayor here in seeking to raise density norms, particularly in areas with good public transport potential . Specification of minima for different types of situation is an appropriate way of pursuing this;
- The other involves issues of the impacts on the quality of life of particular types of scheme, notably negative effects of over-intensive/tall development, with externality effects that are mostly concentrated within boroughs, and indeed sub-borough areas. As such, it is boroughs (and their electorates) who are the appropriate, legitimate and potentially responsible custodians of those interests – though the density matrix (as transferred into borough plans actually seems to pass that responsibility up to the Mayor). Density measures are a pretty crude indicator of problem potential here, and standards/guidelines for what is not permissible seem best formulated at a local level (maybe worked out among like-minded boroughs), but imposing common statistical standards from City Hall for maximum acceptable densities – even if these were likely to be enforced – is not a good way of securing a better and more politically acceptable mix of schemes.
(ME) That’s not my point. Local people, planners and politicians will certainly be the ones fighting out the local issues of development intensity, over-shadowing, car parking and all the other stuff.
My point is a separate one: that discouraging land price escalation should be a high priority for GLA policy. One way to discourage such escalation is to set a binding (= non-negotiable) upper limit for each part of the city, within which boroughs could make their own micro-local design policies. The plan should do the same for affordable housing percentages. I am not disagreeing with the research you did. I’m simply emphasising an isssue which, as you say, your research did not address.
This would be enforced through the Mayor’s call-in powers over schemes and the Mayor’s oversight of borough plans.
Does that make sense ? Ian
LATER: Ian replies to my red comments (20 December)
I’m perfectly content for you to post this with your (red) responses – and see no point in slugging back on what would be the same lines as in the piece you have (just with added bluntness).
For the record, I do think that intensification is a sensible element in a portfolio of actions to up housing output inside London (as in the OLC and some of the specific elements I believe to be in the Plan), but don’t think super-densification (or some versions of densification) are a good thing. Or crucially that densification has done anything in the short run to boost housing output.
So, in relation to the matrix, the basic points (as you recognise) are that:
- we doubt it’s made any real difference to outcomes reflecting market forces (within an overconstrained regional environment) and the practical ways in which ‘planners’/politicians/Mayors have accommodated/fine tuned these;
- repeating the same prescription, with added moral rearmament will make no difference, in the absence of any influential group seeking to hold the Mayor to account (as the Assembly has conspicuously avoided trying to do);
- it’s a bad/corrupt idea to include policy statements that we know won’t actually guide action;
- that the GLA are an unlikely/inappropriate and clumsy body to be policing the negative quality impacts of bad intensification schemes – and boroughs should be left in a position where their electors hold them responsible for so doing.
Or something like that. In this, as in other ways, I think it’s time for the GLA to stop playing symbolic politics with the Plan.
I shall be arguing this – but it’s not worth repeating it here. So, please do publish my note with your annotations.
All best for a Christmas holiday to charge up your batteries for the rest of the consultation period.
Later (16 January)
My main concern in this field remains the need for more inflexibility in the key planning variables affecting valuation and land price, notably (in London anyway): maximum density and social housing %.
Interestingly at an LSE seminar yesterday James Clark (GLA housing policy) was forthright in asserting that certainty about “affordable” % was important as a way of damping-down land prices and he said that anecdotal evidence already suggested that it was working. But he absolutely refused to apply the same logic to maximum density controls. He said (i) that higher densities are in general always welcome and (ii) there’s not much scope for applying such limits in reality because UK planning allows everything to be traded off against everything else. Well, if this second point is valid for density, why isn’t it also valid for % “affordable”. To me that’s illogical.
Later (26 January) Property Week…
Journalist Peter Bill is spot on with a short article Khan’s heartless London Plan is good news for developers
“‘Densification’ is the Big Idea. A prescription that will promptly jack up values on the right land.”
Guest post by Jamie Gough
originally written in July 2016
The economic consequences of Brexit are dire. But for the left a far more serious problem thrown up by the referendum and the vote to Leave is what it shows about longstanding working class consciousness regarding ‘immigrants’, and how the Leave campaign has shifted working class opinion further to the right. For left strategy this should be the crucial concern. This aspect of Brexit is therefore what I focus on in this note.
In England and Wales the majority of the working class (in the everyday rather than Marxist sense) voted for Brexit. Many Remain voters, of both right and left, have seen this as a sign of a deep, inherent xenophobia and racism amongst British-born working class people, or as evidence of their inability to understand economic questions. I wish to argue, to the contrary, that the white working class Brexit vote was a logical coping strategy in the circumstances, that is, given the political economy of Britain over the last forty years and its present configuration. Correspondingly, the vote was not based in xenophobia and racism as such, though these gave it expression, but rather an opposition to further net immigration because of its perceived impacts on access to jobs, public services and housing. This view, however, blames another section of the world working class and thus removes culpability from capital and capitalism. The left can change this economic view and challenge xenophobia only by leading a struggle based on a different economic strategy, one which opposes capitalist austerity, proposes measures which benefit the majority of the population materially, and which breaks through in practice the mystifications of capitalist value relations.
Explaining popular consciousness requires going beyond a description of dominant ideologies; analysis of discourses in themselves cannot explain their hold on people’s imagination. Rather, we need to see them as part of praxis, the unity of material practice and consciousness. Widespread ideas – ideologies – do not arise simply from discursive interventions; they develop over long periods through lived experience. Thus my focus is on everyday life and its structuring by political economy and class relations.
I use a pragmatist approach to how people choose their behaviour, including its moral aspects: that these are not a simple and direct result of their intrinsic personal interests, but are rather framed within materially-feasible strategies whether personal or collective.
The view that immigration is the problem rather than neoliberal capitalism is, in Marxist terms, based on appearance rather than essence. However, in the Marxist approach, ‘appearance’ is not mere illusion or mystification, but is rather rooted in materially-based social relations. This is a further reason for my emphasis on working class coping strategies.
The vote to leave and its motivations
The majority of the working class in the everyday sense, standard classes C2, D and E, in England and Wales, voted for Brexit. The majority of classes C1, B and A voted to remain. (I will use the term Working Class (capitalised) in the Marxist sense, meaning all those directly or indirectly dependent on wages over their lifetime. This includes the majority of standard classes E to B and some of A.) Classes C2, D and E appear to have voted to leave mainly on three bases.
(i) that ‘immigrants’ are to blame for lack of jobs, poor wages and conditions, inadequate public services and lack of good affordable housing;
(ii) that the state –here represented by the EU– is incapable of ameliorating these conditions and in fact makes them worse;
(iii) a generalised nostalgia for better times.
Below I examine these three motivations in turn. For each I discuss some differentiations and nuances of the motivations, and then analyse their construction. I argue that these views have been produced by forty years of neoliberalism and the failure of social democracy and socialists effectively to challenge it. These working class views, in turn, now support and reinforce neoliberalism. A key question for the left is therefore how to challenge and change these views, the subject of my final section.
(i) Blaming the ‘immigrants’
Opinion polls during the referendum campaign, and vox pop reports such as John Harris’s pieces in The Guardian, strongly suggest that the main reason that working class people voted for Leave was that they believed that this would reduce immigration to Britain and thereby reduce competition for jobs, public services and housing. Three complexities need immediate consideration.
First, the term ‘immigrant’ in this context is a vague and elastic term, a ‘chaotic conception’. Exiting the EU could indeed reduce the number of EU citizens coming to Britain. However, the hostility to these (overwhelmingly white) EU citizens seems, for many, to have spilled over into hostility to black Britons (the vast majority of whom are of course not immigrants from anywhere) and to refugees from the Middle East (as featured in UKIP’s notorious poster, and the Mail and Express’s naming of refugees as ‘European’ migrants). This is evident from the attacks that have taken place since the referendum result, which have been not only on Poles and Rumanians but also on black people and people perceived as ‘Muslims’. The Leave campaign and the vote were articulated not only by xenophobia but also racism.
A second complication is that the vote for Brexit was as strong in localities and regions of Britain with very few EU migrants and black people as it was in those with many. British-born people in the former areas were not faced with local competition from ‘immigrants’. Their votes to Leave, however, can be simply explained if one assumes that they have a national rather than local interpretation of the economy: jobs, public services and housing are short at a national scale because of the millions of immigrants in Briton as a whole. This national view is hardly surprising in an economy which has been highly integrated since the 16th century. We should not lose sight, however, of the hostility to immigrants in areas where there are many EU citizens, such as those working in agriculture and food processing in East Anglia. The slave conditions under which East Europeans are employed there appear to British-born working class people, who have decreasing number of these jobs, as caused by the immigrants. A similar point could be made about the huge Brexit vote in outer east London where there are many recent migrants both white and non-white, as well as many black Britons.
A third complication is that some black working class people voted for Brexit, apparently using the same argument as whites: immigrants are competition. This suggests that the real racism which articulates the view of many whites is underlain by economic competition common to the whole working class irrespective of ‘race’ or nationality. However, the very poorest areas in England and Wales mostly voted Remain, in part because of the vote of BME people.
British working class hostility to immigrants is, of course nothing new. In the 19C many English workers were hostile to Irish immigrants, in the late 19C east London trade unionists were hostile to east European Jewish migrants, and in the 1950s and 1960s immigrants from the Caribbean and south Asia were met with hostility and exclusion. In the last few decades, surveys of British working opinion have consistently shown high levels of hostility to immigration. In the last ten years, this feeling has been ably articulated and exploited by UKIP (Ford and Goodwin, 2014). While UKIP won only one seat in the 2015 general election, it is now the second party in the majority of Labour-held constituencies. It has many local councillors, concentrated in the poorest areas. In these areas UKIP’s rise has been aided by street actions and attacks on Muslims by fascist groups such as the EDL and BNP (Rotherham, close to where I live, is a case in point). The hostility to immigrants underlying the working class Leave vote therefore has a strong historical basis. The referendum campaign and result, however, have reinforced and articulated this sentiment and projected it into national politics with a virulence, which is perhaps unprecedented in British history.
A theoretical starting point for me is a pragmatist view of justice and social practice (Gough, 2010). Most political discourse, including on the left, proceeds on the basis that social actors have ‘interests’, determined more or less by their existing lives, on which their political views and values are based. The task of political parties is then to promise to meet some of those interests – a ‘consumer sovereignty’ view of politics. But ‘interests’ have no meaning outside of a feasible means of achieving them (thus everyone in England might want to live in a pretty cottage in the Lake District, but this is a meaningless interest). So in examining social values and views, we need to look at what feasible strategies are available for people to achieve them. The feasibility of the strategy depends on the social-political situation and the resources and power that different social groups have within it.
Working Class strategies
What are the underpinnings of the competition between workers articulated by nationality and visible difference? Here, we need to step back and consider the most basic relations of capitalist society as such (in all times and places), the position within this society of the Working Class (Lebowitz, 2003), and the consequent strategies available to workers to improve their lot. There are three basic strategies to maintain or improve employment and consumption positions available to Working Class people in fully-capitalist societies (Gough, 2010):-
(a) The liberal and neoliberal strategy
This is to compete with other workers for given jobs, public services and housing. The supply of these things in liberal ideology is determined by market forces which are not susceptible to political influence. This competition is therefore a zero sum game.
Workers’ competitiveness can be developed in two modes, respectively individual and collective:
(1) First, cultivating the competitiveness of the individual worker or their household against all others. This is done by making one’s labour power better for potential or actual employers, through for example working hard, ingratiating oneself with the boss, or through undertaking training. It can be done through an individual’s cash within housing markets or even in accessing better public services. This is the ‘aspirational’ or ‘entrepreneurial’ individual beloved of neoliberal ideology.
(2) A second mode of competition is to compete as a group: to unite with others constructed materially and ideologically as ‘the same’ against groups constructed as the Other; the Other is to be excluded, through essentially political means, from jobs, public services and housing. This divide can be based on gender or age. It can also be based on ethnicity, nationality or ‘race’. The history of capitalism internationally is depressingly replete with examples; indeed, one can say that this type of competition between workers has been and is the rule rather than the exception. This mode of competition is, however, in contradiction to the fundamental wish of capital to have free access to the entire world working class, to render all labour power abstract – abstracted, that is, from social distinctions like gender, age, nationality, ‘race’, ethnicity or religion. The dominant group of workers thus has to use political means, acting against a ‘free’ labour market, to carve out or maintain their privilege: sometimes trade unions controlled by the dominant group (men, whites, etc) imposing discriminatory agreements and practices on employers, sometimes the state (for example immigration controls, or white citizens’ influence over local authority housing or housing markets). In this sense, this strategy is against liberalism and neoliberalism by restricting the ‘free’ labour markets desired by capital. But it also reinforces liberalism and neoliberalism by weakening the solidarity of the Working Class as a whole and consequently its ability to resist capital.
(b) The social democratic strategy
Workers actively collaborate with capital, partly mediated by the state, to construct a more productive economy, better quality public services and a better housing stock. This is pursued partly within workplaces, firms and industries, with workers receiving respect and decent wages and conditions from the employers in return for active commitment to the labour process. The influence of workers here is often, though not always, through trade union representation. It is pursued partly through the state: substantial levels of taxation of capital, and good quality public services which benefit both capital and citizens. The housing market, and property and land markets more generally, are strongly regulated by the state, and forms of cooperative and social housing play a major role. Social democratic parties, whose electoral base is the working class, play an important role in the state. This strategy, in sharp contrast to the liberal ones, involves collective organisations of the Working Class. But these collective organisations do not aim to fight capital, but on the contrary to collaborate with it for shared aims. ‘Efficiency’ and ‘fairness’ go hand in hand.
(c) The socialist strategy
This proceeds through struggle by collectives of workers against capital, and against the state to the extent that it expresses the logic of capital. Better jobs, public services and housing are to be obtained either at the expense of capital, through greater controls over capital, or through public provision. These collectives include trade unions, social movements, residents’ groups, one-issue campaigns and socialist parties. These collectives initially emerge from local associations and local concerns. The latter may adopt sectionalist and exclusionary politics (a2 above). But they may also develop towards increasing inclusion through socially –and spatially– wider practices of cooperation; and if they do, they become more powerful and effective. This class strategy is based on the premise that competition between workers, (a), is a zero sum game. It also notes that social democratic strategy leads to highly uneven benefits to workers (socially, spatially) which are, moreover, vulnerable to capitalist crises whether at the workplace, local, national or global scale.
It might be added, parenthetically, that in the history of capitalism there are two other strategies used by workers to secure their livelihood: migration from Europe to the colonial settler countries; and a strategy of ‘self sufficiency’ of the household or a small community, an anarchist utopia, either on cheap rural land or in cheap housing in the city. But these two strategies obviously offer nothing to the contemporary British working class.
Working Class strategies in Britain since the 1970s
How does this analysis help us to understand the referendum campaign and result, in particular the appeal to so many people of opposing ‘immigration’? Here one needs to consider the period since the 1970s during which neoliberalism has become dominant.
Socialist practice was strong in Britain from the late 1960s until the mid-1980s: trade union and workplace actions, social movements, collective struggles over public services and housing. But since the defeat of the miners’ strike in 1985, these struggles have been much weaker, with the partial exception of ecological struggles. Crucial in this evolution has been the deepening rule of value in the Marxist sense. Workers have accepted wage cuts and job losses because the firm is not making sufficient profits. Public spending cuts have been accepted because the fiscal deficit ‘has to be reduced’ and the public debt ‘has to be paid off’. The invisible nature of surplus value has enabled corporations and the rich to hide their rapidly-increasing wealth, extracted from the working class, and to remove it from states’ taxation. Thus the idea of opposing capital has appeared increasingly unrealistic. In consequence, the ideals of solidarity across the working class have been weakened, and new generations have hardly encountered them.
Mild social democratic government interventions have appeared in partial opposition to neoliberalism, responding to Working Class dissatisfaction and also to contradictions of neoliberalism for capital. Since the 1970s, there have been innumerable local economic interventions of a mild social democratic character. When Major replaced Thatcher after the poll tax revolt and Tory tensions over the EU, he steered slightly to the left during his 1990-7 tenure (Council Tax, ‘community-led and holistic’ urban programmes). The New Labour government of 1997-2010 introduced a large number of social-democratic measures: the minimum wage, Sure Start, area-based poverty programmes, devolution to Scotland and Wales, the English Regional Development Agencies, Regional Spatial Strategies, Local Strategic Partnerships, and neighbourhood empowerment. But these were hobbled by their feeble funding and by their neoliberal integument. Urban programmes were applied in a spatially selective way, so that most poor neighbourhoods got little or nothing. Where neighbourhoods benefitting from urban funding had large BME populations, white people in the same locality sometimes perceived this as favouritism towards BME people, exacerbating racist sentiment (Bradford was a notable example). Devolution to neighbourhoods tended to exacerbate competition within the working class. At any rate, many of these programmes were abolished by the coalition government in 2010. Blair’s promise of ‘stakeholder capitalism’ appeared to offer something to workers, but proved a chimera. The Working Class in recent decades has therefore had little encouragement to rally behind a social democratic strategy.
The decreasing credibility of socialist and social-democratic strategies among the Working Class has left only liberalism. Most people are pragmatic rather than ideological in their approach to economic questions, and liberal strategies have increasingly appeared as the only feasible ones, by elimination of the others. The individualistic approach, a1 above, has appeared feasible for the middle class and some of the upper working class, the ABC1s. But it has held no promise for the rest of the working class. Training, self-advancement and self-promotion are useless in an economy of deskilled, low paid casualised jobs. Public service cuts cannot be got round by going private. House purchase is impossible. Thus the anti-immigrant strategy, a2, becomes the only apparently feasible one for the C2DEs (Worth, 2013). This suggests a reason for the pattern noted earlier, that ABC1s mainly voted Remain while C2DEs mostly voted Leave. Both groups are seeking to compete with other workers for jobs, services and housing; but whereas the ABC1s can aim to compete as individuals, many C2DEs can see no option but to compete by nationality and ‘race’.
To be sure, the economic-political strategies available to Working Class people are not the only cause of working class xenophobia and racism. The media, not only the notoriously rightwing press but also the main TV channels, has for the last 40 years kept up a continuous stream of anti-immigrant, anti-refugee and blatantly racist ‘stories’. In the Sun, Mail and Express these completely dominate coverage of politics (column inches, front pages), with the direct implication that ‘immigrants’ are the dominant cause of people’s problems. This line of propaganda was reprised by the stars of the Leave campaign, with the chorus of the Sun, Mail and Express fortissimo. The impact of this propaganda is not, however, an independent ‘factor’ in creating anti-immigrant sentiment. Messages from the media and politicians are not indifferently and passively absorbed by people; a message is powerful to the extent that it chimes with people’s views based on their own personal and collective strategies. In this case, anti-immigrant propaganda from above had resonance with the strategy of excluding immigrants developed by working class people themselves from their perceptions of the alternatives.
(ii) Working class anti-statism
Opinion polls suggest that the Leave vote was partly based on disillusionment with the state (in which I include all spatial scales of the state), with government, with the politicians and with their acolytes and ‘experts’. The Leave campaign’s slogan, ‘Take back control’, and its attacks on ‘the establishment’ and ‘experts’, can be understood as appealing to this anti-state sentiment. This disillusionment had two notable effects within the referendum debate. First, the EU itself, qua a level of the state, was regarded as either useless or malignant. Secondly, mainstream politicians and functionaries, both British and international (Lagarde, Obama, EU prime ministers et al.) who argued for Remain were simply not believed.
This disillusionment was, like the hostility to immigration, a product of 40 years of neoliberalism. Neoliberalism has had two distinct effects here. First, neoliberal ideologues have consistently preached that the state is an obstacle to prosperity. The state should be reduced not only quantitatively (taxation and spending) but also qualitatively, in regulating, coordinating and guiding. The Leave campaign drew strongly on this ideology, in pointing to the supposed financial costs to Britain of EU membership, the EU’s supposed profligacy, and the EU’s ‘bureaucracy’ (read laws and regulations) which allegedly strangles business with red tape. The Remain campaign was too much itself enmeshed in this anti-state ideology to point out that many EU regulations are beneficial to workers and the environment, or to the benefits of EU regional funds to poor regions in Britain. It presented the benefits of EU membership solely as the single market in goods and services, that is, absence of state regulation of trade.
Secondly, and more importantly, forty years of neoliberalism in Britain have seen both national and local government (and in a minor way, the EU) unable to protect jobs, public services and affordable housing. After decades of such failure, despite endless promises to do the opposite, a reasonable conclusion is that the state is useless for Working Class people (Gough and Eisenschitz, 2006: Ch.5). The chronic broken promises and outright lies of politicians which are required by neoliberal government have added further fuel to this fire. The result is a generalised contempt for the state and its representatives. The EU referendum gave working class people an opportunity to express this contempt.
Interestingly, several recent referenda in Britain concerning local and regional government have demonstrated the same anti-state attitude. The New Labour government held a referendum in the North East of England to set up an elected regional government, something never previously existing in England. Despite the North East being chosen for seeming to have the strongest regional identity and anti-Westminster feeling, the proposal was heavily defeated. Surveys of opinion showed that a major reason was that people didn’t want yet another level of the state, with its attendant expense and bureaucratic meddling. Similarly, most of the referenda in the North and Midlands to set up mayors in cities have been defeated, in contrast to the positive vote in middle-class dominated Bristol.
In short, if the state fails over forty years to protect their living standards then working class people, given the opportunity, will minimise the levels of the state ruling over them. This is a crisis, among other things, of the legitimacy of the state.
(iii) Nostalgia – but for what?
Voting in the referendum was strongly differentiated by age: across the classes, young adults voted to Remain while middle aged and older people voted to Leave. This suggests that motivations were based not only on the current political and economic situation but also on life time experiences. The reaction to the result from many Leavers, ‘we’ve got our country back’, suggests nostalgia for an idealised good society in the past. On the part of older white working class people, this nostalgia seems to focus strongly on a real or fantasised mono-ethnic society and culture. Some white people in localities with a now large BME population express this as ‘no longer feeling I belong here’, feeling excluded by visible expressions of BME cultures (Ford and Goodwin, 2014). This has obviously fed into ‘anti-immigrant’ sentiment.
This nostalgia for a white past needs some analysis, however. The implied historical time period – better times in the postwar boom, deterioration since the 1970s – suggests that the positive feelings about the earlier period may been grounded in its greater prosperity, better public services and far better housing supply: the (imagined) period of mono-culturalism correlates with better economic and social conditions for working class people. The sense of loss of ethnic-cultural homogeneity may then stand in for anger about deterioration of material life, particularly as the former is easily visible whereas the latter is molecular and obscure. Similarly, the nostalgia for a white Britain has a strong element of loss of neighbourhood community. But the latter is largely a product of long term tendencies in social life in capitalism, deepened by neoliberalism with its individualisation of the Working Class, longer hours of waged work for those that have it, and deterioration of public services (for a more nuanced argument, see Gough and Eisenschitz, 2006: Ch 6, sections 1-3). These considerations direct us back to political-economic strategies.
Implications for the left now
The Labour Party, at least since Blair, has had a de facto strategy of substantial immigration to Britain, both of skilled workers (to meet endemic and chronic skills shortages) and of semi-skilled and unskilled labour (to fuel the expanding low wage sector and further reduce wages and conditions in it). The party leadership, aware of working class opposition to immigration, has never spelt out this strategy, and has orchestrated pieces of political theatre to demonstrate that it is keeping out immigrants, especially refugees. Many backbench Labour Party politicians have been more forthright, calling for more barriers to be erected to immigration, at least of non-skilled workers. Even before the referendum result was known, leading Labour politicians were joining in this refrain, and since the referendum this idea has spread on the left.
Many on the left argue that stronger restriction of immigration would have little, or negative, impact on the jobs, services and housing available to working class people. As a short to medium term prediction, I am rather dubious about this; it may be true in some localities and regions, but it is probably not true in others.
Others on the left, including Jeremy Corbyn and the far left groups, argue that freedom of movement of the world’s workers is a right, all the more so at a time when capital (money, productive, commodity) has unprecedented freedom to move between countries. I agree with this argument. Anti-racist campaigns, led by BME people but involving whites wherever possible, are vital: to welcome refugees and migrants, against restrictive immigration laws and procedures, against police racism and deaths in custody, against racial or ethnic discrimination in employment and housing, and against media racism. But my analysis above shows that, unless they are convinced of a socialist economic strategy, many working class people will reject the Open Borders argument. I have argued that the hostility of most working class people to immigration is not primarily based on ideology or discourse, even longstanding imperialist racism or the poisonous propaganda of the Tory press. It has been adopted as a survival strategy by many working class people because socialist militancy, social democratic reforms, and individual aspiration and enterprise have failed to deliver the goods, whereas on the surface of things restriction of immigration promises to deliver. There is no chance now that they will be shifted from this view, and from the clutches of UKIP and the fascists, unless they become convinced that a different political economic strategy is feasible.
An essential task of the left in fighting xenophobia is therefore to develop struggles against austerity and for decent jobs, public services and housing (Worth, 2013). To the extent that even limited victories are won, more people can be convinced that this is a viable strategy for dealing with their problems. In other words, to make a socialist approach of solidarity and collective good hegemonic in the working class, a long period of struggle around concrete material issues will be needed. These struggles can gradually demystify the rule of value: the ‘need’ to reduce the fiscal deficit; the ‘impossibility’ of taxing corporations and the rich; the ‘greater efficiency’ of private firms than the public sector; the imperative of the profit rate and payment of dividends by industrial and commercial firms; and ‘competitiveness’ through absolute surplus value.
As to the anti-state sentiment in the working class, socialist strategy argues for a greater role for the present state: higher taxation of corporations and the rich, expanded public services and social housing, greater regulation of business, public ownership of (at least) utilities, and public investment in green infrastructures and housing. Since all of these are demonstrably beneficial for the Working Class, it is feasible to overcome the anti-statism which neoliberalism has bequeathed.
My argument that anti-immigration and anti-state sentiment is based on working class people’s real experience, and that these reactionary viewpoints can be overcome through class struggle, corresponds to Marx’s view of bourgeois ideology and its critique (Critique of Political Economy; Capital, Vol 1, Ch 1; Geras, 1972; Ollman, 1993). Workers’ view that they need to compete with others to improve their lot, is both illusory and real. Illusory because it cannot substantially and in the long term improve material conditions; real because there are real social processes involved —labour and housing markets, the capitalist labour process, government budgets— which encourage competitive behaviour. Marx’s critique set out to show the deep social relations— exploitation, indefinite capital accumulation, uneven development— underlying these appearances. But he also argued that this critique is academic unless realised in concrete, material class struggles, which can begin to challenge and put in question the fundamental social relations of capitalism (Colletti, 1972).
Colletti, L (1972) Marxism: science or revolution?, in Blackburn, R (ed) Ideology in Social Science, London: Fontana/Collins: 369-377
Ford, R and Goodwin, M (2014) Revolt on the Right: explaining support for the radical right in Britain, London: Routledge
Geras, N (1972) Marx and the critique of political economy, in Blackburn, R (ed) Ideology in Social Science, London: Fontana/Collins: 284-305
Gough, J (2010) Workers’ strategies to secure jobs, their uses of scale, and competing economic moralities: rethinking the ‘geography of justice’, Political Geography 29 (3) 130-9
Gough, J and Eisenschitz, A with McCulloch, A (2006) Spaces of Social Exclusion, Abingdon: Routledge
Lebowitz, M (2003) Beyond Capital: Marx’s political economy of the working class, 2nd edn, Gordonsville: Palgrave Macmillan
Ollman, B (1993) Dialectical Investigations, New York: Routledge
Worth, O (2013) Resistance in the Age of Austerity: nationalism, the failure of the left and the return of God, London: Zed Book
I would like to thank the many friends who have sent me comments on an earlier version of this piece. I would particularly like to thank Rory Rowan, Paul Usherwood and Maureen Roshier for ideas which I have tried to integrate into my argument. JG
This was originally written as a ‘blog post’ but without a blog on which to be posted. It then appeared on a Verso blog with the introduction: In the latest in our series of blog posts which aim to critically analyse the Brexit vote and it’s implications, James Gough, Senior Lecturer in Town and Regional Planning at the University of Sheffield, examines what the racism and xenophobia of parts of the British working class means for contemporary left strategy. [link: Jamie Gough ] A shorter version will be published in the next issue of Capital and Class, in a special symposium on Brexit. Do comment below and/or contact Jamie direct on jamie.gough [at] sheffield.ac.uk I am grateful to him for agreeing to this further dissemination. ME
5 April 2017 I am one of those invited to give evidence at a Scrutiny Committee meeting today, looking into the Council cabinet’s proposals to set up a Haringey Development Vehicle #HDV. [For background, see my previous post and the Council’s web site.]
evidence from Prof Michael Edwards, UCL Bartlett School of Planning, firstname.lastname@example.org [ and later updates at the end ]
My comments are mainly about [some of] the risks and uncertainties which the Council confronts. In this I’m drawing on experience since my first professional job working on the economics of Milton Keynes, through a career of consultancy, research and teaching on the economics of planning and property development. In particular I set up and ran for 15 years a Masters programme on property development and planning, initially with a European scope but now more broadly international. I have also learned a lot from being involved in the King’s Cross development over the last 25 years, and the GLA London Plan process from 2000 onwards. I’m a member of the Highbury expert Group on Housing Supply.
But first I want to make a comment as a resident. I have lived in Seven Sisters Ward for 14 years. I am a regular reader of the Council’s glossy magazine which comes through my letter box and I also get periodic emails from the Council. I have read draft Town and Country Planning documents as they appear and have made representations on some of them. But I have never been aware of, let alone consulted on, the HDV proposal and I think it’s impossible that I would have missed an announcement about it, given my professional interest.
The Council’s Business Case of 2015 was prepared before the EU referendum and before the numerous changes in housing and planning law which were enacted in the Housing and Planning Act 2016 and trailed in the White Paper recently released. As a result of these changes in the economic and political environment the Council’s decisions have to be tested against a much wider range of possible circumstances than must have seemed likely in 2015.
The economy of the UK is very weak, with low investment; what little growth we have being driven by migration and expanding household debt and no clear prospect that we’ll be able to take advantage of a devalued pound to increase our exports. Many of our export sectors in finance, insurance and related professional services are directly threatened by brexit while others – like the university sector, a huge earner of foreign exchange, are threatened by visa restrictions. We share with Greece the decline in real incomes in the last decade.
We thus need to consider the possibility that the UK economy will fail to grow and may contract in the coming decade. Furthermore the effect of inflation of import prices leading to higher interest rates would both impoverish an indebted population and change balance of power within the HDV.
The other contextual factor is related to housing policy: it keeps changing in ways which make it ever harder for councils to resume house-building. That’s one of the reasons why Haringey has proposed the HDV. But it seems quite possible that government will find ways of extending the Right to Buy to Council-owned companies or in other ways inhibit the efforts of London Boroughs to circumvent government policy. Although the Minister has backed off the RtB threat recently we cannot be very confident.
So what are the risks we should be looking at:
- The risks of debt exposure of the HDV. We are told that the Investment Partner (IP) will match the value of the Council’s successive transfers of property with injections of equal amounts of its own equity finance. Then on top of that the HDV will borrow the money to do its developments. Can the HDV borrow through the Public Works Loan Board (at about 2% currently) or would it have to pay open market interest rates of perhaps (7-8%)? I’m not a local government finance professional but I doubt whether a private company would be eligible for PWLB.
In any event (whatever the interest rate) if interest rates then rise, it could indefinitely postpone the moment when Haringey begins to receive 50% of the profits from the venture. (We are told that the Council would receive profits only after all debts are repaid.)
- All the work of managing the HDV and the property portfolio handed over to it on day 1 would be undertaken by the IP (Lend Lease). This would presumably mean that the IP is expected to charge the HDV with its costs, and these costs would undoubtedly include some level of profit to themselves on each task performed. The IP would thus be enjoying steady profits from these operations while the Council would gain no profit share from the HDV until much later, if at all.
- If the government goes ahead with measures which would impose the Right to Buy on sub-market dwellings produced by Council subsidiaries, the HDV could be losing units which it had made such sacrifices to produce.
- The Council’s cash flow under the HDV regime would, at least initially, fall because the rental income from its commercial property portfolio would instead flow to the HDV. The leader of the council in her recent article (extract below), implicitly accepts this prospect, but expects it to be made good by growing income from Business Rates and Council Tax. That may be so, but we ought to be able to see the figures.
- A final risk which I consider should be explored is what happens if and when the IP decides to sell its share. We are assured by the Council Leader that Haringey would have to consent to any such sale. But if economic conditions become very adverse and there are few willing buyers the Council might not have much choice. I raise this point because we have seen examples, especially in Germany, of large portfolios of rented housing falling into the hands of hedge or private-equity funds of the very aggressive kind which then exert intense pressure to raise rents and evict those who cannot pay. Rather less likely, though possible, is that the Council sells its share, or part of it.
I have listed all these risks because they appear to me to be possibilities which should be explored before the scheme is finalised. Perhaps they have been explored. Your committee and the general public at least need detailed reassurances and surely should be able to scrutinise the cash flow projections which correspond to them.
Among the alternatives which should be explored I am not at all happy that the set is wide enough or serious enough.
The “do nothing” strategy Option 1 Base Case gets little attention in the Business Case document. But it could really be the best strategy in current conditions insofar as “regeneration” on current models almost invariably leads to a reduction in social rented housing. (Assembly report PDF) It would, in that event, maximise the Council’s capacity to house those in greatest need including the homeless, while not meeting the Opportunity Area targets for total dwelling numbers.
This would combine well with a more piecemeal approach: developing individual sites or estates as an when it can feasibly be done in the changing economic and policy environment. If political condition improve, for example, the Council would be able to borrow and build in the normal way. If conditions get worse, the Council would at least have battened down the hatches.
There is a lesson from King’s Cross here. Camden negotiated one huge outline planning permission for what is now known as King’s Cross Central (KXC) with one huge S106 agreement alongside it. The local community groups called for the Council to give permissions stage by stage but were defeated. Under intense negotiation the scheme was to have about 41% of affordable housing units of various kinds, with some co-funding from the HCA (from the Labour Government). In the first half of the development this went well. But, after HCA funds for affordable housing were severely cut back by coalition and conservative governments, the developer exercised a clever clause in the S106 agreement which enabled them to reduce the social housing % in the later phases. Camden was tied down to a 2006 contract and had to accept a reduction to about 31%.
Had the permission been split into phases, a fresh negotiation would have taken place for the later phases and, since market values for homes had escalated enormously, it would have been possible to negotiate at least the same level of affordable housing, and probably more.
I tell this story not because there’s a likely parallel in Tottenham, but because it illustrates the dangers of committing an entire long-term programme in one agreement.
Finally we should be looking at 2 other alternatives:
A Development Corporation. London has two already and why don’t we explore how good a third one would be for Haringey? Although there is criticism of the level of community engagement in the 2 existing ones, they are at least governed by accountable bodies, with planning meetings open to the public and fully subject to FOI. They also have the attraction of being able to draw on GLA funds.
Finally the study should explore a majority-owned public-private company, perhaps on the model of the Sociétés d’économie mixte in France, hundreds of which have been operating for decades. The law prescribes that public bodies, taken together, must have a minimum of 51% control, and maximum of 85%. It’s a distinctly lower level of privatisation than the 50% proposed here because the public owner can ultimately break a deadlock in the public interest. The economist Nicholas Falk has also written compellingly on German and Dutch models which we should be learning from: [ Main book with the late Sir Peter Hall 2014 on learning from Europe ]
[ 2014 link ] [ 2017 link ]
Extracts from: Cllr Kober article 19 January 2017 http://www.haringey.gov.uk/news/article-council-leader-cllr-claire-kober-haringey-development-vehicle
That transfer of land constitutes the Council’s 50% equity stake in the development. The private partner then matches that stake with an equal cash equity contribution, cementing the 50/50 nature of the partners’ relationship. The vehicle will then borrow whatever additional funds it needs to pay for development, and do the building work. The proceeds from development are then used first to repay the borrowing, and what’s left over is split 50/50 between the partners. [I was told in today’s meeting that this has since been ‘clarified’: the IP’s equity contribution would not be made in one go, all at the outset, as this text implies, but would be advanced as needed, project by project.]
First of all, I’m determined that council budgets – and the services which depend on them – are protected. The first principle has to be that we are no worse off. Where the council loses rental income from commercial property transferred into the vehicle on day one, we are absolutely clear that the vehicle will make good the difference. As the vehicle’s work goes on, we will very closely manage both our General Fund and Housing Revenue Account, always ensuring that any impact is manageable. In the long run, our costs will be greatly outweighed by the returns from development and the increases in council tax and business rate income.
For further source material see previous blog post.
Later addition, after the meeting.
- A courteous committee which asked a lot of questions. It is amazing how little they have been able to find out about the HDV after a year or so of studying it. How can “scrutiny” be applied to something so inscrutable?
- I was delighted to hear (informally, in a coffee break) that they had interviewed Pete Redman (of Trade Risks, and the Highbury Group). Apparently, while broadly sympathetic to the Cabinet’s ambitions, he had favoured splitting the one huge project up into smaller ones (one of my main points) and had also made strong criticism of the legality or necessity (I’m not sure which) of the level of secrecy in which the negotiations are shrouded.
- They are interested in the continental models and in the experience of other UK Councils. I told them about Janice Morphet’s work on English LHAs and they might want to meet her.
- The other witness this morning was Gail Waldman of the Highgate Society who was extremely knowledgeable about borough affairs and the Local Plan system and policies. She has promised to send me her written submission and I’ll seek her permission to link to it. Very impressive indeed.
Later 12 April 2017 a good blog post by Doug Thorpe of RHN: http://radicalhousingnetwork.org/a-2bn-gamble-with-public-assets
14 Feb + 19 Feb 2017 The municipality where I live, Haringey, is proposing to pass a large proportion of the landed property it owns (we own) to a 50:50 private company. The plan has been brewing without consultation for some years but surfaced recently through an article in the national press by the great Aditya Chakrabortty and a response by the leader of the council, Claire Kober. I was asked to come to a meeting opposing the sell-off yesterday. A big meeting with 200-300 people: anxious and angry tenants, good analysis, diverse class mix and both Labour and Green parties – perhaps others – as well as non-party people. My contribution below.
Video of the meeting, notes from Joe Beswick and other material at GreenN8 | Aditya Chakrabortty article | Claire Kober response | Scrutiny Committee report Jan 2017 | Business Case January 2015 | Statement by David Lammy MP 14 Feb | and I’ll add more stuff as it come to hand.
My 5 minutes:
I’m an economist and planner, and now a semi-retired professor at UCL’s Bartlett School of Planning. My comments draw mainly on my experience in supporting community groups negotiating with developers and councils at King’s Cross over 25 years and on the decade of experience across London in the JustSpace.org.uk network of community groups.
One of the big issues Just Space organisations have been battling ever since the GLA was created is the weakness of the Opportunity Areas policies in London – the policies for the main areas where large scale development is planned. There are 38 such areas and rarely any effective participation by residents or businesses in the formulation or execution of plans. These often emerge as cosy deals between developers, compliant borough councils and the Mayor’s office. The outcomes tend to be deeply inadequate provision of social housing, major displacement of low- and middle-income people living in and around the Opportunity Areas and of industrial and service businesses.
The Upper Lea Valley, within which lies most of Tottenham, is one of these and we can see the democratic deficit powerfully displayed in this HDV proposal, smuggled in with no effective consultation. (I’ve been a Haringey resident for many years, receive regular emails and glossy magazines from the council but heard nothing about the HDV until now. Even in the Borough Local Plan documents which I have plodded through I do not believe there is a reference to the HDV.) It seems that Haringey has learned nothing from the famous Supreme Court judgment against it of October 2014 which ruled that consultation is valid only if these conditions are met:
- Consultation takes place at formative stage
- Sufficient reasons are given, allowing intelligent consideration
- Adequate time is allowed for consideration and response
- Responses are conscientiously taken into account
- “arguable yet discarded options” are set out with the reasons for the choice of preferred option.
The present proposal is in many ways the opposite of what would be sensible. We are in a period of great uncertainty. Planning and housing law changes frequently, governments in the coming decades might be much more to the left – and thus supportive of Council development— or even more to the right and thus finding ways to frustrate even the optimistic aspirations of the HDV. Interest rates could escalate to more ‘normal’ levels, thus further postponing Haringey council’s expectations of their 50% share of profits remaining after all costs are covered and debt repaid.
In these conditions of uncertainty it is rational, surely, to sacrifice as little as possible, preserving freedom of maneuver for better or even worse times to come.
Community organisations at King’s Cross urged Camden to do its deal with Argent phase by phase but the council refused and signed a single agreement for the whole scheme under the laws and policies obtaining in 2006. After the fall of the Labour government and the withdrawal of government subsidy for social housing, Argent were able to exercise a clause in their agreement to lower their social housing percentage. Prices realised in private market sales of flats in the scheme have of course escalated mightily since 2006 so the developer could well have afforded to maintain their original undertakings from their increased profit. But the contract had been signed in 2006 and could not be re-calculated. Argent argued, quite ‘correctly’, that their responsibility to shareholders, including pension funds, obliged them to do their best for profitability.
The rational course now is for Haringey to put the whole scheme on ice and do a grown-up and open public consultation on a variety of options. The consultation must include cash flow forecasts to deal with suspicions that the HDV proposal has Haringey giving up all its assets at the outset and gains no profit share until after the IP has enjoyed years or decades of profitable operations. The options must include:
A “do nothing” scheme in which businesses can continue to operate and tenant households to remain in situ, their homes remaining in the Housing Revenue Account while leaseholders remain under council freeholds. This is “battening down the hatches” hoping for a more benign policy environment to come. Since “estate regeneration” under current practices leads to a reduction in social housing, this could well be the best strategy for maximising social housing (London Assembly Housing Committee report Feb 2015 Fig 2).
Setting up a wholly-owned development company, as Croydon and now Hounslow have done, or one with a clear majority Council control. A tolerably good model for this is the Société d’économie mixte used all over France in which public bodies must have between 51% and 85% ownership and control.
They should also compare these schemes with a Mayoral Development Corporation. Just Space is very critical of the inadequate democracy embodied in the 2 MDCs established so far (at the Olympic Park and Old Oak Common) but they at least have clear public accountability, prepare local plans which are subject to examination in public and have planning committees open to the public – not to mention access to City Hall funding. So compared with today’s HDV proposal they are much more democratic.
Note: Supreme Court endorsed basic requirements in its Moseley case judgement 29 Oct 2014 http://www.bailii.org/uk/cases/UKSC/2014/56.html Commentaries at http://www.out-law.com http://www.bdb-law.co.uk …. R (on the application of Moseley (in substitution of Stirling Deceased)) (AP) (Appellant) v London Borough of Haringey(Respondent)
Added 19 Feb: Close reading of the tory government’s recent Housing White Paper by the eagle eyed Joe Halewood points out that the Right to Buy would be extended to all sub-market rental housing (“affordable” as well as social) and to arms length housing companies as well. He wrote on the day the White Paper came out and again today. He concludes “Hence there is never any chance ever that councils or ALMOs will ever build for social rent and hence all councils will become private landlords.” Do read it.
There are many examples of this government forgetting to implement some of its more ludicrous or controversial ideas but we should assume the worst. And it reinforces my view —above— that “doing nothing” might be the best course of action for Haringey, or at least it merits careful evaluation against various possible futures.
Joe Beswick writes: Your point about profits is interesting. A couple of things strike me.
This post, which will be written over some days or weeks, is my notes as I read A City for All Londoners, published in late October 2016 as the Mayor of London’s first airing of the policies and approaches he has in mind as the basis for the new London Plan, a draft of which is expected in the autumn of 2017. Previous mayors, so far as I recall, have called their equivalents ‘Towards a London Plan’.
What I write here is personal, not the views of Just Space, nor of UCL, nor of the Queen of England. In the back of my mind as I read are the Community-led Plan for London documents which Just Space has been working on for 18 months and in which I have played a small supporting role, mainly on economy.
The first comment I have is on the format. There are no printed copies available, I gather, so everyone must use the PDF. The version the GLA posted was over-designed and terribly unfit for purpose. At first sight it looked like a layout for a 96 page saddle-stitched A5 booklet. But the PDF was compiled so it prints 2-up on landscape A4 and it’s tricky to print so the pages are all the right way up. How many low- and middle-income and/or elderly Londoners have the skill and equipment to print things like this or could pay to get it done on the high street or at the library?
Many will want to (or have to) read it on screen, and for that it was deeply unsuitable, mainly because the text is in narrow columns, between 2 and 4 to a page. One has to scroll up and down, left to right to read it: impossibly burdensome, especially on a phone. Nobody seems to have been thinking and I wrote to GLA asking them for a user-friendly version. Meanwhile here is a smaller version which is better for scrolling on devices. city_for_all_londoners_small though the resolution is bad on the maps. Success: within a couple of days Ben Johnson, the mayor’s advisor on Digital matters replied to say that the team had replaced the bad PDF with a better one. The new one scrolls in the same simple way as our version and his high resolution images (though the page numbers no longer correspond). Congratulations to them for listening. And they say they are giving thought to improving the accessibility of documents in future, especially consultation documents.
My wry friend Robin, when we first looked at it, came to a page with a map and said “Oh look, no photo of the mayor.” He was spot on: this plan has something like 20 photos of the mayor. That must a world class achievement. A professor I know carefully deleted all these pictures of the mayor to conserve his ink cartridges: it’s not just the poor who economise.
The mayor’s foreword is warm and personal, emphasising his fear that young Londoners today are being deprived of the opportunities he had. The strains of growth are referred to, but the growth itself is unquestioned.
The summary and structure are simple and make clear the thrust. First comes Accommodating Growth. No questioning the desirability or the character of growth, or the ambition to fit as much as possible of it within London – a slight shift from previous mayors who pretended it could all be fitted in. Housing is, as usual, treated just as a supply problem (not enough have been built, and so on) without any reference to how demand got so out of hand, so inflated, so unequal. Nothing about the haemorrhaging of the social housing stock and no attempt to qualify his use of the word ‘affordable’. No mention at all of private renting or of cuts and caps to benefits. Depressing. The economy paragraph does at least refer to brexit but it sees success as though economics were an olympic sport where London is defending its gold medal: making London as attractive as possible to the imagined global players, calling for an immigration system fostering access to talent and so on. There is a slightly surprising new (to me) strand of idiocy: that we need to protect our environment and our world class culture so that people and businesses around the world… A sentence about ensuring that everyone benefits and finally “I will also promote economic activity across London, day and night, and take account of the particular needs of small businesses operating in the capital.” We have clearly had no impact whatever: ‘across London’ reads to me like softening-up the reader for a throughly centralising plan in which suburban employment will continue to shrivel. And note that small businesses just have ‘needs’, no potentialities.
A portmanteau paragraph called environment, transport and public space then says nothing tangible though it does set a target for London to become zero-carbon by 2050. I must check whether that is significant, and whether it includes aviation. Nothing on reducing the need to travel. The final section of the summary returns to the overall title: a city for all Londoners and to me it seems excellent and relatively heartfelt. I just quote (most of) it: ‘For the city to be successful, Londoners in all their diversity must live well together. Social integration is a broad but vital concept – it means addressing inequalities, tackling disadvantage and discrimination and promoting full participation in the life of our city. It means considering how people from BAME, disabled, or LGBT+ communities, as well as women and young people from low-income families, are disproportionately affected by all issues in London – and making sure that in every area of policy, they are given the resources they need to make London a more equal city. Social integration relies on an affordable, accessible transport system, measures to improve health and reduce health inequality, and ensuring that the city’s amazing culture continues to thrive and unite us.…’
Nothing in this summary about democratic process except that that final paragraph on inequalities does have ‘…promoting full participation in the life of our city.’ [I’ll reflect and add more comments on that later. There are contradictory signs about City Hall’s attitudes to public participation this time round.]
There remains the unspoken issue of scope. The London Plan should deal comprehensively with the city but has always been blinkered by the fact that it has significance under the Town and Country Planning acts as part of the Development Plan and this has perhaps been a reason or a pretext for limiting it to land use and related transport issues, even though it is supposed to be embody the spatial integration of all the mayor’s strategies. (Check that wording). Thus the plan has nothing about the fiscal constraints on GLA activity or about the appalling and vindictive cuts which have been imposed by the Tories in national government on Labour Boroughs. It has nothing about health services despite the under-funding, privatisation and re-structuring being inflicted on them, nor about education or social security. The City Hall defence would be that health, social security and education are not competences of the GLA but that should not prevent their treatment in the analysis and the plan as essential to understanding the social and economic dynamics of the city (not to mention some severe coordination failures which flow from their omission).
Digression: the launch event
Some of us got seats (or just smuggled ourselves in) to the launch event this morning 31 October. There is quite a lot on Twitter #allLondoners, much of it from @Justspace7 but some from other people. A very middle-aged and mainly white crowd in the room.
The GLA fielded a powerful panel: John Lett + deputy mayors + Benson from Housing and others. The overall impact on me was that this is a slightly more encouraging apple pie than the apple pies of previous mayors but that everything depends on the detail of exactly how it is elaborated and implemented. All of the ideas and proposals, I think, were evident in officers’ discourse before the mayoral election, and many were embodied in the very undemocratic 2014 document London Infrastructure Plan 2050. If the new mayor has any hand in the new document it is a matter of emphasis: some modest proposals for private rentals and an aspiration for 50% affordable housing (though with much of it not in fact affordable to most Londoners). Pat Turnbull of London Tenants Federation and Just Space made the most powerful intervention from the floor, asking where were London’s working classes who had to make the greatest sacrifices —loss of their estates, displacement, seizure of their estate green space— to enable housing to be built which they could never afford to occupy. Applause. Richard Lee asked for audio and transcripts to be placed on the web site & was told that there would be written records of the workshops and launch (though probably not transcripts) but that audio would be given consideration…). Strong sense that ‘consultation’ is mainly by invitation. Delighted that the slides shown at the launch were made available the same day. I did, after the meeting, extract from Ben Johnson (advisor on business and digital policy) an undertaking to try and get a user-friendly PDF. End of digression.
Now to start reading the main sections…
Starts by outlining population and household growth and the (unquestioned) need to accommodate it. There is a sentence in the first paragraph on the incursions that makes on the rest of the city’s land: “…As well as housing, it is also crucial to sustain and promote economic growth by making the right decisions about places of work. Land is in high demand for many other competing priorities, such as green space and infrastructure of all kinds.…” but still it is couched in terms of growth. It’s good to see it there but the devil is in the detail.
The discussion of land and floorspace for employment (I’d prefer to call it non-residential activity so it’s clear that it covers education, health, libraries and so on – but that sounds pompous) starts with central London —the Central Activities Zone CAZ— where the mayor plans to resist change of use from office to residential “…unless this can be justified…” and facilitate inward commuting.
In the rest of London the mayor says “Across the city, I will make provision for industrial and retail activity, and I will promote viable strategic locations for office space, including in Outer London.” This paragraph goes on with the assumption that fostering “regeneration” is an aim. A few comments on all this:
The text is trapped by some dead or dangerous categories: “office”, “retail”, “industrial” and “strategic”. First of all the range of activities which goes on is now really hard to force into the categories of land use classes. Vehicle repair takes place in all manner of premises; delivery/distribution of goods involves huge purpose-built sheds through smaller industrial estate buildings, retail ‘parks’ to tiny depôts, pickups and drop-boxes in shops, stations, petrol stations and so on. While the vehicle movements associated with all this distribution activity do seem to be alarming TfL, there is no sign that the premises dimension is getting any attention, nor that the pollution and congestion aspects are being examined. There is more to the economy and society than the property investors’ and planners’ categories of office, industrial and retail. The best passage in this text is the bit on cultural activities (“cultural capital’) where the full range of locations is reviewed. But the same could and should be done for the rest of the economy and that’s what’s missing. No sign here of the JustSpace discussions with GLA Economics about what they should be doing in their Evidence Base.
One of the fallacies embedded in London planning is that only very big things can be regarded as ‘strategic‘ and thus merit the GLA’s attention and policy: big industrial areas, big shopping centres. In fact major changes in the structure of London are the cumulative outcome of thousands of small changes, extinguishing services and jobs in high streets and behind them. This is what has led JustSpace to call for careful studies of these local economies.
We really do have to push for the GLA to start from the economy we have, paying as much attention to the non-sexy 50% of jobs outside the main centres and high-value sectors. They don’t seem to realise that the extinction of that activity makes a negative contribution to growth while improvements in pay, productivity and output there is just as much a contribution to growth as more jobs in finance and business services.
This chapter on conflicting demands for land breaks out inexplicably into a section on transport. It says “To manage this demand, I will look at introducing innovative methods, including using road space for different purposes at different times of the day, shifting lorry consolidation centres closer to the River Thames or the rail network, and encouraging more business deliveries by bike.” This all sounds decent, though the shifting of “lorry consolidation centres…” sounds half-baked, or perhaps a poor summary. perhaps it mean break-of-bulk rather than consolidation. Rail and river (and canals) are indeed good ways of bringing in heavy and bulky stuff, saving very large amounts of truck traffic. So thats good to see, but it means protecting wharves beside the water and keeping some railway sidings free of housing developments and that’s what we have to watch out for in the Plan, when it comes. Still nothing about reducing the need to travel by bringing homes and destinations closer to each other, fostering local services or realising the concept of ‘lifetime neighbourhoods’. [That was the only good idea to enter London Planning in the Johnson period and has now disappeared from the text.]