Who owns London property now, and why?

What is a city for? And more importantly, who is it for? London has become just a safe investment for the world’s rich — who barely live there.

An editorial in the Observer (1) on the UK’s cities, political system and social life bemoaned a regular theme: that London, like other world capitals, has become a city divided between the rich, the poor still hanging on in there, and a declining, threatened, middle class who had reclaimed most of it until the advent of the global super-rich. These issues raise key questions, especially who is the city for, and on what basis does it exist?

One clue came from Transparency International (TI) (2), with an analysis of London property holdings suggesting that one in 10 properties in the borough of Westminster was owned through secret offshore holdings. In all, TI found that around 30,000 London properties (equivalent to 2.5 square miles of real estate) were now owned through these jurisdictions. In this sense, London is not only another country in the excesses of its property market, it is also entwined with the web of compliant corporate finance arrangements operated out of the City of London, as detailed in Nicholas Shaxson’s Treasure Islands (3). To make matters worse for the Conservative Party, which ostensibly represents the UK’s moneyed classes, a recent report for Westminster City Council, a key “super-prime” property market area in central London (4), highlighted the tensions between existing central residents and gigantic waves of capital investment in bricks and mortar by the ultra-wealthy, with around 75% of all central London homes being sold to the international rich.

These figures highlight concerns that extend well beyond traditional Conservative-voting neighbourhoods. London’s politically conservative heartlands now worry about whether a private education and good connections will help their offspring maintain a foothold in their home territories (which include Chelsea and Highgate). Rising social anger (crucially, among the affluent and the excluded) is focused on the inability of London and its governance systems to deliver affordable, good-quality housing, as well as on investors in buy-to-let properties, and the inequalities and incentives that have driven their proliferation. This is evident in census data, which shows that in 2001, 25% of London households were public renters from local authorities and housing associations; this has dropped to 24%.

The story behind these changes is the downturn in ownership by those actually living in London, from 56% of households in 2001 to 50% by the 2011 census. At the same time private rentals increased from 17% to 26% (5), while wealthy international and UK landlords have benefited from low interest rates and the initial crash in prices after 2008.

Demolition for new development

Behind all this is the furore over demolitions of some 50 public housing estates to make way for new development, which have led to net losses in affordable or public housing (6). Protests have focused on the forced eviction of residents from estates before demolition, and the intense social impact of these developments. Such events looked particularly bad for London’s mayor, Boris Johnson, and for local authorities, because they are major attacks, symbolic and real, on social vulnerability, with a callous disregard both for rental tenants and for those who had tried to get a foothold on the housing ladder by purchasing their homes under right- to-buy legislation. One group, Focus E15, assembled some 30 women living with their children in hostel accommodation within the Carpenters Estate in the borough of Newham, who focused their energies on challenging the transnational landlords, and attracted the support of activist Russell Brand. But though their evictions were halted through good organisation and media attention, the wider story is still of plans for demolition.

The loss of any public housing is the wrong way to go in a city that is building rapidly only to benefit affluent and international investors privileged by planning decisions. Despite the stated rationale of increasing housing supply (which is currently not keeping up with need, as less than half the necessary annual 50,000 units are being built (7)), and improving social diversity and quality, the results are net losses in affordable housing, while buy-to-let investors snap up new properties, and gain in the lurch towards private renting. This has led to infighting on the political left, and also to surprising changes of political power experienced by Conservatives in the borough of Hammersmith and Fulham (8).

The government must also deal with the broader question of London’s position as a vortex that distorts regional inequalities; the Chancellor of the Exchequer, George Osborne, seems to have become alert to this since Scottish independence was rejected and arrangements for additional regional powers brought in.

London’s status as a near-popping-point bubble of investment has left the government with the difficult job of balancing the “needs” of capital, which flows to the points of optimum return in a global system. The UK’s governing coalition, despite early talk of re-balancing the economy, has been weighed down by the dominance of finance over what remains of a peripheral industrial base, and has responded with open arms to footloose capital. Boris Johnson speaks passionately of the global plutocrats — “the top 0.1 per cent — about 29,000 people — [who] pay an amazing 14.1 per cent of all taxes”. He has implored everyone to “stop any bashing or moaning or preaching or bitching and simply give thanks for the prodigious sums of money that they are contributing to the tax revenues of this country, and that enable us to look after our sick and our elderly and to build roads, railways and schools” (9).

Destination of choice

What he failed to mention was the massive drain on urban resources, and the impact of investment in discreet palaces and buy-to-let apartments to which most London developers are tailoring their schemes. Disgruntled Londoners, both those on minimum wages and those with good incomes, now overlap in their claims to a more humane and sustainable urban life; and they are all angry with foreign wealth and the domestic political class in thrall to it. Johnson’s social politics are like those of New York’s former mayor, Michael Bloomberg, when he argued that if every global billionaire moved to New York, it would be a “godsend” (10). History shows that approving raw money-power despite worsening social distress has not been a long-term recipe for political success. But despite the interest in affordable housing of New York’s new mayor, Bill de Blasio, his city has recently taken London’s crown as destination of choice for billionaires (11).

Can we begin to identify the conjunction of interests around capital, financial services, real estate and sections of the political class as a plutocracy? This constellation is more accurately described as a “plutocratic city” — where the power of money has re-made a city — physically, socially and politically. This overwhelming concentration of money-power appears to have had major impacts on the democratic and social life of the city. After the second world war, London experienced a relatively attenuated gentrification, in which neighbourhoods changed from predominantly working-class to more middle-class enclaves. But since the financial crash of 2008 parts of it, such as Hammersmith, Newham and Southwark, have experienced a rapid social cleansing of low-income groups, which even Johnson has compared to events in the former Yugoslavia (12).

If we define successful cities as urban communities that provide access to essential resources for all citizens, we can understand that the language of the political elites who run cities now refers to global competitiveness, not to the needs of existing city residents. Local politicians in wealthy London boroughs such as Westminster are stuck with the logic of investment, which means attracting and maintaining wealth-elites — because if they don’t, they will damage a city economy thought to bestow the greatest universal benefit when unregulated.

The global wealth-elite is now drawn to those cultural infrastructures, fiscal benefit regimes and government ushers from which they can get capital gains on property, and safe havens for their own economic and social uses. London has been made and re-made for money rather than people — physically, politically and culturally. Understanding how money-power has transformed the foundations of political life, and altered the skyline, the homes (and basements) of London, all the while emphasising deep changes in the city’s ambiance and culture, is critical if the damaging consequences are to be reversed.

Because plutocratic power starves the democratic ecosystem of the ideas, resources and values that it needs to breathe, political parties or movements with alternative visions risk suffocation unless the city can once more discover its diversity, and plurality of voices.

Written by Rowland Atkinson, Roger Burrows and Simon Parker and first published at Le Monde Diplomatique (English version)