An email comes in from Dave Hill (Guardian blogger/journalist): I’ve just discovered your blog and your post about Mayor Johnson’s housing policies and their implications. I’d love to learn more about your work in this area and your conclusions.Regards,Dave Hill; Guardian. http://commentisfree.guardian.co.uk/dave_hill/
Since I just did a short talk on this yesterday at the launch for UEL’s book “London’s Turning: the making of Thames Gateway” I have converted it into text here as a kind of reply to Dave:
International contextA period of rapid capital accumulation, globally, in the last decade;A great deal of money-capital in the hands of investors, desperately looking for profitable outlets;
Authoritarian regimes increasingly dominating the profitable production of goods
In N W Europe profit is being sought in chasing the growth of asset values; increasingly a rentier economy
housing
land and other real estate
retail and service businesses, wireless spectrum
in general: whatever is an ‘under-priced’ asset
fuelled further by low interest rates, de-regulation
1990s complacency that housing problems were ‘solved’ is giving way to an awareness of a crisis
And speculative pursuit of asset values is inherently unstable, as we are now discovering.
UK housing
Investment has been pouring in to housing, property and credit-supply
…but not much of that is going into new production of housing, most into acquisition, chasing up the prices of the stock
= a practical dilemma for management of the economy:
high interest needed to deter credit growth and housing price inflation; but low interest needed for the productive economy. Stability may be unattainable.
= an intellectual dilemma for neo-liberal economics: rising (house) prices do NOT produce the expected surge in output so problem
gets worse, not better
Interpretations of the crisis
Economists’ orthodoxy
markets would equilibrate if permitted to do so
planning is the problem: de-regulate
The alternative view
London’s growth is a poverty machine as well as a wealth machine
the process is a class-relations problem
planning is (an unwitting?) part of mechanism
deal with it through a set of measures aimed at the class-relations directly
(rather an ‘institutional’ view, but more politically explicit)
Pessimistic scenario – for Thames Gateway, but is generally applicable
Continued polarisation of housing conditions
Housebuilding firms don’t keep up with plan and value for money remains poor
Infrastructure costs (physical and social), revenue costs, a burden
Fiscal stress on public bodies; S106 at best pays initial capital costs
Property values grow but mainly to the benefit of landowners, developers and established owner-occupiers
Changes needed
Measures to swing investment away from ‘rentier’ speculation in asset-value growth, to production
through tax changes
through pensions reform
through changing the balance of power between owners, occupiers and lenders
Land policy reforms, learning from Holland, Vienna, Zürich, etc
and from our own C18th, New Town and colonial experience
Optimistic scenario for Thames gateway
Freeholds transferred into development trusts
sharing value-growth through ground-rent reviews
S106 dropped (and PGS)
Infrastructure funding with “English Urban Bonds”
New kinds of development structures, firms
Management of land banks gives way to production skills as source of profit
scope for private developers, RSLs, co-ops
large and small enterprises
Cap on Central London employment growth
diversion of growth to suburban and regional centres and other parts of UK
radial infrastructure more efficiently used, less costly
Conclusion and comment to Dave…1. I can turn this into more accessible prose if you want: you can see that it’s points for a talk s it stands.2. It is wrong SIMPLY to blame banks / lenders / big corporations / developers (as the SWP tends to do) because the process includes all of us who are owner-occupiers or paying mortgages. The so-called ‘housing ladder’ is really a kind of dredger for money: it collects money from tenants and new purchasers and conveys it up to those who have been owners for longer. It’s not an exact analogy but it’s better than the ladder. What I am trying to emphasise is that a lot of different social forrces converge. 3. The problem has become so intractable partly because so many people are now hooked into the process as real or imagined beneficiaries: people who think it’s a good way to save for retirement or to provide for their kids, governments giving subsidies and tax support on the DEMAND side which adds to pressur
e on prices,
4. The article I wrote over a year ago is at
Edwards, M (2008) ‘Structures for development: getting them right’ in London’s Turning. Thames Gateway: prospects and legacies Eds. P. Cohen and M. Rustin. London, Ashgate, 0 7546 7063 5 for chapter see http://eprints.ucl.ac.uk/5016 for book see http://www.ashgate.com/isbn/9780754670636
michael edwards 