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analysis of urban trends, culture, theory, policy, action

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Speculating on London's housing future

Joe Beswick, Georgia Alexandri, Michael Byrne, Sònia Vives-Miró, Desiree


Fields, Stuart Hodkinson & Michael Janoschka

To cite this article: Joe Beswick, Georgia Alexandri, Michael Byrne, Sònia Vives-Miró, Desiree
Fields, Stuart Hodkinson & Michael Janoschka (2016) Speculating on London's housing future,
City, 20:2, 321-341, DOI: 10.1080/13604813.2016.1145946

To link to this article: http://dx.doi.org/10.1080/13604813.2016.1145946

Published online: 06 Apr 2016.

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CITY, 2016
VOL. 20, NO. 2, 321 –341, http://dx.doi.org/10.1080/13604813.2016.1145946

Speculating on London’s
housing future
The rise of global corporate landlords in
‘post-crisis’ urban landscapes

Joe Beswick, Georgia Alexandri, Michael Byrne,


Sònia Vives-Miró, Desiree Fields, Stuart Hodkinson and
Michael Janoschka
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London’s housing crisis is rooted in a neo-liberal urban project to recommodify and finan-
cialise housing and land in a global city. But where exactly is the crisis heading? What future
is being prepared for London’s urban dwellers? How can we learn from other country and
city contexts to usefully speculate about London’s housing future? In this paper, we bring
together recent evidence and insights from the rise of what we call ‘global corporate land-
lords’ (GCLs) in ‘post-crisis’ urban landscapes in North America and Europe to argue that
London’s housing crisis—and the policies and processes impelling and intervening in it—
could represent a key moment in shaping the city’s long-term housing future. We trace
the variegated ways in which private equity firms and institutional investors have exploited
distressed housing markets and the new profitable opportunities created by states and supra-
national bodies in coming to the rescue of capitalism in the USA, Spain, Ireland and Greece
in response to the global financial crisis of 2007 – 2008. We then apply that analysis to emer-
ging developments in the political economy of London’s housing system, arguing that despite
having a very low presence in the London residential property market and facing major
entry barriers, GCLs are starting to position themselves in preparation for potential entry
points such as the new privatisation threat to public and social rented housing.

Key words: private equity, housing crisis, dispossession, global corporate landlords, London

Introduction is dominated by evidence and platitudes


over rising property prices and plunging

A
s this Special Feature makes clear, affordability, and for good reason: London
London, more than anywhere else in is now the unrivalled king of the global prop-
the UK, is experiencing an acute, per- erty league for the super-rich, with prime
vasive and socially explosive housing crisis so property values rising faster than any major
severe and polarising that it has become the city in the last decade (Knight Frank 2015).
city’s number one political issue. The crisis Ordinary Londoners meanwhile wilt under

# 2016 Informa UK Limited, trading as Taylor & Francis Group


322 CITY VOL. 20, NO. 2

average house prices of £500,000 (in October suddenness and severity of the global finan-
2015)—more than double the country cial crisis conjured illusions that the neo-
average (Land Registry 2015)—and by far liberal game was up, in reality, the co-consti-
the highest average private sector rents in tutive relationship between finance and urban
the UK (Anderson 2015), with landlords space so central to neo-liberalisation has con-
increasingly empowered to choose their tinued to develop with new asset classes
tenants and a growing willingness to engage emerging and new financial and investment
them in rental price bidding wars (Lunn strategies being pursued. This paper focuses
2014). No wonder evictions and homeless- on one such post-crisis development—the
ness are on the rise. The London housing vulture-like move by private equity firms
crisis does not stand uncontested from and other institutional investors to accumu-
below and is generating an embryonic late wealth from the dispossession experi-
‘urban social movement’ (Castells 1983) enced by millions of people through
pushing at the political space opened up by foreclosures (repossessions) of distressed
the recent election as Labour Party Leader residential real estate and mortgages. These
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of a leading anti-privatisation voice in the corporate vultures precisely target crisis con-
shape of Jeremy Corbyn. But with the crisis texts, exploiting household precarity, home
worsening all the time, looming around the loss, state programmes to recapitalise banks
corner is a palpable sense that once the Con- through buying up and selling on toxic
servative Government’s current Housing and debts and assets, and the wider structural
Planning Bill (House of Commons 2016) reverse from home ownership to renting
becomes law, its intended radical assault on that was kick-started by the global financial
the remaining public housing stock and the crisis.
security of tenure and affordability it once This paper tracks the rise of GCLs in four
guaranteed will accelerate the class cleansing of the worst-hit national housing markets
of London begun under the Coalition Gov- during the 2007 – 2008 financial crisis—the
ernment (2010 – 15) (Hodkinson and USA, Spain, Ireland and Greece—and exam-
Robbins 2013). ines what this might tell us about the possible
If this is the today and tomorrow of the future trajectory of the London housing
London housing crisis that authors elsewhere system. A first section draws out what we
in this Special Feature examine, our focus call the ‘Blackstone Connection’ between
here is on its longer-term repercussions. our four post-crisis urban contexts, showing
Drawing speculatively on the initial findings how GCLs like Blackstone—one of the
of an ongoing international research project world’s largest private equity firms—are
investigating the growing transnationalisa- taking over and profiting in these landscapes.
tion of housing systems,1 this paper suggests We then analyse the finance-led real estate
that the rise of private equity firms as boom and bust in the countries mentioned
nascent ‘global corporate landlords’ (GCLs) above, subsequent state action to restore
in the ‘post-crisis’ urban landscapes across this mode of accumulation and the nature of
the USA, Spain, Ireland and Greece might the re-emerging real estate –finance link
be a harbinger of London’s housing future. with respect to the fundamental aspects of
By post-crisis we are referring not to the GCLs’ role in the restructuring of the post-
definitive end of crisis but rather to the crisis housing markets. The analysis is built
immediate aftermath of the extreme struc- on a comparative methodology that traces
tural conditions and uncertainties that similar trends and processes over the boom,
characterised the dramatic crisis events of bust and post-crisis periods in each national
2007 – 2008 and which can now be seen as housing system using both official data and
facilitating new rounds of ‘accumulation by an interpretative account of how state pol-
dispossession’ (Harvey 2003). While the icies, regulatory structures and investor
BESWICK ET AL .: SPECULATING ON LONDON’S HOUSING FUTURE 323

activities are transforming and reorganising that 25% of its housing in any city is afford-
the relationship between finance and urban able to people on low incomes (Right to the
space. We then apply that analysis to emer- City Alliance 2015). But Blackstone has also
ging developments in the political economy become a symbolic nemesis for housing cam-
of London’s housing system, arguing that paigners, an example of how the ongoing
despite the present (low) exposure of decline in home ownership rates, constrained
London residential property to GCLs and mortgage credit and a post-crisis surge in
major entry barriers, the picture is beginning rental demand are enabling global investment
to change in ways analogous to these other companies to become private landlords with
countries, reinforced by the concerted unprecedented power over their tenants,
efforts of the state and a league of real who have in turn faced the loss of rent subsi-
estate – financial complex intermediaries to dies, unwarranted eviction notices, and exor-
rapidly make markets, and create new asset bitant rent increases and additional charges
classes. While acknowledging that none of (Call, Powell, and Heck 2014; Dowsett
the comparators represent cases directly ana- 2014; Garcia 2015; Ingliss 2015; Van der
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logous to London, and that we are employing Voo 2015). Facilitated by enabling states
highly variegated and diverse national and and available private finance, GCLs like
urban contexts to comment on a single city, Blackstone are targeting severely underva-
we nevertheless discern clear lessons for lued property markets, where large-scale
London from a comparative analysis of acquisition of (distressed) residential
these national case studies. We conclude by assets—ideally high volume portfolio pur-
arguing that a key task for activism in pre- chases—can be executed rapidly, before the
venting London’s housing crisis from becom- housing market ‘normalises’. The devaluation
ing a future corporate dystopia is to block off of the targeted housing markets, the potential
the main entry point to global corporate for impressive capital gains later and the
landlordism in London, namely, the current opportunity to use residential assets as the
government’s privatisation assault on public basis for financial instruments means they
and social rented housing. offer a formidable income yield. Or, as Black-
stone CEO Steve Schwarzman stated in 2010
describing his firm’s strategy in post-crisis
The Blackstone Connection: the rise of the Europe as ‘basically waiting to see how
global corporate landlord beaten up people’s psyches get, and where
they’re willing to sell assets . . . You want to
On 14 October 2015, housing activists in the wait until there’s really blood in the streets’
USA and Spain organised the third global day (Irish Independent 2014).
of action against Blackstone under the banner While all kinds of investors have waded
‘#StopBlackstone Our Homes Are not a into the distressed real estate market, the
Commodity’. The campaign’s international entry of institutional investors, and specifi-
focus on Blackstone follows the firm’s cally private equity firms like Blackstone,
recently acquired status as the largest single deserves special attention by those organising
owner of repossessed homes and non-per- for a more just housing system. Private equity
forming mortgage loans in the USA and firms raise capital from large institutions such
Spain, respectively, making it arguably the as pension funds and insurance companies to
leading global corporate residential landlord. leverage further loans from banks and capital
Blackstone’s poor treatment of its tenants and markets in order to pursue investments. One
its market-leading position have fuelled a strategy is opportunistic investments in high-
growing movement to demand it stop risk/high-return markets. In an era marked
buying occupied, foreclosed and subsidised by high liquidity and low yields, private
(public or social) housing, as well as ensure equity strategies attract institutions seeking
324 CITY VOL. 20, NO. 2

to garner larger returns for their clients, for accumulated large property portfolios: Black-
example, pension holders (on these dynamics stone’s rental subsidiary Invitation Homes
in the lead up to the global financial crisis, see controls about 50,000 rentals, followed by
Acharya, Franks, and Servaes 2007; Creswell American Homes 4 Rent’s 38,000 homes
2008). As its name indicates, private equity is and Colony Starwood Homes’ 30,000
not publicly offered, making its funds and (Gopal and Perlberg 2015). Despite control-
actors far more opaque than publicly listed ling a small share of the market overall
ventures. The combination of light-touch (about 1% of the nation’s 15 million detached
regulation and low transparency can make rental homes, cf. Zandi and Lafakis 2015), tar-
private equity firms far less accountable to geted acquisitions by institutional investor-
both investors and people on the ground, landlords have profoundly impacted Sun
such as tenants. This is of particular concern Belt markets, including Phoenix, Atlanta
in the case of distressed/opportunistic and Tampa. Investors have also been entering
private equity strategies, which by nature the market for distressed real estate assets in
are high risk, frequently short term and Spain, taking control of large amounts of
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often associated with loading assets with land and housing, primarily in the urban
unsustainable debt (Creswell 2008; Fields centres of Madrid and Barcelona (Mendez
and Uffer 2014). Institutional investors also and Pellicer 2013; Baker 2014). As in the
have an edge over smaller actors: they can USA, Blackstone appears to be the dominant
buy in very high volumes thanks to credit player, undertaking extensive and varied pur-
facilities from major retail and investment chases. The firm edged out competitors like
banks and equity financing from public Goldman Sachs, Oaktree Capital Group,
pension funds (Perlberg and Gittelsohn Apollo Global Management and Lone Star
2013; Burns 2015). In-house expertise allows Funds in a bidding war for the entire
them to analyse markets, target purchases defaulted mortgage portfolio (consisting of
and engage in financial engineering to maxi- 94,000 loans) of failed bank CatalunyaCaixa
mise returns. The volume of repossessed (at a 40% discount, paying only E3.6 billion
homes and distressed mortgages consolidated for a portfolio valued at E6.5 billion). It has
under the ownership of banks and asset man- also purchased close to 4000 units of
agement companies (AMCs) represents a new housing directly (much of it state-subsidised),
canvas for institutional actors to capture and a portfolio of 29 completed residential
financial rents, for example, issuing rent- developments and vacant land for construc-
backed financial instruments or repackaging tion. In Ireland, similar to Spain, state-led
distressed loans into bonds. The result is the deleveraging institutions have acted as
centralisation of housing ownership under ‘market makers’ for institutional actors,
the control of global investment companies, selling almost exclusively to US private
who are tying residents into capital markets equity firms and hedge funds, including
even after the mortgage relation has been Blackstone, Colony Capital, Lone Star
severed. Capital and Oaktree Capital (Cushman and
The institutional investor-as-landlord Wakefield 2015). So far the surge of foreign
model is the most developed in the USA, investment capital has primarily been
where private equity firms started buying directed into Ireland’s commercial real estate
up and renting out repossessed detached market with debt sales in 2014 amounting to
(single-family) homes as early as 2008 E21 billion suggesting an enormous quantity
(Brennan 2013). In 2012, some of the of transactions (Goodbody 2015). Some of
world’s largest real estate private equity the investment-grade assets being purchased
firms, including Blackstone and Colony in Ireland are development land, which
Capital, followed early entrants like Way- firms plan to develop as rental housing
point into the market. They rapidly (Byrne 2015a). In Greece too, firms are
BESWICK ET AL .: SPECULATING ON LONDON’S HOUSING FUTURE 325

attracted to distressed commercial loans, as trade investments in property on global


well as absorbing Greek companies, or con- markets in the form of securities, derivatives
trolling Greek banks. In Athens, Blackstone and loan portfolios (Weber 2002; Gotham
part-owns a real estate developer building a 2006) combined with the neo-liberal state’s
resort on the site of the former airport and marketisation mission that removed borders
also owns a former factory site where it to capital mobility, withdrew from playing
wants to build a shopping mall. Oaktree a strong direct or regulatory role in providing
Capital, Dolphin Capital and Goldman social and physical infrastructure (including
Sachs have also been active in buying up com- public housing) and incentivised owner occu-
panies, public land and development sites pancy by expanding access to mortgage credit
(Hadjimichalis 2014; Vourekas 2014). (López and Rodrı́guez 2010). The outcome
Having introduced the basic concept of was to facilitate finance capital’s penetration
the ‘global corporate landlord’ model throughout society through household
through the connecting activities of Black- indebtedness and intensify the finance – real
stone in the post-crisis urban contexts of estate relation, exacerbating capitalism’s
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the USA, Spain, Ireland and Greece, we fault lines through cycles of speculation-
now offer a more considered comparative fuelled crisis that reached unprecedented
analysis of how the crisis of neo-liberal levels in 2007– 2008 and hit our four
urban financialisation and subsequent state country cases especially hard.
action to resuscitate capitalism in these The importance of expanding home own-
four very different countries has opened ership to ever wider sections of society was
the door to GCLs. a central feature of political life in the USA,
Spain, Ireland and Greece from the early
1990s. As home ownership grew, historically
Preparing the ground for vulture capital: low interest rates attracted flows of capital
the crisis of urban financialisation in the into the real estate sector due to its promise
USA, Spain, Ireland and Greece of high returns and its reputation as a stable
asset class. Economic policies provided tax
The sudden rise of GCLs in North America incentives for promoting home ownership
and Europe outlined in the previous section and property development, while planning
may appear as a spontaneous post-crisis amendments by pro-growth planning
development but it was strongly presaged in regimes in Ireland, Spain and Greece liber-
the process of neo-liberalisation itself that ated land for further construction. The
has driven the growing interdependence global credit boom made both consumer
between urbanisation and financialisation and commercial mortgages widely and
over the past 40 years. Finance capital has of easily available; even households with inse-
course always played a central role in (re)de- cure and low-paid jobs could access mortgage
veloping urban infrastructures necessary for debt from so-called sub-prime lenders,
the reproduction and expansion of capitalist helping to fuel the real estate bubble. It was
relations (Harvey 1982; Moreno 2014). But during this period that the transformation of
neo-liberalisation transformed the built housing from a physical commodity into a
environment itself into a mechanism for financial asset could be observed, either
value capture by finance as a mode of through securitisation (primarily in the
accumulation (Weber 2002; Newman 2009). USA, but to some extent also in Spain) or
This integration of finance and urban space the growing interrelationship between local
in turn rendered real estate increasingly real estate and global circuits of capital (pri-
‘liquid’, that is, converted it into a tradeable marily the Irish and Spanish cases), with
income-yielding asset (Coakley 1994; Guir- ensuing market volatility (especially Spain
onnet and Halbert 2014). This ability to and Greece). The financialisation of housing
326 CITY VOL. 20, NO. 2

generated vast increases in house prices

53% average decrease no tipping


11.1 units per 1000 inhabitants

increase predicted for 2016


everywhere from 1997 to 2008—doubling in

173% (nominal), 103% (real)

14,000 in 2014 –15; huge

1.6% drop (to 74%, 2014)


the USA, Spain and Greece and tripling in
Ireland (see Table 1).

Greece
This financialisation of housing in each
national context was built on a fundamental

point in sight
contradiction with circuits of capital increas-
ingly organised around investment and

75.6%
trading in mortgage debt and derivative pro-
ducts, which depended on rising asset prices
and increasing numbers of people taking on

49.5% average decrease (tipping


18.0 units per 1000 inhabitants
higher levels of personal debt to access

Negligible; 15% (100,000) of


294% (nominal), 187% (real)

8.2% drop (to 69.9%, 2013)


housing. In the USA, as securitisation came

point: January 2013)


mortgages in arrears
to dominate the mortgage market, mortgages

Ireland
themselves became the raw materials for
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globally traded financial instruments


(Newman 2009), ending up as ‘collateralised
debt obligations’ (CDOs) in the books of

78.1%
European banks, distributing the risk
throughout the system (Aalbers 2008). As
US house prices stalled after 2006, sub- 17.7 units per 1000 inhabitants

375,000 since 2008 (nearly 7%

43% average decrease (tipping


203% (nominal), 118% (real)

2.9% drop (to 77.7%, 2013)


prime borrowers began defaulting in higher
numbers, foreclosures increased and the

point: March 2014)


financial instruments crafted from these

of all mortgages)
Spain

loans became illiquid, setting off the chain


of events that rapidly became a global finan-
Table 1 The boom– bust cycle in the USA, Spain, Ireland and Greece compared

cial crisis (Harvey 2011; Lapavitsas 2013;


Immergluck 2015). National housing
80.6%

systems erupted into chaos resulting in the


profound devaluation of both property itself
6.7 units per 1000 inhabitants

and related financial assets (see Saegert,


(tipping point: April 2011)
7 million from 2007 to 2014

5.3% drop (to 63.4%, 2015)


93% (nominal), 59% (real)

Fields, and Libman 2009; Immergluck 2010


27% average decrease

for the USA; Colau and Alemany 2014,


Janoschka 2015 for Spain; Norris and Byrne
USA

2015 for Ireland; and Nikolidaki 2015 for


Greece). What became clear in 2008 was the
extent to which markets and economies
68.7%

around the world were interconnected, as


the collapse of retail and investment banks
Price increase, 1997

in the USA like Lehman Brothers led to a


Statistical data: OECD, Eurostat.
2007 homeowner

housing crisis and destabilised the banking


Homeowner rate
Housing price

sector in Europe, leading to heightened


Peak housing
production

Foreclosures

public deficits (see Spain, Italy and Portugal)


to peak

decline

decline

and default (Greece) in Southern Europe.


rate

Wide sections of the financial system


became insolvent due to the collapse of
The boom

asset values, proliferation of distressed debt


The crisis
years

years

and the dispersal of risk throughout the


financial system via ‘toxic assets’.
BESWICK ET AL .: SPECULATING ON LONDON’S HOUSING FUTURE 327

From crisis to opportunity banks relate to real estate (BTG Global Advi-
sory 2015).
While the urban legacy of the financial crisis
continues to evolve with further retrench- State re-financing and the ‘bad’
ment of public services and redistributive banks. Selective state intervention in the
policies under ‘austerity urbanism’ (Peck management of both the wider financial
2012), what we are most interested in here, system and specifically with regard to these
however, are the ways in which the political distressed assets has been vital to the re-estab-
economic consequences of the crisis have lishment of the financialisation – real estate
served to produce the terrain for a new nexus since 2008. One strategy has been
round of post-crisis financialisation. As the state re-financing of the banking system.
previous discussion of Blackstone indicates, The US Government spent $4.5 trillion
this has occurred via a series of transform- between 2008 and 2014 purchasing illiquid
ations and reorganisations in the relationship assets and troubled mortgages and recapita-
between finance and urban space, many of lising banks in an effort to strengthen finan-
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which have been facilitated and promoted cial markets and bolster the housing market.
by states. Below we discuss these transform- This ‘quantitative easing’ allowed financial
ations under the following categories: dis- institutions to clear up their balance sheets
tressed assets; state re-financing and the ‘bad and avoid further losses; meanwhile the US
banks’; new financial actors; and new invest- central bank has held interest rates near zero
ment strategies. for several years, sending investors abroad
in search of profitable yield. Governments
Distressed assets. The periodic devaluation of in the so-called ‘PIGS’ countries of Portugal,
capital invested in the built environment has Ireland, Greece and Spain (a derogatory term
long been a feature of capitalist crises for those European Union (EU) member
(Harvey 1982). In the current context this states unable to re-finance their government
process is reflected in the proliferation of dis- debt or to bail out over-indebted banks on
tressed real estate assets and related financial their own) have ploughed similarly dizzying
commodities that now serve as the vehicle quantities of money into their respective
for a renewed finance – real estate complex financial system, bringing about fiscal and
based on a different set of key actors and sovereign debt crises across the European
new investment strategies. House prices fell periphery: Spain’s government spent E14.5
by approximately 27% in the USA, 43% in billion to recapitalise and merge regional
Spain, 45% in Ireland and 53% in Greece banks from 2010 to 2012, then used E41
(see Table 1), and large swathes of mortgage billion in bailout funds from the EU to natio-
loans turned bad, particularly those issued nalise the regional banks; in Ireland the gov-
at the 2005– 2007 peak of the boom in most ernment spent E65 billion recapitalising and
countries to the extent that roughly 15% of ultimately nationalising much of its belea-
all mortgages in Ireland and more than 30% guered banking sector; and in Greece more
in Greece are in arrears. This price – mortgage than E90 billion were spent for bank recapi-
spiral has contributed to the more than 7 talisations. While in the initial recapitalisa-
million foreclosures completed in the USA tions the state participated as a basic
(accounting for 15% of all mortgages) and shareholder, after Greece’s recent third reca-
in excess of 375,000 in Spain. Beyond the resi- pitalisation in November 2015, ownership
dential market, investment-grade commercial of banks’ shares passed to international
assets have been equally badly hit. Current banks and hedge funds (Alexandri and
estimates suggest that nearly two-thirds of Janoschka, forthcoming). Interestingly, since
the E879.1 billion of ‘non-performing loans’ 2011 Blackstone has been responsible for
(i.e. distressed debt) held by European stress testing the Greek banking sector, and
328 CITY VOL. 20, NO. 2

in September 2015 was hired as an expert assets. These financial actors, often referred
advisor by the Central Bank of Greece on to as ‘vulture funds’ due to their focus on
the issue of non-performing loans. countries and companies in crisis, have been
A second strategy for dealing with dis- snapping up devalued direct property assets
tressed assets has been the establishment of and non-performing loans on both sides of
the so-called ‘bad banks’ or AMCs to the Atlantic. Real estate investment trusts
acquire and manage distressed assets (Byrne (REITs) have also emerged as important
2015b). Spain’s bad bank, SAREB (Manage- actors, publicly listed vehicles that allow for
ment Company for Assets Arising from the real estate investment without buying bricks
Banking Sector Reorganisation), was estab- and mortar property, making for a highly
lished in 2012 and took control of debts, liquid investment. REITs are shareholding
repossessed homes, stalled property develop- companies and investing in their shares is
ments and land from across the Spanish another investment avenue for ‘vulture
banking sector. Ireland’s NAMA (National funds’. Legislation providing for REITs was
Asset Management Agency) fulfils the same either introduced or amended after the crisis
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role, acquiring E72 billion in real-estate- in Spain, Ireland and Greece, and they have
related debt since its foundation in 2010, become important investors in distressed
equal to a remarkable 47% of Irish GDP debt (see below). Similar to the previous
(gross domestic product), from across the boom cycle, substantial tax breaks and other
banking sector (Byrne 2015b). From a differ- state measures accompany this strategy of
ent angle, in Greece where the need for a ‘bad orchestrating a new cycle of accumulation
bank’ has been solved through the takeover of by dispossession in the post-crisis era.
its national banks by international hedge The scale of this transformation certainly
funds, the rescue and recapitalisation of the gives cause for concern. By mid-2015, US
banks was accompanied by vast increases in institutional investors had amassed half a
direct and indirect taxation related to prop- million single-family rental (SFR) homes,
erty ownership, inaugurating a process of dis- and just seven of the largest firms currently
possession through unpaid taxes when at the control more than 150,000 properties (with
end of 2014 foreclosures were ordered on Blackstone and its subsidiary companies,
outstanding tax payments to public and such as Invitation Homes or Bayview Asset
private actors. In all four countries, monetary Management, heading this list). In European
policy and the reorganisation of assets went commercial debt markets an estimated E163
hand in hand, orchestrating a flow of capital billion of distressed debt was offloaded
from the public to the financial system. between 2012 and mid-2015, 27% of which
was sold on by the bad banks. Ireland has
New financial actors. The proliferation of led the way here with its bad banks,
distressed (and thus extremely devalued) NAMA and the Irish Banking Resolution
assets and state structures to acquire and Corporation (IBRC), the largest vendors of
manage them in the wake of the crisis has, distressed real estate assets in Europe in
from a financial investor perspective, created 2014, responsible for just under a third of
vast new ‘opportunities’ and ‘markets’. And the E96.7 billion of distressed real estate
yet, the very crisis-ridden nature of the finan- asset sales in Europe in 2013 and 2014.
cial and real estate sectors in the USA, Spain, Spain’s SAREB was set up two years after
Ireland and Greece has required new sources NAMA but has already deleveraged assets
and forms of capital to exploit the moment. worth E20 billion to institutional investors
This has seen a new set of financial actors (Cushman and Wakefield 2015) as part of its
rise in influence, namely, private equity legal requirement to deleverage assets within
firms, hedge funds and other ‘alternative 15 years (Font and Garcia 2015). A signifi-
investment funds’ that specialise in distressed cant majority of European distressed debt
BESWICK ET AL .: SPECULATING ON LONDON’S HOUSING FUTURE 329

has been bought up by just a handful of instruments have been subject to more
‘vulture funds’ dominated by US private market demand than can be accommodated
equity: 33% of all such assets disposed (Corkery 2014; Tricon Capital Group 2015).
between 2012 and 2014 were bought by As the market evolves it remains to be seen
Lone Star Funds, 17% by Cerberus Asset whether corporate landlords are gearing
Management and 10% went to CarVal their investments with excessive leverage
Asset Management (Cushman and Wakefield that could affect their ability to effectively
2014). In the Irish case, for example, 90% of manage the properties, which could have pro-
NAMA assets have been purchased by US blematic implications for both tenants and
private equity firms (Byrne, forthcoming). bond investors. Meanwhile six SFR REITs
in the USA are now publicly listed on the
New investment strategies. The entry of stock market. REITs have also emerged as a
‘vulture’ capital signals a significant trans- key vehicle for re-financialising housing via
formation in the urban housing systems of the rental sector in Spain (called socimis)
post-crisis countries. In short, diverse facets and Ireland. Indeed, Ireland’s largest land-
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of the financial – real estate complex are lord—the Irish Residential Real Estate
being concentrated in one set of global Investment Trust (IRES)—with 1200 apart-
actors who are gaining control of both ments largely bought from NAMA is now a
direct property assets and financial assets REIT, largely financed by Canadian firm
linked to property. While it is too early to CAPREIT, which aims to ‘consolidate the
understand the implications of these actors’ fragmented Irish rental market’ (IRES
investment strategies, some of the dynamics website 2015); IRES has announced it hopes
emerging in the private rented sector seem to increase rents by a startling 20% across
to us both illuminating and concerning. As its portfolio in 2015 (Byrne 2015a).
our discussion of Blackstone has already indi- The involvement of global finance in local
cated, rental properties have emerged as a real estate markets is far from novel; indeed,
major new ‘asset class’ for the new breed of it was perhaps the central driver of the
investor, underlining how housing realities global financial crisis. What is novel,
and financial dynamics are driving new however, is the nature of the flows of
rounds of financialisation. Two features of capital which characterise the post-crisis
housing systems in crisis-hit countries are context. During the boom, property was
particularly salient here—the plummeting of linked to global flows via numerous
property prices on the one hand and the avenues. In the USA, this infamously took
drying up of mortgage credit and with it pos- the form of mortgage securitisation and
sibilities for investment in mortgage markets related derivative products. In Europe, cer-
on the other. In this context, and given the tainly in Ireland, Spain and Greece, this pri-
continued and exacerbated unavailability of marily took the form of national banks
social housing, the private rented sector has borrowing on inter-bank markets and
grown quickly and with housing stock avail- lending into their respective national con-
able at exceptionally low prices, investor struction and property sectors. In all these
yields in the rental sector have become attrac- cases, the key actors were in some sense fam-
tive. We have already noted that private iliar: property developers; mortgage brokers;
equity and institutional investment in US and domestic banks. But the rise of GCLs is
rental markets has exploded in the wake of transforming the world of urbanisation and
the crisis: as of July 2015, eight companies finance. A housing estate in a local neigh-
had issued 21 SFR securitisations, covering bourhood of Madrid can now be directly
the rental income stream of 84,000 properties owned and controlled from the heights, so
with a market value of more than $16 billion. to speak, of the global financial system,
Despite their novelty, from the start these largely without the involvement of domestic
330 CITY VOL. 20, NO. 2

actors. In a sense, then, the link between local On the surface, current evidence suggests
property and global flows of capital has been the answer could be ‘very little at all’. The
intensified. The implications of tenants and UK has by far the least financialised rental
for housing markets in Europe are as yet sector among comparable advanced capitalist
unclear, but the example of Blackstone and countries (Faulkner 2015) with corporate
the US experience (Call, Powell, and Heck residential landlordism and institutional
2014; Fields 2015; Ingliss 2015) suggests that investment at less than 1% (DCLG 2011;
the cost of rent and security of tenure are Investment Property Forum 2014). By mid-
likely to be the first victims of this emerging 2013, institutional capital held just one-fifti-
‘investment’ strategy. eth of the £837 billion of private rental
Standing back from this comparative stock in the UK (Investment Property
picture and thinking about how it relates to Forum 2014), and as Table 2 shows, both
the UK, and particularly its global city of the contribution of direct GCL investment
London currently gripped by a housing and the exposure of UK REITs to the
crisis that in many ways sets it apart from private rental sector (PRS) are at present
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the rest of the national housing system, our insignificant.


final section below now explores what the There are three compelling reasons why
post-crisis rise of the GCLs in the USA, this picture is unlikely to change either now
Spain, Ireland and Greece might realistically or in the foreseeable future.
imply about the long-term denouement of
the London housing crisis.
(1) Structural limits to institutional invest-
ment in private renting. Private renting
in the UK was a marginal and margina-
The London housing crisis of 2015: entry lised tenure for much of the 20th
point for global corporate landlords? century as a result of state policies in
favour of owner occupation and public
Connecting London’s housing crisis to house building. By the 1990s, the PRS
foreign investors has become a cause célèbre housed barely over 10% of Londoners
in recent years with lurid media tales of bil- (Greater London Authority 2014).
lionaire oligarchs buying up mansions they
then leave to crumble whilst empty, and
Table 2 Global corporate landlords and real estate
foreign non-resident buyers vacuuming up investment trusts in the UK private rental sector
the vast majority of homes put up for sale,
thus preventing local residents from buying Proportion of UK PRS stock directly held by 0.2%a
and helping to inflate prices and rents for overseas investors (GCLs), by value
Proportion of UK PRS stock held by REITs, by 0.3%
everyone (Hill 2013). Some commentators value
have gone as far as to claim that the capital’s Proportion of overseas investors’ (GCLs) directly 0.04%
housing stock provides a ‘new global held PRS holdings as % of total UK housing
reserve currency’ (Goldfarb 2013). However stock, by value
accurate that analysis might be, it remains Proportion of REITs’ PRS holdings as % of total 0.06%
value of UK housing stock
firmly rooted in the present and firmly
focused on individual overseas ownership, a
The GCL figures only account for whole block purchases
thus leaving alone the crucial issue of finan- and not for purchases of individual units. This is due to the
cialisation and the future role of GCLs in a availability of data and is not expected to make a large
difference to the figure. All reviewed sources agree that
post-crisis London housing system. institutional exposure to residential rental assets is
Looking far further ahead, we want to extremely low.
explore what the rise of GCLs elsewhere Source: DCLG (2011) and Investment Property Forum
might mean for London. (2014).
BESWICK ET AL .: SPECULATING ON LONDON’S HOUSING FUTURE 331

While the neo-liberal assault on public could be interpreted as a quid pro quo
housing and the state-led efforts to re- for the scale of the rescue package gifted
boot the PRS through the roll-out of to the financial sector in the wake of the
housing demand subsidies (housing credit crunch. Given the systemic inter-
benefit) have seen it rapidly re-emerge dependence between the UK economy
to house just under one-third of the and the housing market—and the poten-
population, this has so far been driven tial for economic collapse should interest
by individual not institutional private rates rise, banks abandon forbearance
landlords with 78% of landlords in the and house prices fall, with all its political
UK PRS owning just one unit, and 95% implications—it is unlikely the UK Gov-
owning less than four (DCLG 2011). ernment would do anything to change
The PRS renaissance has therefore been these current favourable conditions in
accompanied by a shift towards wide- the near future (see Edwards 2015).
spread small-scale landlordism, linked (3) London’s over-priced property market.
to the rise of asset-based welfare (Lowe Alongside unavailability of distressed
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2011). This poses major entry barriers real estate, a third barrier to GCLs is
to the existing PRS for GCLs. London’s overvalued housing market.
(2) Crisis but no systemic crash. In contrast to UBS, the major Swiss investment bank,
how GCLs entered the post-crisis urban reports that London property is the
landscapes discussed in this paper, most over-priced of any major city in
London and the wider UK context the world, and urges ‘caution’ with
managed to avoid the catastrophic respect to the city, which scores higher
impact of the global financial crisis on than any other on their Global Real
the housing system. There is therefore Estate Bubble Index (UBS 2015). Over-
currently no giant pool of distressed valuation combines with under-avail-
assets that can be systematically acquired ability to explain the current absence of
by vulture capital. London experienced a GCLs in London’s rental market and
sharp but relatively modest decline in while London property may provide
average house prices by 17% between high capital returns, the entry costs are
2008 and 2009, returning to their pre- arguably prohibitive in London.
recession levels by 2012 and now stand-
ing at 41% higher than that low-point However, while the present low levels of
figure (Land Registry 2015). Despite GCL exposure in London, the hitherto
rising unemployment and mortgage absence of a crisis sufficient to prepare the
arrears, repossessions peaked at 0.43% ground for the next round of financialisation
of all mortgages in 2009 and dropped to of housing in the city and the historical entry
0.26% by 2013 (DCLG 2014)—com- barriers to GCLs in the PRS might reflect the
pared to 15% and 7% in the USA and present pathway, there is another way of
Spain, respectively. Reasons for the com- viewing the London housing crisis in ways
paratively small scale of repossession far more relevant to a GCL takeover in the
include the central bank’s decision to long term. We have identified three broad
drop the base interest rate from 5.75% gateways through which this can happen,
in 2007 to 0.5% in 2009 where it cur- and in fact already has:
rently sits, state rescue schemes for mort-
gage holders, and a semi-formalised pact (1) The UK’s ‘bad bank’ and its sub-prime
between the state and financial insti- mortgage auction. Although the UK
tutions encouraging the latter to exercise avoided a full-scale housing market and
restraint in their repossession activity mortgage meltdown, many UK banks
(Wilson 2014). This latter measure including Northern Rock were fatally
332 CITY VOL. 20, NO. 2

wounded by the global financial crisis (2) State-led financialisation of the ‘new’
and were effectively nationalised by the PRS. GCLs might struggle to access the
UK Government. Beneath the political existing PRS dominated by individual
radar, in 2010, the government set up landlords, but an alternative entry route
its own state-owned deleveraging is currently being prepared through a
vehicle (‘bad bank’) called UK Asset state-led project to transform the
Resolution (UKAR), taking over the London rental property market into an
toxic assets it held from the nationalisa- internationally tradeable asset class.
tion of Northern Rock and Bradford This project can be visibly traced at
and Bingley, who had embraced sub- least as far back as 2007 at the height of
prime lending and extensive securitisa- the housing boom when the Labour
tion. By 2011, UKAR’s mortgage book Government created the legislation
was worth £77 billion (UKAR 2011), allowing REITs to be set up in the UK.
making it larger in book value than But in reality it has much deeper histori-
Spain’s SAREB and similar to Ireland’s cal roots laid during the decades of public
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NAMA. Like its Irish and Spanish housing privatisation and the major
equivalents, UKAR has been rapidly deregulation reforms of the PRS during
deleveraging these distressed, underva- the late 1980s that re-empowered
lued assets by selling them on to a private landlords to raise rents and evict
coterie of private equity funds and tenants. This laid the basis for the PRS’s
investment banks queuing up to take rapid re-emergence and predicted
them off their hands, with its book growth over the next 10 years with
value reduced to £51.1 billion by London experiencing the potentially sys-
March 2015 (UKAR 2015). UKAR’s temic tenure shift towards private rental
latest sale was of the Granite portfolio, we have observed in the other locations
transferred for £13 billion to private (Whitehead et al. 2012; Greater London
equity firm Cerberus. It beat off compe- Authority 2014). The state-led project
tition from rival consortia of Goldman works alongside an informal ‘discourse
Sachs/Blackstone and JPMorgan/ coalition’ (Hajer 1993) of real estate
CarVal to buy 118,323 securitised mort- intermediaries to construct a compelling
gages, including many of Northern case for GCL investment in a financia-
Rock’s now infamous ‘Better Together’ lised ‘rental revolution’ (Knight Frank
loans that allowed mortgagors to add a 2014) that would benefit investors while
£30,000 loan on to a full mortgage tar- solving London’s housing affordability
geted at sub-prime borrowers—the pin- crisis. The financialisation of student
nacle of the UK’s pre-recession credit housing has trail blazed this agenda.
binge (Dunkley 2015). Cerberus also Purpose-built student accommodation
acquired a £3.3 billion portion of TSB’s was recently declared a ‘mature and glob-
mortgage debt, giving it control over ally recognised’ asset (Savills 2015), and
an additional 34,000 mortgages across student housing REITs are now listed
the UK (Dunkley 2015). While we do on the London Stock Exchange. The
not know how much London property £4.2 billion of investment in the first
is contained in these two portfolios, five months of 2015 already surpassed
these transactions, and others like any previous year-long total, and over-
them, reveal GCLs’ readiness to partici- seas capital accounted for over 90%,
pate in the financialisation of the UK dominated by North American private
housing market and gain a foothold in equity and institutional investors
preparation for a more serious phase of (Savills 2015). No wonder given the star-
the London housing crisis to come. tling 97% average increase in student
BESWICK ET AL .: SPECULATING ON LONDON’S HOUSING FUTURE 333

housing rents in the decade to 2012 – 13 include: Essential Living, who are capita-
(National Union of Students 2012; lised by M3 partners, a London-based
Greater London Authority 2015). manager of global funds; Get Living
Holding up student housing as a model London, offering 1439 rental homes on
of rental market financialisation, the the former Olympic site in East
2010 –15 Conservative-led UK Coalition London and owned by the Qatari sover-
Government turned its focus on the eign wealth fund; and Fizzy Living,
mainstream rental sector with the backed by £200 million from Abu
launch of a review in 2012 into the ‘bar- Dhabi Investment Authority.
riers to institutional investment in Following a slow start, UK REITs are
private rented homes’ (DCLG 2012). It also now beginning to flourish from
was led by none other than Sir Adrian new incentives including abolishing the
Montague, a City of London veteran 2% entry charge and zero capital gains
with a long track record in private tax with around 40 UK REITs listed,
equity investment in public projects, with capitalisation of over £33 billion
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who in a previous appointment to the (British Property Federation 2015). The


Treasury pioneered the Labour Govern- majority of REITs centre on commercial
ment’s use of the Private Finance Initiat- real estate, although some hold mixed
ive between 1997 and 2001 that opened portfolios, featuring residential and com-
the door to more than £300 billion mercial. The first residential-only
worth of lucrative contracts for private vehicle—the Mill REIT—launched in
corporations investing in public infra- 2014 and focused on London, but was
structure. His eventual report outlined liquidated in October 2015 citing a lack
four areas for strategic state intervention: of interested investors. However, there
market making; pump priming; creating are signs that London rental property is
and incentivising new investment becoming attractive to institutional
vehicles; and the eradication of elements investors and private equity. According
unattractive to investors. In line with to an industry consultant UK REITs
this roadmap, in 2013 a market-making plan on devoting a quarter of their
‘PRS Taskforce’ was established within future activity to residential projects,
the Department for Communities and and the government’s exemption of
Local Government to ‘kick-start the financial capital from capital gains tax in
new private rented sector . . . character- April 2015 may have been behind Lone
ised by a growing number of large scale, Star Capital’s acquisition in October
professionally managed developments, 2015 of a portfolio of mixed-use UK
owned and managed by institutional real estate assets for just under £1
investors’ (House of Commons 2015, billion. The REIT sector will have been
12). A £700,000 ‘Build to Rent’ fund massively boosted by the government’s
was established in 2012, increased to 2013 decision to change the law control-
£1.1 billion in 2013, to help finance con- ling the development of office buildings
struction. Despite mixed success so far, meaning that empty offices can now be
the asset class is nevertheless beginning converted into houses or flats without
to emerge with 21,388 build to rent apart- planning permission. This creates a
ments either completed, under construc- further entry point for GCLs: as a
tion or in the planning process as of highly valorised central node in the
October 2015 (Patnaude 2015)—a global financialised economy, the City
decade ago the figure was nearly zero— of London’s commercial property port-
with 93.4% of completed homes built in folio represents a highly traded global
London. Early movers in the sector asset class where over 60% of the stock
334 CITY VOL. 20, NO. 2

is held by overseas capital (Investment . English local authorities will be


Property Forum 2014). By converting required to sell all their empty
their empty offices to housing, GCLs council homes valued in the top
can overnight become major players in third most expensive properties
the London housing rental market. for the local area. For London, the
(3) Capturing the London rent gap through implications are stark: Shelter
social housing privatisation. Up to now, (2015) estimates that 1433 council
the exposure of the social housing homes would be forcibly sold
sector to global financial flows and own- each year under the scheme with
ership has been extremely limited. The up to 60,314 eventually affected.
exception has been the New Labour But these stock numbers could
Government’s experiment with the rise even further under plans to
Private Finance Initiative in public legally compel social landlords to
housing regeneration which has seen charge market or near market
around 20 council estates in England— rents to tenants with an income of
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including six in London—taken over on over £40,000 in London and


long-term lucrative investment contracts £30,000 elsewhere. Consultancy
owned to varying degrees by offshore firm Savills estimates 60.1% of the
infrastructure companies with often dis- 27,108 affected households in
astrous consequences for residents and London will neither be able to
the taxpayer (Hodkinson 2011; Hodkin- afford market rent or be able to
son and Essen 2015). However, this buy their house under the RTB
could now change as a result of the new (Brown 2015), placing them under
and highly aggressive phase of social greater risk of eviction to the PRS
housing privatisation underway since and growing the numbers of
2010 (Hodkinson and Robbins 2013) empty council homes that could
that threatens to generate multiple be forcibly sold off as bulk sales
routes through which a large pool of with institutional investors
social housing can be acquired by waiting in the wings.
GCLs as follows: . Following a change in UK law in
. The relaunched Right to Buy 2010, investors can now profit for
(RTB) offers council tenants in the first time from social housing in
London a £102,000 discount on Britain and the government has
the purchase of their council been going to extra lengths to make
home, and in the future all the existing social rented sector
housing association tenants being attractive to institutional investors
able to buy their homes at equival- by further deregulating rents and
ent discounts. Recent research has tenancy protections. State funding
found that at least 36% of former for social house building in
council homes sold under the England is now conditional on
RTB in London are now owned renting out new homes at up to
by buy-to-let landlords (Copley 80% of local market rents; and the
2014). There is no reason why the government has created flexible
new glut of ex-council homes des- landlord-friendly tenancies by
tined to enter the housing market ending statutory security of tenure
should not also find their way for new social tenants. It is against
into the hands of institutional this background that the recent, see-
landlords. mingly inconsequential, statutory
BESWICK ET AL .: SPECULATING ON LONDON’S HOUSING FUTURE 335

reclassification of housing associ- (unintentionally) adopting a rent


ations as ‘public non-financial insti- gap analysis in a recent influential
tutions’, taking them out of the report urging councils to knock-
charitable sector, and effectively down and ‘regenerate’ estates,
bringing them into the public commenting that there are ‘particu-
sector, now appears as a deliberate larly large concentrations of
act by the government to prepare council owned land in inner
the sector for either full-scale dereg- London, and this is some of the
ulation or full-scale privatisation, but highest-priced land in the world’
in either scenario institutional inves- (Allen and Pickard 2015). In order
tors and private equity can takeover to redevelop these estates, some
and profit (Wiles 2015). This is London local authorities are using
because by reclassifying all housing the opportunities afforded by the
associations as public bodies, their global real estate fair, MIPIM,
debt is placed onto the public each year, to attract global inves-
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books, providing the state with a tors to finance and build new
ready and effective motive to homes and mixed-use develop-
remove that debt by either deregu- ments, opening the door to GCLs.
lating them further so as to prompt
a reversed classification, or by effec- What will actually happen with respect to
tively selling off the debt to inves- these three gateways remains conjecture and
tors. This ‘nationalise to privatise’ speculation, but there is no doubting the
strategy (Wiles 2015) would bring interest that global investors have in entering
social housing in London (where the UK social housing sector and especially
the most profitable estates lie) one its London portal. This was evidenced in
step closer to corporate takeover, 2011 when Hong Kong-based Chow Tai
GCL capture and the consequent Fook Enterprises Ltd—owned by billionaire
loss of the city’s affordable rental Cheng Yu-Tung—joined forces with two
stock. other Hong Kong investors to acquire a £30
. Against a background in which million stake (61%) in the UK’s Pinnacle
London Local Authorities are Regeneration Group. As well as wanting to
operating under a rampant auster- diversify their investments out of Hong
ity programme, and cuts to local Kong’s over-heating property market, they
government have been higher than explained their main motive was the opportu-
almost any other public depart- nities created by government cuts to social
ment, many London urban auth- housing for investors to fill the hole
orities are seeking to exploit the through regeneration partnerships with local
‘rent gaps’ (Smith 1979) located in authorities and gain the ‘key into a door’,
their own public housing estates namely, the door of London’s profitable
(Watt 2009, 2013), which are sited real estate market (Barwell 2011). Sensing
in the most expensive real estate similar opportunities to profit from
market in Europe, to expand the London’s affordable housing shortage and
overall housing supply at the the upward pressure on rents and prices
expense of affordable and secure everywhere, in the spring of 2014, a private
housing under so-called ‘regener- consortium purchased the New Era estate in
ation’ schemes. The motivation is the London Borough of Hackney. Built in
clear, and at times explicitly the 1930s by a charitable trust in Hoxton,
acknowledged, with senior Labour the 96-flat estate provides affordable accom-
politician Lord Adonis modation for working-class Londoners. Its
336 CITY VOL. 20, NO. 2

new owners were led by Westbrook Partners, preventing London’s housing crisis from
a private equity firm headquartered in becoming a future corporate dystopia—block-
New York specialising in international real ing off the main entry point to global corporate
estate—an archetypal GCL—and primarily landlordism in London by resisting the current
invested in by US pension funds. On acqui- government’s privatisation assault on public
sition, the consortium offered tenants the and social rented housing.
chance to remain on the estate, provided
they could meet the new ‘normalised’ rents,
amounting to an increase of 400%. Amid Conclusion: back to the future, but which
growing tenant and media opposition, West- future?
brook then served eviction notices for Christ-
mas, but were eventually forced to back The hitherto absence of critical research on
down and in December 2014 the estate was the financialisation of London’s rental
transferred to a charitable landlord, the housing market inevitably makes the work
Dolphin Square Foundation, who assured presented here a first but important step in
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tenants of continued affordable rents. better understanding the long-term ongoing


However, what this shows is how a new economic and residential restructuring of
class of investors are eschewing prime real London. While the findings are clearly pre-
estate for which they could overpay in liminary, there is a strong message for
favour of opportunities to buy into the London in the snapshots of sudden housing
social housing sector that will generate market restructuring in the USA, Spain,
strong returns in the long run. This has par- Ireland and Greece. The recent shift
ticularly menacing implications for London towards the private rental society, in which
for the simple reason that despite four the rental sector develops as a centrepiece
decades of neo-liberal roll-back policies that for the new financial strategies of accumu-
have decimated the overall public housing lation and dispossession, has deeply disturb-
stock by over 3 million homes and reduced ing implications for the notion of housing
social renting from 30% to less than 18% of rights, showing that even without a mortgage
the UK population (DCLG 2015), tenant contract in place, financial capital is still able
opposition to privatisation means London to exert control over housing and residents.
still has a relatively large amount of public Indeed, beyond fulfilling the obligations of
and social rented housing, especially in the the lease agreement between tenant and land-
central urban areas proving so attractive to lord, today rent payments serve as the basis of
corporate investors (see Watt 2009). a global asset class (Bryan and Rafferty 2014).
Returning to our main question, at present What should be clear at this stage is that the
London’s and the UK’s fundamentals are emerging new model re-floats some parts of
importantly different to the post-crisis national the real estate economy on the shoulders of
contexts that have spawned GCLs, suggesting the vast majority of the population, the
that the path of rental financialisation and the ‘99%’ that is unable to participate in global
rise of the GCL in the city is still one which speculation flows. It further pushes us
can be forestalled, resisted and subverted. towards the next stage of the financialisation
However, we have identified that London’s of housing and the urban more generally,
social and public housing—the legacy of the applying again a new and equally heavy
lengthy post-war class compromise, and a load of social pain onto those who have
source of convenient, affordable housing for been suffering now for decades the negative
many Londoners—could be the portal by effects of previous rounds of financialisation.
which GCLs can gain large-scale access to At present London is different, marked by
London’s housing in a post-crisis future scen- the absence of a large pool of available,
ario. This points to a key task for activism in undervalued assets—the equivalent of
BESWICK ET AL .: SPECULATING ON LONDON’S HOUSING FUTURE 337

foreclosed homes in the USA, or social more equitable, sane and affordable solution
housing portfolios in Spain—for GCLs to to the present housing crisis. All of this
fasten onto. The likely continuation of state remains speculation with more research
policy dedicated to preventing mass mort- needed to better understand the particulari-
gage repossessions makes the path of rental ties of the London situation compared to
financialisation via the future takeover of the four post-crisis national contexts dis-
GCLs seem improbable. However, recent cussed and provide a more robust treatment
targeted discourses concerning social of how the new financialisation may
housing providers, and apparently inconse- develop, or be forestalled.
quential alterations to the state’s classification
of social housing stock, alongside key
elements of the Housing and Planning Bill, Disclosure statement
provide a direction of travel which—if fol-
lowed in the ways that we have specu- No potential conflict of interest was reported by the
lated—could see the mass transfer of social authors.
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and public housing to the private sector,


with GCLs being the most likely recipients.
Funding
The slow erosion of London’s public
housing through ‘regeneration’ and the
The UK research in this paper was supported
capture of state-induced rent gaps provides
by the Economic and Social Research
a clear portal for GCLs to (incrementally)
Council [Grant Ref: RES-061-25-0536].
take over London’s ‘undervalued’ housing
estates. But what is also clear is that the
future of London’s housing, and the conse-
Note
quences of financialisation, or otherwise, of
the rental sector, remains decidedly open.
1 This paper stems from ongoing research into the
The recent example of how tenants on the transnational dimension of housing systems being
New Era estate in the London Borough of undertaken by an international network of
Hackney successfully resisted the takeover researchers and activists. The findings presented here
of their affordable homes by a US private build on insights and evidence generated by 30
participants from 11 countries who gathered in
equity firm shows that London and Lon-
London in July 2015 for a three-day meeting to share
doners can resist the dispossession of their their own research about the emergent phenomenon
residential use values, and the financialised of global corporate landlords. The authors would like
inflation of exchange values, and achieve an to thank those participants who all contributed to the
equitable outcome. Tellingly, a leading analysis presented here and to the editors and two
anonymous referees for their supportive and critically
investment chronicle, reviewing the lesson
constructive comments.
to be learned from the New Era estate, cau-
tioned interested investors that the London
rental sector has become a ‘political “hot
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