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Speculating on London's housing future

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City 20(2):321-341

DOI:10.1080/13604813.2016.1145946

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University of Santiago de Compostela

London's housing crisis is rooted in a neo-liberal urban project to recommodify and financialise 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 landlords’ (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 emerging 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.

The boom-bust cycle in the USA, Spain, Ireland and Greece compared

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Global corporate landlords and real estate investment trusts in the UK private rental sector

…

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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

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Speculating on London’s

housing future

The rise of global corporate landlords in

‘post-crisis’ urban landscapes

Joe Beswick, Georgia Alexandri, Michael Byrne,

`nia Vives-Miro

´, Desiree Fields, Stuart Hodkinson and

Michael Janoschka

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

As this Special Feature makes clear,

London, more than anywhere else in

the UK, is experiencing an acute, per-

vasive and socially explosive housing crisis so

severe and polarising that it has become the

city’s number one political issue. The crisis

is dominated by evidence and platitudes

over rising property prices and plunging

affordability, and for good reason: London

is now the unrivalled king of the global prop-

erty league for the super-rich, with prime

property values rising faster than any major

city in the last decade (Knight Frank 2015).

Ordinary Londoners meanwhile wilt under

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

CITY, 2016

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

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average house prices of £500,000 (in October

2015)—more than double the country

average (Land Registry 2015)—and by far

the highest average private sector rents in

the UK (Anderson 2015), with landlords

increasingly empowered to choose their

tenants and a growing willingness to engage

them in rental price bidding wars (Lunn

2014). No wonder evictions and homeless-

ness are on the rise. The London housing

crisis does not stand uncontested from

below and is generating an embryonic

‘urban social movement’ (Castells 1983)

pushing at the political space opened up by

the recent election as Labour Party Leader

of a leading anti-privatisation voice in the

shape of Jeremy Corbyn. But with the crisis

worsening all the time, looming around the

corner is a palpable sense that once the Con-

servative Government’s current Housing and

Planning Bill (House of Commons 2016)

becomes law, its intended radical assault on

the remaining public housing stock and the

security of tenure and affordability it once

guaranteed will accelerate the class cleansing

of London begun under the Coalition Gov-

ernment (2010–15) (Hodkinson and

Robbins 2013).

If this is the today and tomorrow of the

London housing crisis that authors elsewhere

in this Special Feature examine, our focus

here is on its longer-term repercussions.

Drawing speculatively on the initial findings

of an ongoing international research project

investigating the growing transnationalisa-

tion of housing systems,

this paper suggests

that the rise of private equity firms as

nascent ‘global corporate landlords’ (GCLs)

in the ‘post-crisis’ urban landscapes across

the USA, Spain, Ireland and Greece might

be a harbinger of London’s housing future.

By post-crisis we are referring not to the

definitive end of crisis but rather to the

immediate aftermath of the extreme struc-

tural conditions and uncertainties that

characterised the dramatic crisis events of

2007–2008 and which can now be seen as

facilitating new rounds of ‘accumulation by

dispossession’ (Harvey 2003). While the

suddenness and severity of the global finan-

cial crisis conjured illusions that the neo-

liberal game was up, in reality, the co-consti-

tutive relationship between finance and urban

space so central to neo-liberalisation has con-

tinued to develop with new asset classes

emerging and new financial and investment

strategies being pursued. This paper focuses

on one such post-crisis development—the

vulture-like move by private equity firms

and other institutional investors to accumu-

late wealth from the dispossession experi-

enced by millions of people through

foreclosures (repossessions) of distressed

residential real estate and mortgages. These

corporate vultures precisely target crisis con-

texts, exploiting household precarity, home

loss, state programmes to recapitalise banks

through buying up and selling on toxic

debts and assets, and the wider structural

reverse from home ownership to renting

that was kick-started by the global financial

crisis.

This paper tracks the rise of GCLs in four

of the worst-hit national housing markets

during the 2007–2008 financial crisis—the

USA, Spain, Ireland and Greece—and exam-

ines what this might tell us about the possible

future trajectory of the London housing

system. A first section draws out what we

call the ‘Blackstone Connection’ between

our four post-crisis urban contexts, showing

how GCLs like Blackstone—one of the

world’s largest private equity firms—are

taking over and profiting in these landscapes.

We then analyse the finance-led real estate

boom and bust in the countries mentioned

above, subsequent state action to restore

this mode of accumulation and the nature of

the re-emerging real estate–finance link

with respect to the fundamental aspects of

GCLs’ role in the restructuring of the post-

crisis housing markets. The analysis is built

on a comparative methodology that traces

similar trends and processes over the boom,

bust and post-crisis periods in each national

housing system using both official data and

an interpretative account of how state pol-

icies, regulatory structures and investor

322 CITY VOL. 20, NO.2

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activities are transforming and reorganising

the relationship between finance and urban

space. We then apply that analysis to emer-

ging developments in the political economy

of London’s housing system, arguing that

despite the present (low) exposure of

London residential property to GCLs and

major entry barriers, the picture is beginning

to change in ways analogous to these other

countries, reinforced by the concerted

efforts of the state and a league of real

estate–financial complex intermediaries to

rapidly make markets, and create new asset

classes. While acknowledging that none of

the comparators represent cases directly ana-

logous to London, and that we are employing

highly variegated and diverse national and

urban contexts to comment on a single city,

we nevertheless discern clear lessons for

London from a comparative analysis of

these national case studies. We conclude by

arguing that a key task for activism in pre-

venting London’s housing crisis from becom-

ing a future corporate dystopia is to block off

the main entry point to global corporate

landlordism in London, namely, the current

government’s privatisation assault on public

and social rented housing.

The Blackstone Connection: the rise of the

global corporate landlord

On 14 October 2015, housing activists in the

USA and Spain organised the third global day

of action against Blackstone under the banner

‘#StopBlackstone Our Homes Are not a

Commodity’. The campaign’s international

focus on Blackstone follows the firm’s

recently acquired status as the largest single

owner of repossessed homes and non-per-

forming mortgage loans in the USA and

Spain, respectively, making it arguably the

leading global corporate residential landlord.

Blackstone’s poor treatment of its tenants and

its market-leading position have fuelled a

growing movement to demand it stop

buying occupied, foreclosed and subsidised

(public or social) housing, as well as ensure

that 25% of its housing in any city is afford-

able to people on low incomes (Right to the

City Alliance 2015). But Blackstone has also

become a symbolic nemesis for housing cam-

paigners, an example of how the ongoing

decline in home ownership rates, constrained

mortgage credit and a post-crisis surge in

rental demand are enabling global investment

companies to become private landlords with

unprecedented power over their tenants,

who have in turn faced the loss of rent subsi-

dies, unwarranted eviction notices, and exor-

bitant rent increases and additional charges

(Call, Powell, and Heck 2014; Dowsett

2014; Garcia 2015; Ingliss 2015; Van der

Voo 2015). Facilitated by enabling states

and available private finance, GCLs like

Blackstone are targeting severely underva-

lued property markets, where large-scale

acquisition of (distressed) residential

assets—ideally high volume portfolio pur-

chases—can be executed rapidly, before the

housing market ‘normalises’. The devaluation

of the targeted housing markets, the potential

for impressive capital gains later and the

opportunity to use residential assets as the

basis for financial instruments means they

offer a formidable income yield. Or, as Black-

stone CEO Steve Schwarzman stated in 2010

describing his firm’s strategy in post-crisis

Europe as ‘basically waiting to see how

beaten up people’s psyches get, and where

they’re willing to sell assets ... You want to

wait until there’s really blood in the streets’

(Irish Independent 2014).

While all kinds of investors have waded

into the distressed real estate market, the

entry of institutional investors, and specifi-

cally private equity firms like Blackstone,

deserves special attention by those organising

for a more just housing system. Private equity

firms raise capital from large institutions such

as pension funds and insurance companies to

leverage further loans from banks and capital

markets in order to pursue investments. One

strategy is opportunistic investments in high-

risk/high-return markets. In an era marked

by high liquidity and low yields, private

equity strategies attract institutions seeking

BESWICK ET AL.: SPECULATING ON LONDON’S HOUSING FUTURE 323

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to garner larger returns for their clients, for

example, pension holders (on these dynamics

in the lead up to the global financial crisis, see

Acharya, Franks, and Servaes 2007; Creswell

2008). As its name indicates, private equity is

not publicly offered, making its funds and

actors far more opaque than publicly listed

ventures. The combination of light-touch

regulation and low transparency can make

private equity firms far less accountable to

both investors and people on the ground,

such as tenants. This is of particular concern

in the case of distressed/opportunistic

private equity strategies, which by nature

are high risk, frequently short term and

often associated with loading assets with

unsustainable debt (Creswell 2008; Fields

and Uffer 2014). Institutional investors also

have an edge over smaller actors: they can

buy in very high volumes thanks to credit

facilities from major retail and investment

banks and equity financing from public

pension funds (Perlberg and Gittelsohn

2013; Burns 2015). In-house expertise allows

them to analyse markets, target purchases

and engage in financial engineering to maxi-

mise returns. The volume of repossessed

homes and distressed mortgages consolidated

under the ownership of banks and asset man-

agement companies (AMCs) represents a new

canvas for institutional actors to capture

financial rents, for example, issuing rent-

backed financial instruments or repackaging

distressed loans into bonds. The result is the

centralisation of housing ownership under

the control of global investment companies,

who are tying residents into capital markets

even after the mortgage relation has been

severed.

The institutional investor-as-landlord

model is the most developed in the USA,

where private equity firms started buying

up and renting out repossessed detached

(single-family) homes as early as 2008

(Brennan 2013). In 2012, some of the

world’s largest real estate private equity

firms, including Blackstone and Colony

Capital, followed early entrants like Way-

point into the market. They rapidly

accumulated large property portfolios: Black-

stone’s rental subsidiary Invitation Homes

controls about 50,000 rentals, followed by

American Homes 4 Rent’s 38,000 homes

and Colony Starwood Homes’ 30,000

(Gopal and Perlberg 2015). Despite control-

ling a small share of the market overall

(about 1% of the nation’s 15 million detached

rental homes, cf. Zandi and Lafakis 2015), tar-

geted acquisitions by institutional investor-

landlords have profoundly impacted Sun

Belt markets, including Phoenix, Atlanta

and Tampa. Investors have also been entering

the market for distressed real estate assets in

Spain, taking control of large amounts of

land and housing, primarily in the urban

centres of Madrid and Barcelona (Mendez

and Pellicer 2013; Baker 2014). As in the

USA, Blackstone appears to be the dominant

player, undertaking extensive and varied pur-

chases. The firm edged out competitors like

Goldman Sachs, Oaktree Capital Group,

Apollo Global Management and Lone Star

Funds in a bidding war for the entire

defaulted mortgage portfolio (consisting of

94,000 loans) of failed bank CatalunyaCaixa

(at a 40% discount, paying only E3.6 billion

for a portfolio valued at E6.5 billion). It has

also purchased close to 4000 units of

housing directly (much of it state-subsidised),

and a portfolio of 29 completed residential

developments and vacant land for construc-

tion. In Ireland, similar to Spain, state-led

deleveraging institutions have acted as

‘market makers’ for institutional actors,

selling almost exclusively to US private

equity firms and hedge funds, including

Blackstone, Colony Capital, Lone Star

Capital and Oaktree Capital (Cushman and

Wakefield 2015). So far the surge of foreign

investment capital has primarily been

directed into Ireland’s commercial real estate

market with debt sales in 2014 amounting to

E21 billion suggesting an enormous quantity

of transactions (Goodbody 2015). Some of

the investment-grade assets being purchased

in Ireland are development land, which

firms plan to develop as rental housing

(Byrne 2015a). In Greece too, firms are

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attracted to distressed commercial loans, as

well as absorbing Greek companies, or con-

trolling Greek banks. In Athens, Blackstone

part-owns a real estate developer building a

resort on the site of the former airport and

also owns a former factory site where it

wants to build a shopping mall. Oaktree

Capital, Dolphin Capital and Goldman

Sachs have also been active in buying up com-

panies, public land and development sites

(Hadjimichalis 2014; Vourekas 2014).

Having introduced the basic concept of

the ‘global corporate landlord’ model

through the connecting activities of Black-

stone in the post-crisis urban contexts of

the USA, Spain, Ireland and Greece, we

now offer a more considered comparative

analysis of how the crisis of neo-liberal

urban financialisation and subsequent state

action to resuscitate capitalism in these

four very different countries has opened

the door to GCLs.

Preparing the ground for vulture capital:

the crisis of urban financialisation in the

USA, Spain, Ireland and Greece

The sudden rise of GCLs in North America

and Europe outlined in the previous section

may appear as a spontaneous post-crisis

development but it was strongly presaged in

the process of neo-liberalisation itself that

has driven the growing interdependence

between urbanisation and financialisation

over the past 40 years. Finance capital has of

course always played a central role in (re)de-

veloping urban infrastructures necessary for

the reproduction and expansion of capitalist

relations (Harvey 1982; Moreno 2014). But

neo-liberalisation transformed the built

environment itself into a mechanism for

value capture by finance as a mode of

accumulation (Weber 2002; Newman 2009).

This integration of finance and urban space

in turn rendered real estate increasingly

‘liquid’, that is, converted it into a tradeable

income-yielding asset (Coakley 1994; Guir-

onnet and Halbert 2014). This ability to

trade investments in property on global

markets in the form of securities, derivatives

and loan portfolios (Weber 2002; Gotham

2006) combined with the neo-liberal state’s

marketisation mission that removed borders

to capital mobility, withdrew from playing

a strong direct or regulatory role in providing

social and physical infrastructure (including

public housing) and incentivised owner occu-

pancy by expanding access to mortgage credit

(Lo´ pez and Rodrı´guez 2010). The outcome

was to facilitate finance capital’s penetration

throughout society through household

indebtedness and intensify the finance–real

estate relation, exacerbating capitalism’s

fault lines through cycles of speculation-

fuelled crisis that reached unprecedented

levels in 2007–2008 and hit our four

country cases especially hard.

The importance of expanding home own-

ership to ever wider sections of society was

a central feature of political life in the USA,

Spain, Ireland and Greece from the early

1990s. As home ownership grew, historically

low interest rates attracted flows of capital

into the real estate sector due to its promise

of high returns and its reputation as a stable

asset class. Economic policies provided tax

incentives for promoting home ownership

and property development, while planning

amendments by pro-growth planning

regimes in Ireland, Spain and Greece liber-

ated land for further construction. The

global credit boom made both consumer

and commercial mortgages widely and

easily available; even households with inse-

cure and low-paid jobs could access mortgage

debt from so-called sub-prime lenders,

helping to fuel the real estate bubble. It was

during this period that the transformation of

housing from a physical commodity into a

financial asset could be observed, either

through securitisation (primarily in the

USA, but to some extent also in Spain) or

the growing interrelationship between local

real estate and global circuits of capital (pri-

marily the Irish and Spanish cases), with

ensuing market volatility (especially Spain

and Greece). The financialisation of housing

BESWICK ET AL.: SPECULATING ON LONDON’S HOUSING FUTURE 325

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generated vast increases in house prices

everywhere from 1997 to 2008—doubling in

the USA, Spain and Greece and tripling in

Ireland (see Table 1).

This financialisation of housing in each

national context was built on a fundamental

contradiction with circuits of capital increas-

ingly organised around investment and

trading in mortgage debt and derivative pro-

ducts, which depended on rising asset prices

and increasing numbers of people taking on

higher levels of personal debt to access

housing. In the USA, as securitisation came

to dominate the mortgage market, mortgages

themselves became the raw materials for

globally traded financial instruments

(Newman 2009), ending up as ‘collateralised

debt obligations’ (CDOs) in the books of

European banks, distributing the risk

throughout the system (Aalbers 2008). As

US house prices stalled after 2006, sub-

prime borrowers began defaulting in higher

numbers, foreclosures increased and the

financial instruments crafted from these

loans became illiquid, setting off the chain

of events that rapidly became a global finan-

cial crisis (Harvey 2011; Lapavitsas 2013;

Immergluck 2015). National housing

systems erupted into chaos resulting in the

profound devaluation of both property itself

and related financial assets (see Saegert,

Fields, and Libman 2009; Immergluck 2010

for the USA; Colau and Alemany 2014,

Janoschka 2015 for Spain; Norris and Byrne

2015 for Ireland; and Nikolidaki 2015 for

Greece). What became clear in 2008 was the

extent to which markets and economies

around the world were interconnected, as

the collapse of retail and investment banks

in the USA like Lehman Brothers led to a

housing crisis and destabilised the banking

sector in Europe, leading to heightened

public deficits (see Spain, Italy and Portugal)

and default (Greece) in Southern Europe.

Wide sections of the financial system

became insolvent due to the collapse of

asset values, proliferation of distressed debt

and the dispersal of risk throughout the

financial system via ‘toxic assets’.

Tab le 1 The boom– bust cycle in the USA, Spain, Ireland and Greece compared

USA Spain Ireland Greece

The boom

years

Peak housing

production

6.7 units per 1000 inhabitants 17.7 units per 1000 inhabitants 18.0 units per 1000 inhabitants 11.1 units per 1000 inhabitants

Price increase, 1997

to peak

93% (nominal), 59% (real) 203% (nominal), 118% (real) 294% (nominal), 187% (real) 173% (nominal), 103% (real)

2007 homeowner

rate

68.7% 80.6% 78.1% 75.6%

The crisis

years

Foreclosures 7 million from 2007 to 2014 375,000 since 2008 (nearly 7%

of all mortgages)

Negligible; 15% (100,000) of

mortgages in arrears

14,000 in 2014–15; huge

increase predicted for 2016

Housing price

decline

27% average decrease

(tipping point: April 2011)

43% average decrease (tipping

point: March 2014)

49.5% average decrease (tipping

point: January 2013)

53% average decrease no tipping

point in sight

Homeowner rate

decline

5.3% drop (to 63.4%, 2015) 2.9% drop (to 77.7%, 2013) 8.2% drop (to 69.9%, 2013) 1.6% drop (to 74%, 2014)

Statistical data: OECD, Eurostat.

326 CITY VOL. 20, NO.2

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From crisis to opportunity

While the urban legacy of the financial crisis

continues to evolve with further retrench-

ment of public services and redistributive

policies under ‘austerity urbanism’ (Peck

2012), what we are most interested in here,

however, are the ways in which the political

economic consequences of the crisis have

served to produce the terrain for a new

round of post-crisis financialisation. As the

previous discussion of Blackstone indicates,

this has occurred via a series of transform-

ations and reorganisations in the relationship

between finance and urban space, many of

which have been facilitated and promoted

by states. Below we discuss these transform-

ations under the following categories: dis-

tressed assets; state re-financing and the ‘bad

banks’; new financial actors; and new invest-

ment strategies.

Distressed assets. The periodic devaluation of

capital invested in the built environment has

long been a feature of capitalist crises

(Harvey 1982). In the current context this

process is reflected in the proliferation of dis-

tressed real estate assets and related financial

commodities that now serve as the vehicle

for a renewed finance–real estate complex

based on a different set of key actors and

new investment strategies. House prices fell

by approximately 27% in the USA, 43% in

Spain, 45% in Ireland and 53% in Greece

(see Table 1), and large swathes of mortgage

loans turned bad, particularly those issued

at the 2005–2007 peak of the boom in most

countries to the extent that roughly 15% of

all mortgages in Ireland and more than 30%

in Greece are in arrears. This price –mortgage

spiral has contributed to the more than 7

million foreclosures completed in the USA

(accounting for 15% of all mortgages) and

in excess of 375,000 in Spain. Beyond the resi-

dential market, investment-grade commercial

assets have been equally badly hit. Current

estimates suggest that nearly two-thirds of

the E879.1 billion of ‘non-performing loans’

(i.e. distressed debt) held by European

banks relate to real estate (BTG Global Advi-

sory 2015).

State re-financing and the ‘bad’

banks. Selective state intervention in the

management of both the wider financial

system and specifically with regard to these

distressed assets has been vital to the re-estab-

lishment of the financialisation–real estate

nexus since 2008. One strategy has been

state re-financing of the banking system.

The US Government spent $4.5 trillion

between 2008 and 2014 purchasing illiquid

assets and troubled mortgages and recapita-

lising banks in an effort to strengthen finan-

cial markets and bolster the housing market.

This ‘quantitative easing’ allowed financial

institutions to clear up their balance sheets

and avoid further losses; meanwhile the US

central bank has held interest rates near zero

for several years, sending investors abroad

in search of profitable yield. Governments

in the so-called ‘PIGS’ countries of Portugal,

Ireland, Greece and Spain (a derogatory term

for those European Union (EU) member

states unable to re-finance their government

debt or to bail out over-indebted banks on

their own) have ploughed similarly dizzying

quantities of money into their respective

financial system, bringing about fiscal and

sovereign debt crises across the European

periphery: Spain’s government spent E14.5

billion to recapitalise and merge regional

banks from 2010 to 2012, then used E41

billion in bailout funds from the EU to natio-

nalise the regional banks; in Ireland the gov-

ernment spent E65 billion recapitalising and

ultimately nationalising much of its belea-

guered banking sector; and in Greece more

than E90 billion were spent for bank recapi-

talisations. While in the initial recapitalisa-

tions the state participated as a basic

shareholder, after Greece’s recent third reca-

pitalisation in November 2015, ownership

of banks’ shares passed to international

banks and hedge funds (Alexandri and

Janoschka, forthcoming). Interestingly, since

2011 Blackstone has been responsible for

stress testing the Greek banking sector, and

BESWICK ET AL.: SPECULATING ON LONDON’S HOUSING FUTURE 327

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in September 2015 was hired as an expert

advisor by the Central Bank of Greece on

the issue of non-performing loans.

A second strategy for dealing with dis-

tressed assets has been the establishment of

the so-called ‘bad banks’ or AMCs to

acquire and manage distressed assets (Byrne

2015b). Spain’s bad bank, SAREB (Manage-

ment Company for Assets Arising from the

Banking Sector Reorganisation), was estab-

lished in 2012 and took control of debts,

repossessed homes, stalled property develop-

ments and land from across the Spanish

banking sector. Ireland’s NAMA (National

Asset Management Agency) fulfils the same

role, acquiring E72 billion in real-estate-

related debt since its foundation in 2010,

equal to a remarkable 47% of Irish GDP

(gross domestic product), from across the

banking sector (Byrne 2015b). From a differ-

ent angle, in Greece where the need for a ‘bad

bank’ has been solved through the takeover of

its national banks by international hedge

funds, the rescue and recapitalisation of the

banks was accompanied by vast increases in

direct and indirect taxation related to prop-

erty ownership, inaugurating a process of dis-

possession through unpaid taxes when at the

end of 2014 foreclosures were ordered on

outstanding tax payments to public and

private actors. In all four countries, monetary

policy and the reorganisation of assets went

hand in hand, orchestrating a flow of capital

from the public to the financial system.

New financial actors. The proliferation of

distressed (and thus extremely devalued)

assets and state structures to acquire and

manage them in the wake of the crisis has,

from a financial investor perspective, created

vast new ‘opportunities’ and ‘markets’. And

yet, the very crisis-ridden nature of the finan-

cial and real estate sectors in the USA, Spain,

Ireland and Greece has required new sources

and forms of capital to exploit the moment.

This has seen a new set of financial actors

rise in influence, namely, private equity

firms, hedge funds and other ‘alternative

investment funds’ that specialise in distressed

assets. These financial actors, often referred

to as ‘vulture funds’ due to their focus on

countries and companies in crisis, have been

snapping up devalued direct property assets

and non-performing loans on both sides of

the Atlantic. Real estate investment trusts

(REITs) have also emerged as important

actors, publicly listed vehicles that allow for

real estate investment without buying bricks

and mortar property, making for a highly

liquid investment. REITs are shareholding

companies and investing in their shares is

another investment avenue for ‘vulture

funds’. Legislation providing for REITs was

either introduced or amended after the crisis

in Spain, Ireland and Greece, and they have

become important investors in distressed

debt (see below). Similar to the previous

boom cycle, substantial tax breaks and other

state measures accompany this strategy of

orchestrating a new cycle of accumulation

by dispossession in the post-crisis era.

The scale of this transformation certainly

gives cause for concern. By mid-2015, US

institutional investors had amassed half a

million single-family rental (SFR) homes,

and just seven of the largest firms currently

control more than 150,000 properties (with

Blackstone and its subsidiary companies,

such as Invitation Homes or Bayview Asset

Management, heading this list). In European

commercial debt markets an estimated E163

billion of distressed debt was offloaded

between 2012 and mid-2015, 27% of which

was sold on by the bad banks. Ireland has

led the way here with its bad banks,

NAMA and the Irish Banking Resolution

Corporation (IBRC), the largest vendors of

distressed real estate assets in Europe in

2014, responsible for just under a third of

the E96.7 billion of distressed real estate

asset sales in Europe in 2013 and 2014.

Spain’s SAREB was set up two years after

NAMA but has already deleveraged assets

worth E20 billion to institutional investors

(Cushman and Wakefield 2015) as part of its

legal requirement to deleverage assets within

15 years (Font and Garcia 2015). A signifi-

cant majority of European distressed debt

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has been bought up by just a handful of

‘vulture funds’ dominated by US private

equity: 33% of all such assets disposed

between 2012 and 2014 were bought by

Lone Star Funds, 17% by Cerberus Asset

Management and 10% went to CarVal

Asset Management (Cushman and Wakefield

2014). In the Irish case, for example, 90% of

NAMA assets have been purchased by US

private equity firms (Byrne, forthcoming).

New investment strategies. The entry of

‘vulture’ capital signals a significant trans-

formation in the urban housing systems of

post-crisis countries. In short, diverse facets

of the financial–real estate complex are

being concentrated in one set of global

actors who are gaining control of both

direct property assets and financial assets

linked to property. While it is too early to

understand the implications of these actors’

investment strategies, some of the dynamics

emerging in the private rented sector seem

to us both illuminating and concerning. As

our discussion of Blackstone has already indi-

cated, rental properties have emerged as a

major new ‘asset class’ for the new breed of

investor, underlining how housing realities

and financial dynamics are driving new

rounds of financialisation. Two features of

housing systems in crisis-hit countries are

particularly salient here—the plummeting of

property prices on the one hand and the

drying up of mortgage credit and with it pos-

sibilities for investment in mortgage markets

on the other. In this context, and given the

continued and exacerbated unavailability of

social housing, the private rented sector has

grown quickly and with housing stock avail-

able at exceptionally low prices, investor

yields in the rental sector have become attrac-

tive. We have already noted that private

equity and institutional investment in US

rental markets has exploded in the wake of

the crisis: as of July 2015, eight companies

had issued 21 SFR securitisations, covering

the rental income stream of 84,000 properties

with a market value of more than $16 billion.

Despite their novelty, from the start these

instruments have been subject to more

market demand than can be accommodated

(Corkery 2014; Tricon Capital Group 2015).

As the market evolves it remains to be seen

whether corporate landlords are gearing

their investments with excessive leverage

that could affect their ability to effectively

manage the properties, which could have pro-

blematic implications for both tenants and

bond investors. Meanwhile six SFR REITs

in the USA are now publicly listed on the

stock market. REITs have also emerged as a

key vehicle for re-financialising housing via

the rental sector in Spain (called socimis)

and Ireland. Indeed, Ireland’s largest land-

lord—the Irish Residential Real Estate

Investment Trust (IRES)—with 1200 apart-

ments largely bought from NAMA is now a

REIT, largely financed by Canadian firm

CAPREIT, which aims to ‘consolidate the

fragmented Irish rental market’ (IRES

website 2015); IRES has announced it hopes

to increase rents by a startling 20% across

its portfolio in 2015 (Byrne 2015a).

The involvement of global finance in local

real estate markets is far from novel; indeed,

it was perhaps the central driver of the

global financial crisis. What is novel,

however, is the nature of the flows of

capital which characterise the post-crisis

context. During the boom, property was

linked to global flows via numerous

avenues. In the USA, this infamously took

the form of mortgage securitisation and

related derivative products. In Europe, cer-

tainly in Ireland, Spain and Greece, this pri-

marily took the form of national banks

borrowing on inter-bank markets and

lending into their respective national con-

struction and property sectors. In all these

cases, the key actors were in some sense fam-

iliar: property developers; mortgage brokers;

and domestic banks. But the rise of GCLs is

transforming the world of urbanisation and

finance. A housing estate in a local neigh-

bourhood of Madrid can now be directly

owned and controlled from the heights, so

to speak, of the global financial system,

largely without the involvement of domestic

BESWICK ET AL.: SPECULATING ON LONDON’S HOUSING FUTURE 329

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actors. In a sense, then, the link between local

property and global flows of capital has been

intensified. The implications of tenants and

for housing markets in Europe are as yet

unclear, but the example of Blackstone and

the US experience (Call, Powell, and Heck

2014; Fields 2015; Ingliss 2015) suggests that

the cost of rent and security of tenure are

likely to be the first victims of this emerging

‘investment’ strategy.

Standing back from this comparative

picture and thinking about how it relates to

the UK, and particularly its global city of

London currently gripped by a housing

crisis that in many ways sets it apart from

the rest of the national housing system, our

final section below now explores what the

post-crisis rise of the GCLs in the USA,

Spain, Ireland and Greece might realistically

imply about the long-term denouement of

the London housing crisis.

The London housing crisis of 2015: entry

point for global corporate landlords?

Connecting London’s housing crisis to

foreign investors has become a cause ce´le`bre

in recent years with lurid media tales of bil-

lionaire oligarchs buying up mansions they

then leave to crumble whilst empty, and

foreign non-resident buyers vacuuming up

the vast majority of homes put up for sale,

thus preventing local residents from buying

and helping to inflate prices and rents for

everyone (Hill 2013). Some commentators

have gone as far as to claim that the capital’s

housing stock provides a ‘new global

reserve currency’ (Goldfarb 2013). However

accurate that analysis might be, it remains

firmly rooted in the present and firmly

focused on individual overseas ownership,

thus leaving alone the crucial issue of finan-

cialisation and the future role of GCLs in a

post-crisis London housing system.

Looking far further ahead, we want to

explore what the rise of GCLs elsewhere

might mean for London.

On the surface, current evidence suggests

the answer could be ‘very little at all’. The

UK has by far the least financialised rental

sector among comparable advanced capitalist

countries (Faulkner 2015) with corporate

residential landlordism and institutional

investment at less than 1% (DCLG 2011;

Investment Property Forum 2014). By mid-

2013, institutional capital held just one-fifti-

eth of the £837 billion of private rental

stock in the UK (Investment Property

Forum 2014), and as Table 2 shows, both

the contribution of direct GCL investment

and the exposure of UK REITs to the

private rental sector (PRS) are at present

insignificant.

There are three compelling reasons why

this picture is unlikely to change either now

or in the foreseeable future.

(1) Structural limits to institutional invest-

ment in private renting. Private renting

in the UK was a marginal and margina-

lised tenure for much of the 20th

century as a result of state policies in

favour of owner occupation and public

house building. By the 1990s, the PRS

housed barely over 10% of Londoners

(Greater London Authority 2014).

Table 2 Global corporate landlords and real estate

investment trusts in the UK private rental sector

Proportion of UK PRS stock directly held by

overseas investors (GCLs), by value

0.2%

Proportion of UK PRS stock held by REITs, by

value

0.3%

Proportion of overseas investors’ (GCLs) directly

held PRS holdings as % of total UK housing

stock, by value

0.04%

Proportion of REITs’ PRS holdings as % of total

value of UK housing stock

0.06%

The GCL ﬁgures only account for whole block purchases

and not for purchases of individual units. This is due to the

availability of data and is not expected to make a large

difference to the ﬁgure. All reviewed sources agree that

institutional exposure to residential rental assets is

extremely low.

Source: DCLG (2011) and Investment Property Forum

(2014).

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While the neo-liberal assault on public

housing and the state-led efforts to re-

boot the PRS through the roll-out of

housing demand subsidies (housing

benefit) have seen it rapidly re-emerge

to house just under one-third of the

population, this has so far been driven

by individual not institutional private

landlords with 78% of landlords in the

UK PRS owning just one unit, and 95%

owning less than four (DCLG 2011).

The PRS renaissance has therefore been

accompanied by a shift towards wide-

spread small-scale landlordism, linked

to the rise of asset-based welfare (Lowe

2011). This poses major entry barriers

to the existing PRS for GCLs.

(2) Crisis but no systemic crash. In contrast to

how GCLs entered the post-crisis urban

landscapes discussed in this paper,

London and the wider UK context

managed to avoid the catastrophic

impact of the global financial crisis on

the housing system. There is therefore

currently no giant pool of distressed

assets that can be systematically acquired

by vulture capital. London experienced a

sharp but relatively modest decline in

average house prices by 17% between

2008 and 2009, returning to their pre-

recession levels by 2012 and now stand-

ing at 41% higher than that low-point

figure (Land Registry 2015). Despite

rising unemployment and mortgage

arrears, repossessions peaked at 0.43%

of all mortgages in 2009 and dropped to

0.26% by 2013 (DCLG 2014)—com-

pared to 15% and 7% in the USA and

Spain, respectively. Reasons for the com-

paratively small scale of repossession

include the central bank’s decision to

drop the base interest rate from 5.75%

in 2007 to 0.5% in 2009 where it cur-

rently sits, state rescue schemes for mort-

gage holders, and a semi-formalised pact

between the state and financial insti-

tutions encouraging the latter to exercise

restraint in their repossession activity

(Wilson 2014). This latter measure

could be interpreted as a quid pro quo

for the scale of the rescue package gifted

to the financial sector in the wake of the

credit crunch. Given the systemic inter-

dependence between the UK economy

and the housing market—and the poten-

tial for economic collapse should interest

rates rise, banks abandon forbearance

and house prices fall, with all its political

implications—it is unlikely the UK Gov-

ernment would do anything to change

these current favourable conditions in

the near future (see Edwards 2015).

(3) London’s over-priced property market.

Alongside unavailability of distressed

real estate, a third barrier to GCLs is

London’s overvalued housing market.

UBS, the major Swiss investment bank,

reports that London property is the

most over-priced of any major city in

the world, and urges ‘caution’ with

respect to the city, which scores higher

than any other on their Global Real

Estate Bubble Index (UBS 2015). Over-

valuation combines with under-avail-

ability to explain the current absence of

GCLs in London’s rental market and

while London property may provide

high capital returns, the entry costs are

arguably prohibitive in London.

However, while the present low levels of

GCL exposure in London, the hitherto

absence of a crisis sufficient to prepare the

ground for the next round of financialisation

of housing in the city and the historical entry

barriers to GCLs in the PRS might reflect the

present pathway, there is another way of

viewing the London housing crisis in ways

far more relevant to a GCL takeover in the

long term. We have identified three broad

gateways through which this can happen,

and in fact already has:

(1) The UK’s ‘bad bank’ and its sub-prime

mortgage auction. Although the UK

avoided a full-scale housing market and

mortgage meltdown, many UK banks

including Northern Rock were fatally

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wounded by the global financial crisis

and were effectively nationalised by the

UK Government. Beneath the political

radar, in 2010, the government set up

its own state-owned deleveraging

vehicle (‘bad bank’) called UK Asset

Resolution (UKAR), taking over the

toxic assets it held from the nationalisa-

tion of Northern Rock and Bradford

and Bingley, who had embraced sub-

prime lending and extensive securitisa-

tion. By 2011, UKAR’s mortgage book

was worth £77 billion (UKAR 2011),

making it larger in book value than

Spain’s SAREB and similar to Ireland’s

NAMA. Like its Irish and Spanish

equivalents, UKAR has been rapidly

deleveraging these distressed, underva-

lued assets by selling them on to a

coterie of private equity funds and

investment banks queuing up to take

them off their hands, with its book

value reduced to £51.1 billion by

March 2015 (UKAR 2015). UKAR’s

latest sale was of the Granite portfolio,

transferredfor£13billiontoprivate

equity firm Cerberus. It beat off compe-

tition from rival consortia of Goldman

Sachs/Blackstone and JPMorgan/

CarVal to buy 118,323 securitised mort-

gages, including many of Northern

Rock’s now infamous ‘Better Together’

loans that allowed mortgagors to add a

£30,000 loan on to a full mortgage tar-

geted at sub-prime borrowers—the pin-

nacle of the UK’s pre-recession credit

binge (Dunkley 2015). Cerberus also

acquired a £3.3 billion portion of TSB’s

mortgage debt, giving it control over

an additional 34,000 mortgages across

the UK (Dunkley 2015). While we do

not know how much London property

is contained in these two portfolios,

these transactions, and others like

them, reveal GCLs’ readiness to partici-

pate in the financialisation of the UK

housing market and gain a foothold in

preparation for a more serious phase of

the London housing crisis to come.

(2) State-led financialisation of the ‘new’

PRS. GCLs might struggle to access the

existing PRS dominated by individual

landlords, but an alternative entry route

is currently being prepared through a

state-led project to transform the

London rental property market into an

internationally tradeable asset class.

This project can be visibly traced at

least as far back as 2007 at the height of

the housing boom when the Labour

Government created the legislation

allowing REITs to be set up in the UK.

But in reality it has much deeper histori-

cal roots laid during the decades of public

housing privatisation and the major

deregulation reforms of the PRS during

the late 1980s that re-empowered

private landlords to raise rents and evict

tenants. This laid the basis for the PRS’s

rapid re-emergence and predicted

growth over the next 10 years with

London experiencing the potentially sys-

temic tenure shift towards private rental

we have observed in the other locations

(Whitehead et al. 2012; Greater London

Authority 2014). The state-led project

works alongside an informal ‘discourse

coalition’ (Hajer 1993) of real estate

intermediaries to construct a compelling

case for GCL investment in a financia-

lised ‘rental revolution’ (Knight Frank

2014) that would benefit investors while

solving London’s housing affordability

crisis. The financialisation of student

housing has trail blazed this agenda.

Purpose-built student accommodation

was recently declared a ‘mature and glob-

ally recognised’ asset (Savills 2015), and

student housing REITs are now listed

on the London Stock Exchange. The

£4.2 billion of investment in the first

five months of 2015 already surpassed

any previous year-long total, and over-

seas capital accounted for over 90%,

dominated by North American private

equity and institutional investors

(Savills 2015). No wonder given the star-

tling 97% average increase in student

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housing rents in the decade to 2012–13

(National Union of Students 2012;

Greater London Authority 2015).

Holding up student housing as a model

of rental market financialisation, the

2010–15 Conservative-led UK Coalition

Government turned its focus on the

mainstream rental sector with the

launch of a review in 2012 into the ‘bar-

riers to institutional investment in

private rented homes’ (DCLG 2012). It

was led by none other than Sir Adrian

Montague, a City of London veteran

with a long track record in private

equity investment in public projects,

who in a previous appointment to the

Treasury pioneered the Labour Govern-

ment’s use of the Private Finance Initiat-

ive between 1997 and 2001 that opened

the door to more than £300 billion

worth of lucrative contracts for private

corporations investing in public infra-

structure. His eventual report outlined

four areas for strategic state intervention:

market making; pump priming; creating

and incentivising new investment

vehicles; and the eradication of elements

unattractive to investors. In line with

this roadmap, in 2013 a market-making

‘PRS Taskforce’ was established within

the Department for Communities and

Local Government to ‘kick-start the

new private rented sector ... character-

ised by a growing number of large scale,

professionally managed developments,

owned and managed by institutional

investors’ (House of Commons 2015,

12). A £700,000 ‘Build to Rent’ fund

was established in 2012, increased to

£1.1 billion in 2013, to help finance con-

struction. Despite mixed success so far,

the asset class is nevertheless beginning

to emerge with 21,388 build to rent apart-

ments either completed, under construc-

tion or in the planning process as of

October 2015 (Patnaude 2015)—a

decade ago the figure was nearly zero—

with 93.4% of completed homes built in

London. Early movers in the sector

include: Essential Living, who are capita-

lised by M3 partners, a London-based

manager of global funds; Get Living

London, offering 1439 rental homes on

the former Olympic site in East

London and owned by the Qatari sover-

eign wealth fund; and Fizzy Living,

backed by £200 million from Abu

Dhabi Investment Authority.

Following a slow start, UK REITs are

also now beginning to flourish from

new incentives including abolishing the

2% entry charge and zero capital gains

tax with around 40 UK REITs listed,

with capitalisation of over £33 billion

(British Property Federation 2015). The

majority of REITs centre on commercial

real estate, although some hold mixed

portfolios, featuring residential and com-

mercial. The first residential-only

vehicle—the Mill REIT—launched in

2014 and focused on London, but was

liquidated in October 2015 citing a lack

of interested investors. However, there

are signs that London rental property is

becoming attractive to institutional

investors and private equity. According

to an industry consultant UK REITs

plan on devoting a quarter of their

future activity to residential projects,

and the government’s exemption of

financial capital from capital gains tax in

April 2015 may have been behind Lone

Star Capital’s acquisition in October

2015 of a portfolio of mixed-use UK

real estate assets for just under £1

billion. The REIT sector will have been

massively boosted by the government’s

2013 decision to change the law control-

ling the development of office buildings

meaning that empty offices can now be

converted into houses or flats without

planning permission. This creates a

further entry point for GCLs: as a

highly valorised central node in the

global financialised economy, the City

of London’s commercial property port-

folio represents a highly traded global

asset class where over 60% of the stock

BESWICK ET AL.: SPECULATING ON LONDON’S HOUSING FUTURE 333

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is held by overseas capital (Investment

Property Forum 2014). By converting

their empty offices to housing, GCLs

can overnight become major players in

the London housing rental market.

(3) Capturing the London rent gap through

social housing privatisation. Up to now,

the exposure of the social housing

sector to global financial flows and own-

ership has been extremely limited. The

exception has been the New Labour

Government’s experiment with the

Private Finance Initiative in public

housing regeneration which has seen

around 20 council estates in England—

including six in London—taken over on

long-term lucrative investment contracts

owned to varying degrees by offshore

infrastructure companies with often dis-

astrous consequences for residents and

the taxpayer (Hodkinson 2011; Hodkin-

son and Essen 2015). However, this

could now change as a result of the new

and highly aggressive phase of social

housing privatisation underway since

2010 (Hodkinson and Robbins 2013)

that threatens to generate multiple

routes through which a large pool of

social housing can be acquired by

GCLs as follows:

.The relaunched Right to Buy

(RTB) offers council tenants in

London a £102,000 discount on

the purchase of their council

home, and in the future all

housing association tenants being

able to buy their homes at equival-

ent discounts. Recent research has

found that at least 36% of former

council homes sold under the

RTB in London are now owned

by buy-to-let landlords (Copley

2014). There is no reason why the

new glut of ex-council homes des-

tined to enter the housing market

should not also find their way

into the hands of institutional

landlords.

.English local authorities will be

required to sell all their empty

council homes valued in the top

third most expensive properties

for the local area. For London, the

implications are stark: Shelter

(2015) estimates that 1433 council

homes would be forcibly sold

each year under the scheme with

up to 60,314 eventually affected.

But these stock numbers could

rise even further under plans to

legally compel social landlords to

charge market or near market

rents to tenants with an income of

over £40,000 in London and

£30,000 elsewhere. Consultancy

firm Savills estimates 60.1% of the

27,108 affected households in

London will neither be able to

afford market rent or be able to

buy their house under the RTB

(Brown 2015), placing them under

greater risk of eviction to the PRS

and growing the numbers of

empty council homes that could

be forcibly sold off as bulk sales

with institutional investors

waiting in the wings.

.Following a change in UK law in

2010, investors can now profit for

the first time from social housing in

Britain and the government has

been going to extra lengths to make

the existing social rented sector

attractive to institutional investors

by further deregulating rents and

tenancy protections. State funding

for social house building in

England is now conditional on

renting out new homes at up to

80% of local market rents; and the

government has created flexible

landlord-friendly tenancies by

ending statutory security of tenure

for new social tenants. It is against

this background that the recent, see-

mingly inconsequential, statutory

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reclassification of housing associ-

ations as ‘public non-financial insti-

tutions’, taking them out of the

charitable sector, and effectively

bringing them into the public

sector, now appears as a deliberate

act by the government to prepare

the sector for either full-scale dereg-

ulation or full-scale privatisation, but

in either scenario institutional inves-

tors and private equity can takeover

and profit (Wiles 2015). This is

because by reclassifying all housing

associations as public bodies, their

debt is placed onto the public

books, providing the state with a

ready and effective motive to

remove that debt by either deregu-

lating them further so as to prompt

a reversed classification, or by effec-

tively selling off the debt to inves-

tors. This ‘nationalise to privatise’

strategy (Wiles 2015) would bring

social housing in London (where

the most profitable estates lie) one

step closer to corporate takeover,

GCL capture and the consequent

loss of the city’s affordable rental

stock.

.Against a background in which

London Local Authorities are

operating under a rampant auster-

ity programme, and cuts to local

government have been higher than

almost any other public depart-

ment, many London urban auth-

orities are seeking to exploit the

‘rent gaps’ (Smith 1979) located in

their own public housing estates

(Watt 2009,2013), which are sited

in the most expensive real estate

market in Europe, to expand the

overall housing supply at the

expense of affordable and secure

housing under so-called ‘regener-

ation’ schemes. The motivation is

clear, and at times explicitly

acknowledged, with senior Labour

politician Lord Adonis

(unintentionally) adopting a rent

gap analysis in a recent influential

report urging councils to knock-

down and ‘regenerate’ estates,

commenting that there are ‘particu-

larly large concentrations of

council owned land in inner

London, and this is some of the

highest-priced land in the world’

(Allen and Pickard 2015). In order

to redevelop these estates, some

London local authorities are using

the opportunities afforded by the

global real estate fair, MIPIM,

each year, to attract global inves-

tors to finance and build new

homes and mixed-use develop-

ments, opening the door to GCLs.

What will actually happen with respect to

these three gateways remains conjecture and

speculation, but there is no doubting the

interest that global investors have in entering

the UK social housing sector and especially

its London portal. This was evidenced in

2011 when Hong Kong-based Chow Tai

Fook Enterprises Ltd—owned by billionaire

Cheng Yu-Tung—joined forces with two

other Hong Kong investors to acquire a £30

million stake (61%) in the UK’s Pinnacle

Regeneration Group. As well as wanting to

diversify their investments out of Hong

Kong’s over-heating property market, they

explained their main motive was the opportu-

nities created by government cuts to social

housing for investors to fill the hole

through regeneration partnerships with local

authorities and gain the ‘key into a door’,

namely, the door of London’s profitable

real estate market (Barwell 2011). Sensing

similar opportunities to profit from

London’s affordable housing shortage and

the upward pressure on rents and prices

everywhere, in the spring of 2014, a private

consortium purchased the New Era estate in

the London Borough of Hackney. Built in

the 1930s by a charitable trust in Hoxton,

the 96-flat estate provides affordable accom-

modation for working-class Londoners. Its

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new owners were led by Westbrook Partners,

a private equity firm headquartered in

New York specialising in international real

estate—an archetypal GCL—and primarily

invested in by US pension funds. On acqui-

sition, the consortium offered tenants the

chance to remain on the estate, provided

they could meet the new ‘normalised’ rents,

amounting to an increase of 400%. Amid

growing tenant and media opposition, West-

brook then served eviction notices for Christ-

mas, but were eventually forced to back

down and in December 2014 the estate was

transferred to a charitable landlord, the

Dolphin Square Foundation, who assured

tenants of continued affordable rents.

However, what this shows is how a new

class of investors are eschewing prime real

estate for which they could overpay in

favour of opportunities to buy into the

social housing sector that will generate

strong returns in the long run. This has par-

ticularly menacing implications for London

for the simple reason that despite four

decades of neo-liberal roll-back policies that

have decimated the overall public housing

stock by over 3 million homes and reduced

social renting from 30% to less than 18% of

the UK population (DCLG 2015), tenant

opposition to privatisation means London

still has a relatively large amount of public

and social rented housing, especially in the

central urban areas proving so attractive to

corporate investors (see Watt 2009).

Returning to our main question, at present

London’s and the UK’s fundamentals are

importantly different to the post-crisis national

contexts that have spawned GCLs, suggesting

that the path of rental financialisation and the

rise of the GCL in the city is still one which

can be forestalled, resisted and subverted.

However, we have identified that London’s

social and public housing—the legacy of the

lengthy post-war class compromise, and a

source of convenient, affordable housing for

many Londoners—could be the portal by

which GCLs can gain large-scale access to

London’s housing in a post-crisis future scen-

ario. This points to a key task for activism in

preventing London’s housing crisis from

becoming a future corporate dystopia—block-

ing off the main entry point to global corporate

landlordism in London by resisting the current

government’s privatisation assault on public

and social rented housing.

Conclusion: back to the future, but which

future?

The hitherto absence of critical research on

the financialisation of London’s rental

housing market inevitably makes the work

presented here a first but important step in

better understanding the long-term ongoing

economic and residential restructuring of

London. While the findings are clearly pre-

liminary, there is a strong message for

London in the snapshots of sudden housing

market restructuring in the USA, Spain,

Ireland and Greece. The recent shift

towards the private rental society, in which

the rental sector develops as a centrepiece

for the new financial strategies of accumu-

lation and dispossession, has deeply disturb-

ing implications for the notion of housing

rights, showing that even without a mortgage

contract in place, financial capital is still able

to exert control over housing and residents.

Indeed, beyond fulfilling the obligations of

the lease agreement between tenant and land-

lord, today rent payments serve as the basis of

a global asset class (Bryan and Rafferty 2014).

What should be clear at this stage is that the

emerging new model re-floats some parts of

the real estate economy on the shoulders of

the vast majority of the population, the

‘99%’ that is unable to participate in global

speculation flows. It further pushes us

towards the next stage of the financialisation

of housing and the urban more generally,

applying again a new and equally heavy

load of social pain onto those who have

been suffering now for decades the negative

effects of previous rounds of financialisation.

At present London is different, marked by

the absence of a large pool of available,

undervalued assets—the equivalent of

336 CITY VOL. 20, NO.2

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foreclosed homes in the USA, or social

housing portfolios in Spain—for GCLs to

fasten onto. The likely continuation of state

policy dedicated to preventing mass mort-

gage repossessions makes the path of rental

financialisation via the future takeover of

GCLs seem improbable. However, recent

targeted discourses concerning social

housing providers, and apparently inconse-

quential alterations to the state’s classification

of social housing stock, alongside key

elements of the Housing and Planning Bill,

provide a direction of travel which—if fol-

lowed in the ways that we have specu-

lated—could see the mass transfer of social

and public housing to the private sector,

with GCLs being the most likely recipients.

The slow erosion of London’s public

housing through ‘regeneration’ and the

capture of state-induced rent gaps provides

a clear portal for GCLs to (incrementally)

take over London’s ‘undervalued’ housing

estates. But what is also clear is that the

future of London’s housing, and the conse-

quences of financialisation, or otherwise, of

the rental sector, remains decidedly open.

The recent example of how tenants on the

New Era estate in the London Borough of

Hackney successfully resisted the takeover

of their affordable homes by a US private

equity firm shows that London and Lon-

doners can resist the dispossession of their

residential use values, and the financialised

inflation of exchange values, and achieve an

equitable outcome. Tellingly, a leading

investment chronicle, reviewing the lesson

to be learned from the New Era estate, cau-

tioned interested investors that the London

rental sector has become a ‘political “hot

potato”’, and noted that investment in the

sector carried ‘reputational and political’

risk (Handy 2015). Private equity and insti-

tutional investors—GCLs—are at present

only tentatively responding to the state-led

coalition’s persistent attempts to financialise

the PRS. It is clear that the opposition of

tenants and ordinary Londoners can, as in

the case of New Era, robustly repel financia-

lising capital, and demand an alternative: a

more equitable, sane and affordable solution

to the present housing crisis. All of this

remains speculation with more research

needed to better understand the particulari-

ties of the London situation compared to

the four post-crisis national contexts dis-

cussed and provide a more robust treatment

of how the new financialisation may

develop, or be forestalled.

Disclosure statement

No potential conﬂict of interest was reported by the

authors.

Funding

The UK research in this paper was supported

by the Economic and Social Research

Council [Grant Ref: RES-061-25-0536].

Note

1 This paper stems from ongoing research into the

transnational dimension of housing systems being

undertaken by an international network of

researchers and activists. The ﬁndings presented here

build on insights and evidence generated by 30

participants from 11 countries who gathered in

London in July 2015 for a three-day meeting to share

their own research about the emergent phenomenon

of global corporate landlords. The authors would like

to thank those participants who all contributed to the

analysis presented here and to the editors and two

anonymous referees for their supportive and critically

constructive comments.

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Joe Beswick is a doctoral student at the Uni-

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gmail.com

Georgia Alexandri holds a Juan de la Cierva

postdoctoral research fellowship at the Uni-

versidad Auto

´noma de Madrid, Spain.

Email: georgia.alexandri@uam.es

Michael Byrne is a postdoctoral researcher at

the School of Social Policy, Social Work and

Social Justice, University College Dublin,

Ireland. Email: michael.byrne@ucd.ie

So` nia Vives-Miro

´is a postdoctoral fellow at

the Universidad de Santiago de Compostela,

Galicia, Spain. Email: so.vives@gmail.com

Desiree Fields is an urban geographer at the

University of Sheffield, UK. Email: d.

fields@sheffield.ac.uk

Stuart Hodkinson is a lecturer in critical

urban geography at the University of Leeds,

UK. Email: s.n.hodkinson@leeds.ac.uk

Michael Janoschka holds a Ramo

´n y Cajal

research professorship at the Universidad

Auto

´noma de Madrid, Spain. Email:

michael.janoschka@uam.es

BESWICK ET AL.: SPECULATING ON LONDON’S HOUSING FUTURE 341

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Reports of My Death Are Greatly Exaggerated: The Persistence of Neoliberalism in Britain

Chapter

Nov 2024

Student tenants towards rental housing justice: a study of two Indian cities, Delhi and Prayagraj (Allahabad)

Article

Mar 2025
HOUSING STUD

Alok Tiwari

Value switching: Extracting profit from the city

Article

Aug 2024

Land and property, and the wealth extracted from it, has reappeared as a central concern in understanding the process of urbanisation under capitalism. Much of the academic discussion centres on the re-emergence of ‘rentier capitalism’ drawing on 19th-century concepts of land economics. However, the accumulation of wealth through property ownership and the development process points towards a value proposition contained in the land question that is not satisfactorily explained by notions of ‘rent’ or ‘rentier’ capitalism, rooted as they are on 19th-century concepts of the land development process. This article seeks to extend this debate by exploring multiple regimes of value that underpin the contemporary urban development process. The first part of the article maps out four intersecting regimes of land value, before arguing by reference to empirical analysis of land and property sales data in Sydney Australia that switching between these value regimes – value switching – is a key transformative moment in the urban development process. Specifically, this article argues that value switching, as triggered by the land use planning process, has become the key driver of urban development dynamics and adds a further dimension to theories on land and housing development in the financialised city.

Institutional investment in rental housing in the city of social housing

Article

Full-text available

Jan 2025
EUR URBAN REG STUD

While scholarly and public attention on institutional investors in rental housing is considerable, studies that quantify the relevance of such actors are still rare. This article measures institutional investor ownership in a European city with one of the highest shares of social housing: Vienna, Austria. We present a novel approach to measure institutional investor ownership that combines land registry data with the international company database ORBIS and Vienna’s local housing register. This provides unique ownership data for the entire housing market at the property level. We measure the role of institutional investors in different rental tenures and further distinguish between direct and indirect property owners, between national, EU, and non-EU investors, and conduct a geographical analysis of investment hotspots. We make three broader contributions: First, we widen the geography of research on institutional investment by considering a highly regulated housing market context. Second, we demonstrate that a large social housing stock does not per se prevent a significant presence of institutional investors. Third, we introduce a method that may be used in other cases and contexts.

Laboratory Barcelona: Tenants, corporate landlords and housing justice

Article

Dec 2024
URBAN STUD

Jordi Bonshoms-Guzman

In the aftermath of the 2008 global financial crisis, housing and tenant movements across many cities have emerged to contest the unfolding cycle of housing financialisation. In particular, tenant organising against corporate landlords has marked the dawn of a new urban politics of space. This article reflects on the political antagonism that the Sindicat de Llogateres (Tenants’ Union of Barcelona) has deployed against corporate landlords using the class composition analysis developed by the Italian-Marxist school of operaismo. I contend that compositional analysis offers a political understanding of the shifting dynamics of rentier capital (technical composition) and the emergence of new forms of tenant contestation (political composition). In Barcelona’s post-crisis urban laboratory, I argue that the concentration of properties in the hands of landowning corporations has shaped new organisational forms of tenant contention, introducing tactical innovations to the established repertoire of housing contention.

Inter-regional rail travel and housing markets connectedness between London and other regions

Article

Dec 2024
J TRANSP GEOGR

I-Chun Tsai

The Potential for and of Short-Term Rental Accommodation in Rural Areas of the Algarve

Chapter

Nov 2024

Digital technologies, including peer-to-peer platforms and online booking systems, have significantly transformed the tourism industry, with short-term rental accommodations (STRA) becoming a key component of global options. While STRA has notably impacted urban tourist centres, its effects on rural sustainability are less explored. This chapter examines STRA, or ‘alojamento local' (AL) in Portugal, in the rural Algarve, comparing its impacts to urban settings. Using both secondary quantitative data from national databases and qualitative interviews with stakeholders, this study aims to expand the limited literature on rural STRA. It characterizes rural AL patterns, explores the connections between lifestyle migrant entrepreneurship and the STRA sector, and assesses their role in sustainable rural development. This research also addresses the challenges and opportunities in promoting rural tourism as a driver for a sustainable future in areas considered ‘lagging' and ‘in decline' for decades.

Emerging financialization in Brussels: Institutional investment in niche rental housing markets

Article

Nov 2024
EUR URBAN REG STUD

In recent decades, institutional investment in rental housing has expanded into a wider range of localities and rental market segments, thereby further pushing the financialization of rental housing. As investment in single-family homes, multi-family apartments, student housing, (former) social housing, co-living, mobile homes, nursing and care homes, Built-to-Rent developments, and short-term rentals is increasing, niche asset classes are being mainstreamed into the capital flows of global real estate markets. However, there is little research that, on one hand, goes beyond ‘mature’ and ‘primary’ institutional markets where rental housing financialization has emerged under rather exceptional conditions (such as mass-privatization of social housing and severe consequences of the Global Financial Crisis), and on the other hand, attempts to gauge institutional investment across the rental market, including across niche asset classes. Through an in-depth case study of the Brussels Capital Region, we examine how and under which market and policy conditions institutional investment flows into an emerging institutional market where investment primarily takes places in niche asset classes. While recent studies have argued that institutional investment in rental housing is limited and, therefore, financialization still a marginal phenomenon, we argue that an in-depth market-wide analysis of institutional investment strategies is necessary for understanding how and to what extent rental housing financialization takes place. Finally, we argue that the patterns of emerging financialization we observe in Brussels may be applicable to other cities as well.

Beyond the limits of rentability: Revalorizing urban space in late neoliberalism

Article

Apr 2024

David Madden

How has the process of urban spatial valorization evolved since the global financial crisis of 2007–2008? In the late neoliberal city, flows of value are increasingly captured through new forms of privately-controlled rentable property. In order to explore this process, this article develops the notion of rentability. It argues that the post-crisis period of urbanization in the neoliberal core is characterized by an emphasis on the expansion and deepening of rentability throughout urban and suburban space. The article details multiple manifestations of this process. It argues that there this process features distinctive spatial, scalar, and political patterns. And it explores how the expansion of rentability and of landlord-tenant relations are being contested in various ways. As more of urban life becomes subject to rent relations, new opportunities for resistance emerge.

The repertoire of housing contention: the birth of the Stay Put campaign in Barcelona

Article

Feb 2024

Jordi Bonshoms Guzmán

Discourse Coalitions and the Institutionalization of Practice

Chapter

Full-text available

Sep 1993

Maarten Hajer

Politics, citizenship and disobedience in the city of crisis: A critical analysis of contemporary housing struggles in Madrid

Article

Full-text available

Sep 2015
Erde

Michael Janoschka

The city region of Madrid can be considered as an exponent of the striking contradictions associated with the contemporary market-oriented production of housing. Given the increasing economic constraints of many middle- and working-class households because of the crisis, property values have been declining for practically seven years now, and tens of thousands of households have been evicted from their homes because they were unable to pay back their mortgages. Simultaneously, since the outbreak of the indignados movement in May 2011, a contestation of the structural forces ruling the real estate sector has been taking place, and questions about the right of housing became a prominent part of the public debate in an increasingly politicised society. Alongside the background of literature about the post-political city and subversive citizenship, this article pursues three key aims: It analyses the consequences of the persistent crisis with a special focus on the residential housing market in Madrid. Secondly, an analysis of the new social and political dynamics that have been emerging during the crisis is developed. Finally, it pinpoints to the way how the emergence of new actors within contemporary housing struggles has been shifting the social and political discourses in this political arena. Such an approach brings together discussions from the field of Political Science with the new geographies of contested crisis urbanism that relate to debates about the social construction of the city, citizenship and disobedience.

The Financialization of Urban Development Projects: Concepts, Processes, and Implications

Article

Full-text available

Dec 2014

This paper pleads for revisiting Urban Development Projects (UDPs) in the light of the financialization of the urban built environment. If the rising integration of the urban fabric and financial markets has been acknowledged, it remains incidental to most of the literature on UDPs. The restructuring of the built environment (real estate, infrastructures) into bundles of assets provided for finance capital investors looking to diversify their portfolio through risk-adjusted strategies is developing on an increasing scale, from so-called ‘developed’ to ‘emerging’ countries. We posit that contemporary UDPs are an attempt to transform land-use by leveraging resources (including capital) exchanged on real estate markets. Therefore, the financialization of UDPs can be tackled through an analysis of the processes through which investors’ strategies and requirements may be circulated among key actors of UDPs (e.g. local authorities, planners, development agencies, property developers). Three paths through which UDPs are shaped for finance capital investors are examined. First, the production of market representations, by internationalized property consultants, skewed towards investors’ standards. Second, the tailoring of buildings as ‘quasi-financial’ assets in the course of real estate development, through which developers seek to address this now dominant financial clientele. Third, the evolution of strategic planning and land development, whether as a byproduct of greater room gained by developers, or as a result of a direct targeting of the investment industry by local public authorities and their development agencies. Eventually, the paper discusses three avenues for research for an urban political economy of one salient, though undersearched, aspect of the financialization of cities.

Prospects for land, rent and housing in UK cities

Article

Jun 2015

M Edwards

This paper, commissioned by the Government Office for Science as part of the Foresight "Future of Cities" project, reviews and re-frames the history of UK housing over recent decades and offers an account of the current situation from the perspective of a range of cities. It presents possible future scenarios and revisits the earlier examples to see how these cities could be changed by 2060 in various hypothetical social transformations. Without major transformations, the report predicts worsening housing problems, growing inequality and damage to economic competitiveness.

The New Imperialism

Book

Oct 2003

David Harvey

People around the world are confused and concerned. Is it a sign of strength or of weakness that the US has suddenly shifted from a politics of consensus to one of coercion on the world stage? What was really at stake in the war on Iraq? Was it all about oil and, if not, what else was involved? What role has a sagging economy played in pushing the US into foreign adventurism? What exactly is the relationship between US militarism abroad and domestic politics? These are the questions taken up in this compelling and original book. In this closely argued and clearly written book, David Harvey, one of the leading social theorists of his generation, builds a conceptual framework to expose the underlying forces at work behind these momentous shifts in US policies and politics. The compulsions behind the projection of US power on the world as a "new imperialism" are here, for the first time, laid bare for all to see.

Bad banks and the urban political economy of financialization: The resolution of financial–real estate crises and the co-constitution of urban space and finance

Article

Aug 2016

Michael Byrne

This paper seeks to understand the urban dimensions of the resolution of financial crises. It does so by focusing on Asset Management Companies (AMCs), or ‘bad banks’, which are established by governments to acquire and manage toxic assets, often linked to real estate, in the wake of systemic banking crises. Despite the fact that AMCs are a significant financial institution with clear urban implications, they have received surprisingly little attention. Indeed, despite the widespread recognition that financialized real estate markets are inherently crisis prone, there is an absence of literature on the resolution of such crises. The paper argues that AMCs have three distinctly urban dimensions. Firstly, they continue and enhance the extraction of value from urban space. Secondly, they act as ‘market makers’ by restoring the ‘liquidity’ of financialized real estate. Thirdly, they contribute to the globalization of real estate by intensifying the circuits linking local real estate with global pools of capital. Drawing on this analysis, the paper also theorizes AMCs as what have been called ‘apparatuses of financial accumulation’ which, significantly, reveal the systematic inter-dependence of financialization and urban space.

The Return of Class War Conservatism? Housing under the UK Coalition Government

Article

Feb 2013

The May 2010 election of a Conservative-dominated UK Coalition Government unleashed an unprecedented austerity drive under the auspices of “deficit reduction” in the wake of the global financial crisis. This article focuses on housing policy to show how the “cuts” are being used as an ideological cover for a far-reaching, market-driven restructuring of social welfare policy that amounts to a return of what Ralph Miliband called “class war conservatism”. We revisit the main ideological contours and materialist drivers of Thatcherism as a hegemonic strategy, discussing the central role played by housing privatisation in the neoliberal project that was continued, but not completed, by New Labour. We then discuss the Coalition’s assault on the housing welfare safety net it inherited, arguing this has rapidly shut down alternative directions for housing and represents a strategic intervention designed to unblock and expand the market, complete the residualisation of social housing and draw people into an ever more economically precarious housing experience in order to boost capitalist interests.

Financial Derivatives as Social Policy beyond Crisis

Article

Oct 2014
SOCIOLOGY

The period since the global financial crisis has seen financial derivatives not only grow quantitatively in financial markets but also expand socially as a calculative logic, giving increasing precision to the concept of capital and hence class relations. The logic of derivatives involves deconstructing ‘things’ into a spectrum of tradable risks. The article identifies the ways in which this logic is spreading into an increasing range of social, economic and political policy domains. It posits how, through the logic of derivatives, a range of sociological issues can be seen and re-thought through the eyes of financial calculus.

Asset Price Keynesianism, Regional Imbalances and the Irish and Spanish Housing Booms and Busts

Article

Jul 2015
Built Environ

Ireland and Spain were among the European countries which experienced the most severe economic and fiscal problems following the global financial crisis. The proximate causes of these economic crashes have been explored by researchers and governments, who have highlighted strong parallels between the policy, regulatory and economic factors which underpinned them. In both countries residential property price inflation increased dramatically from the late 1990s driven by increased availability of cheap mortgages but unusually was accompanied by marked growth in new house building. Thus, following the international credit crunch in 2008, a simultaneous contraction in both mortgage credit and house building occurred in Ireland and Spain, which precipitated a marked knock-on decline in the employment, tax revenue and consumer spending which the housing boom had underpinned. This article argues that the Irish and Spanish housing booms and busts are similar not just in terms of scale and proximate causes but also in terms of fundamental causes. In both countries the housing boom/bust cycle was underpinned by a suite of macroeconomic policies which aimed to use asset price growth to underpin rising demand and economic growth, or in other words achieve what Robert Brenner (2006) terms 'asset-price Keynesianism'. This approach was particularly attractive to both governments because it enabled them to resolve historical legacies of industrial underdevelopment and regional imbalances by generating construction jobs in underdeveloped areas. As a result of the latter, local/regional governments in both countries played a key role in facilitating the implementation of this policy.

A Look Back: What We Now Know about the Causes of the US Mortgage Crisis

Article

May 2015

Dan Immergluck

This article reviews what we know about the causes of the US mortgage crisis, almost a decade after the crisis began. The paper summarizes the key forces that led to the crisis or, in some cases, to the development of a fundamentally fragile mortgage market, whose vulnerability helped enable the crisis. While some factors, such as federal policies pre-empting state consumer protection laws, were near-term spurs to higher levels of subprime lending, others - such as the migration of lending activity from savings and loans to less regulated mortgage companies - led to the development of a mortgage market that was more risk-loving, less regulated, and more prone to cataclysmic failure.

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