Transcript The Property Market and the Plan

LSE seminars on the Draft London Plan
2003
Fear and Loathing at King’s
The Property Market andCross
the Plan
The Draft Plan as a victory for rentiers and
a store of trouble for London
Michael Edwards, Bartlett School of Planning
UCL
17 March 2003
Key theoretical and conceptual issues
the dynamics of the London economy
property markets, rent and their consequences
the political context and forces
planning methodology / philosophy
Relevant features of the Draft Plan
FBS and TINA
acceptance of containment
centralisation of work, infrastructure
housing
So what?
political/academic basis for challenges?
theoretical and research issues?
Key theoretical and conceptual issues
The dynamics of the London economy
Try and avoid the word "globalisation" and concentrate on what sort
of capitalism we have here. Buck, Gordon et al Working Capital very
helpful on this, with reservations. Key points include
(i) local, regional and national/EU markets are crucial - with the
importance of 'global' markets quite limited (Table 3.4)
(ii) "truly 'global' activities (notably in City financial services)
...is one of the London economies but, not the only one,
nor is it necessarily the dominant source of growth." p135
(iii) frequent references to the effect of housing cost / scarcity
on labour recruitment and retention, and on out-migration
of prospering young families.
and the Madonna quotation "Is it nice to win 20 grand? Definitely but after spending time in this city I can tell you it won't last
very long." p137
A lot of GDP ends up here.....but a slippery concept.
Importance of (domestic + foreign) investment in
built environment for production
built environment for consumption
credit relating to property (including mortgages)
[Harvey on capital switching among circuits, regions
and branches]
property markets, rents and their consequences
High rents and payments for land, and escalating prices,
can play multiple roles in the economy / society
including.....
• (re-)distributing income and wealth from tenants and new
buyers to previous owners
• allocating activities in space (attract, displace)
• generate strong investment flows (the "rent-seeking"
activity Cheshire, Evans et al are concerned about)
• impede investment in other areas / forms
• radically change the composition of activity
• via housing costs, raise labour costs for employers
&/or impoverish employees
• fuelling consumption through equity withdrawal
> generating macro-economic problems
> producing contradictions for interest-rates
the political context and forces - some amateur comments
Long period without a London government, but with some significant
new governance shifts in the period.....
City of London Corporation extending its roles and hegemonic
influence during the vacuum....
• via research, publication
• via participation in...
Vision for London,
London Development Partnership > LDA
London First
and strong representation of real estate interests within this.
Blair government's strong City links......."wooing"
Ken Livingstone's own "wooing" and recruitment of
Judith Mayhew to his Advisory Cabinet......
planning methodology / philosophy
Contrast with the popular planning of 1980s GLC
no "people's plan" flavour
no "community areas"
no plan for labour against capital
Approach to forecasting
trend-based GDP projections >> employment
no model-building and thus
no conditional or linked forecasts
in particular no forecasts of house prices, or
of commercial or domestic rents
"cycles" removed, though London property proceeds
by booms and crises. Can we discuss this?
No alternatives. Not that sort of plan
FBS and TINA
Finance and business services becomes the core of the plan
The Draft and supporting documents emphasis the dire
risk of losing (or failing to attract) MNCs etc. Any threat
deemed to be unacceptable.
Gestures towards a more robust / diverse economy are
minimal
• on retaining industrial etc floorspace
• on protecting SMEs, especially around the centre
• on growing suburban employment (except in East
where the gateway)
acceptance of containment
Green belt sacrosanct. But in fact....
Containment
+
population growth
+
Income growth (for ?50% of households)
+
Income elasticity of demand for housing
leads to>>
• strong upward pressure on prices of land and housing
• volatility
and, combined with falling or constant incomes of other
households, this gives us exclusion / crowding
London is remarkable for its degree of centralisation
This results partly from the effects (at a regional scale)
of containment - Buck et al again
and partly from
investors'
over-concentration
in the centre,
capturing the
externalities of
transport investment
(and the 'buzz')
The draft plan is
reinforcing all this
centralisation of work, infrastructure
Emphasis on more
radial rail
Orbirail and
suburban transport
under-emphasised
Housing:
Differential price escalation is the problem.
From GLA Towards…. Fig 14
The Plan's chart
Based on ONS, GOL and LRC
Covers all lenders, adjusts for dwelling mix and
observes this
Excludes Sales at non-market prices.
Buck et al
fig 4.1
What is proposed?
Not to bring general prices down - which would mean cracking
the land supply problem
instead:
• density increments
not worked through, sensitive to NIMBY resistance
• brown-field land re-cycling
• 50% / 35% "affordable" units which pre-supposes continuing
high disposal prices and/or falling land costs
• also requires massive HC grant and subsidy - which further
inflated the demand side.
Does anyone believe it?
Will those provisions alter this?
or this: the dependence on Housing Benefit at very high levels?
Housing Benefit
Council T ax Benefit
Any Benefit
% of households
claiming benefits,
1999-2000
- any benefit at all
- housing and
council tax benefit
West Midlands
South West
East Midlands
East
South East
Source: Regional
Trends 36, 2001, t 8.8
London
0
10
20
30
40
50
60
70
Housing benefit payments to tenants, 1999-2000
London England
% of households claiming
20%
16%
Weekly average claim
£ 68
£ 48
Annual cost
£ 2.5 bn £ 9.6 bn
Annual cost per claiming hh
£ 4,111
£ 2,877
80
Households are the numbers
claiming in May.
Source: Dept for Work and
Pensions 2000.
Summing up
This is a plan which, far from transforming London in
any progressive way, seems likely to
•
•
•
•
•
valorise Central London real estate by committing future
resources to radial transport to the home counties
[and ? rescuing Canary Wharf too]
foster corporate expansion around the centre at the
expense of SMEs and some diverse
(?3rd) sectors
leave intact the structures which cause housing problems,
seeking transfers from government and developers
to reallocate some dwellings
damage competitiveness via high costs faced by firms and public
services: premises costs and wage costs or...
for those whose employers can't or won't pay decent wages,
and for those on benefit: further cuts in real incomes.
It is a rentiers' plan.
Instead?
If Londoners and their Mayor decide to be a bit more choosy about the kind
of growth they want, then debate should focus upon
(i) major increases in housing supply, sufficient to bring prices down;
(ii) an end to the attrition of the public housing stock through right to buy
(iii) greater emphasis on public transport improvements in and between
suburbs, less on long-haul commuting from outside London
(iv) protecting and expanding the supply of business premises in suburbs,
especially where this can lead to reverse commuting. Less central growth
of jobs, more of housing
(v) strengthen the focus of resources on reducing the exclusion of under-educated
young people - both ethnic minorities and poor whites (i.e. class)
(vi) create some agencies to implement the plan, and collect the profits to finance it
(vii) re-deploy Richard Rogers (or hold some competitions) to devise ways of
developing in suburbs and green belts which are environmentally
impeccable and visually better than agriculture: more Baths.
Research questions:
i. Why is there so little study of property markets (e.g. in
Working Capital) except from inside the property sector?
These relationships, including Madonna's observation,
need quantification and analysis.
ii. What activities could prosper in suburbs, especially
North, South and East?
iii. How could the research community better inform the
plan process?
iv. What is going on politically? Was Ken so determined to
defeat the Tube PPP that he decided to be thoroughly
'Blair' with the City on all other issues?
v. Why are non-property businesses so willing to support
a plan which will serve them so badly? Dysfunctional as a
mode of regulation or as a 'regime' except for rentiers and
established owner-occupiers.
Edwards, M (2002) 'Wealth creation and poverty creation:
global-local interactions in the economy of London'
CITY 6(1): 25-42
An offprint, and other versions of the argument are at
www.bartlett.ucl.ac.uk/planning/information/sds
and
/texts