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Speculating on London's housing future

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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.
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Speculating on London's housing future
Joe Beswick, Georgia Alexandri, Michael Byrne, Sònia Vives-Miró, Desiree
Fields, Stuart Hodkinson & Michael Janoschka
To cite this article: Joe Beswick, Georgia Alexandri, Michael Byrne, Sònia Vives-Miró, Desiree
Fields, Stuart Hodkinson & Michael Janoschka (2016) Speculating on London's housing future,
City, 20:2, 321-341, DOI: 10.1080/13604813.2016.1145946
To link to this article: http://dx.doi.org/10.1080/13604813.2016.1145946
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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,
So
`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 (201015) (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,
1
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 20072008 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 estatefinance 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
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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 financereal
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.
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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 financereal 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 financialisationreal 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
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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%
a
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%
a
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,
transferredfo13billiontoprivate
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 201213
(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-
versity of Leeds, UK. Email: joeksbeswick@
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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... Along with firms, institutions, and trusts looking for new investment opportunities in rental real estate (Beswick et al. 2016;Wijburg, Aalbers, and Heeg 2018), private individuals are increasingly channeling accumulated capital into this sector, for example, through buy-to-let acquisitions (Kemp 2015;Ronald and Kadi 2018). For the latter, purchases of additional property to rent out may be part of more proactive assetbased welfare strategies, where rental revenues and housing wealth augment pensions and welfare safety nets (Ronald, Lennartz, and Kadi 2017). ...
... To understand landlord profiles and their class position, it is important to underscore that the private-rental sector is a highly diverse tenure. Providers range from large firms, trusts, and institutions to individual landlords, managing disparate housing portfolios and pursuing different investment strategies (Beswick et al. 2016;Van Loon 2017;Fields 2018;Özogul and Tasan-Kok 2020). Despite diversity, evidence from European countries, including the UK (Kemp 2015), France, and Germany , suggests a dominance of individual landlords typically managing small portfolios (also see Fields 2019; Hulse, Reynolds, and Martin 2020). ...
... Various studies identify two interrelated trends that further intersect with private rental's resurgence: property concentration and landlord professionalization (Fields 2019;Pawson and Martin 2020;Hochstenbach, Wind, and Arundel 2021). Landlords are expanding their portfolios and managing them increasingly professionally, while larger corporate players have also entered the scene in many countries (Beswick et al. 2016;Wijburg, Aalbers, and Heeg 2018). The remainder of this article will focus on Dutch landlords' demographic and socioeconomic profiles and class position. ...
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The past decade has seen a revival of private renting across a wide range of countries and housing regimes. Economic and housing restructuring has enhanced rental housing’s appeal as an investment class. Apart from an increase in investment from firms, institutions, and trusts, this has triggered a revival of private landlordism among individuals and households. Yet, few detailed studies on the social, demographic, and economic profiles of landlords exist. To fill this gap and understand landlords’ class position, this article draws on Dutch register data with information on the entire Dutch population and housing stock. Analyses of their socioeconomic characteristics reveal the highly privileged class position of many landlords, with a substantial portion found in top income, wealth, and neighborhood positions. One-third of the top wealth percentile—the Dutch top 1 percent—consists of landlords, underscoring their vast economic power. Although landlords with larger housing portfolios are notably more affluent, small-scale landlords are also highly overrepresented in the upper economic strata. Fundamentally, this article’s findings urge us to consider landlordism specifically, and housing more broadly, in terms of class formation and delineation, with a class of landlord elites mobilizing multiple properties for the purpose of wealth accumulation and class reproduction.
... Estes, somados à expulsão de pessoas e famílias das casas hipotecadas, novas barreiras de acesso ao crédito, além de salários cada vez menos estáveis (Hochstenbach e Ronald, 2020), fizeram com que a moradia de aluguel tivesse um papel relevante na história da crise financeira global (Kemp, 2015, p. 601, apud por Hochstenbach e Ronald, 2020. Assim, surgem os denominados Global Corporate Landlords (Beswick et al., 2016), que centralizam internacionalmente a gestão financeira de grandes carteiras de ativos imobiliários. Esses proprietários corporativos globais também estão presentes no contexto de privatização do parque de locação habitacional público de cidades europeias. ...
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The rise of rental housing as a form of tenure has been observed in Latin America, in the context of neoliberal inflection of social policies, financialization and commodification of popular territories. Corporate landlords linked to global financial managers operate in residential markets, articulated by digital platforms that enable them to concentrate the extraction of a dispersed rent flow, with large capacity of outreach and regulatory flexibility. In the lucrative popular real estate market, informal rental housing is fueled by evictions and a new generation of public rental housing policies, either through Public-Private Partnerships or through the introduction of vouchers, which link informal rental housing markets to finance, impacting urban popular territories and redefining housing as a service. financialization of housing; rental housing; corporate landlords; public-private partnerships; informality
... For example, exploring questions of fiscal discipline and austerity politics in the post-2008 financial crisis conjuncture invites productive comparisons across, say, US cities or US and European contexts. But the much longer duration of structural adjustment policies and fiscal austerity experienced in South America and Africa are occluded (Beswick et al., 2016;Peck, 2017;Sanchez Jimenez, 2017). Ideas of the radical contingency of social processes and the emergent nature of the urban move towards a view of the urban as distinctive -always "individual", interrupting efforts at universal conceptualisations (Lefebvre, 2003;Sotiris, 2014;McFarlane, 2019). ...
Article
This Introduction to the special issue, ‘ Comparative Methods for Global Urban Studies’, outlines the basis for a reformatted comparative method inspired by the complex spatialities of the urban world. The articles in the volume each bring forward innovative approaches to comparative methods which support wider conceptualisations of urban processes and urban experiences. The articles in this volume consider a wide range of urban contexts and collectively move beyond geopolitically imprecise propositions of ‘southern’ urbanism to embrace the wider comparative agenda of thinking with both the diversity and the profound interconnectedness of the urban globally. The articles contribute to decentring urban studies, opening conceptualisation to a range of different contexts and differently positioned writers. They also speak to the analytical and methodological challenges posed by current trends in global urbanisation, as dispersed, fragmented and extending over vast territories. Thinking with the multiple elsewheres of any urban context invites a comparative imagination – this introduction draws together the creative ways in which authors in this volume have responded to this potential. Processes of conceptualisation both emerge from and more acutely reveal the spatiality and nature of the global urban: comparative method, then, also proposes a certain mode of theorisation of the urban.
... London's housing market has exhibited characteristics of a crisis for decades (Brownill, 1988;Watt, 2016). As Edwards (2016) argues, the current situation is the outcome of financialised strategies that privilege private rental income over the right to collective housing, based on need (Beswick et al., 2016). London's market is therefore a crisis for many but also one in which mortgage-free buy to let landlords are safe and many ultra-wealthy are able to shelter their capital in real estate (Fernandez, Hofman, & Aalbers, 2016). ...
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In this paper we draw on the findings of a mixed methods research project that has examined the production, regulation, and delivery of housing in London. Our aim is to develop fresh insights into the growing mobilisation of numbers and targets in contemporary planning systems. More specifically, we bring two fields of literature into conversation. First, drawing on recent contributions from Pike et al. (2019) we develop their notion of ‘city statecraft or the art of city government and management of state affairs and relations (p.79). We discuss how and why their framing of contemporary urban governance captures current trends in contemporary cities, including: the financialisation of housing and infrastructure; the rolling-out of delivery-focused public private partnerships; and the broader political projects that underpin planning priorities. The paper combines these insights with wider writings in urban studies on virtualism or the analysis of theories and governmental practices that seek to make the world conform to pre-existing ideas, rather than describing and explaining its formation. We argue that target-based forms of governance represent the implementation of a virtual statecraft in which the material realities of actual places become simulated worlds, ripe for calculation and re-making. We show, through in-depth research on housing regulation and investment/development trends in London, the ways in which virtual forms of statecraft are developed and implemented and with what effects on the material outcomes of urban development processes. The findings are of comparative significance as planning systems across Europe and beyond are becoming increasingly focused on market-oriented oriented forms of planning in an effort to boost the production of housing and to deliver social policy outcomes.
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This article advances explanations of the housing crisis in modern political economies. It argues that the rise of agglomeration economies is driving the massive increase in housing prices in superstar cities. These concentrate high-paying jobs and life chances in central metropolitan areas, pulling in a highly skilled workforce who are willing and able to pay ‘whatever it takes’ for access to these opportunities. As a result, the value of homeownership in strategic urban locations has surged. Investors have thus found it rational to capitalize on longer-term price inflation and invest. Based on a comparison between New York City, London, Paris, and Berlin, this article demonstrates that housing prices in superstar cities move in lockstep with the reconfiguration of urban labour markets. Investors follow this trend in their decisions to invest in housing, which further compounds affordability pressures. The article concludes that access to homeownership in strategic urban locations increasingly mediates inequality and class formation in modern political economies.
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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.
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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.
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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.
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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.
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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.
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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.
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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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Asset management companies (AMCs), such as Ireland’s National Asset Management Agency and Spain’s Socieded de Gestión de Activos Procedentes de la Reestructuración Bancaria (Management Company for Assets Arising from Bank Reorganisation, SAREB), are important policy responses to financial crises involving the acquisition and management of toxic debt. Given their massive real estate portfolios, AMCs have decisive urban impacts. And yet, there is almost no literature on their urban dimension. This article responds to this gap by providing an overview of AMCs as a response to financial and real estate crises and by analysing their urban dimensions. While AMCs are designed to save banks, they impact on cities because of the increasing integration of finance and real estate. Moreover, AMCs deepen the integration of real estate and global capital. Finally, because they are a form of state intervention, AMCs may serve to politicize the tension between the use value of real estate and its exchange value.
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Purpose – This paper aims to ground Harvey’s (2003) top-down theory of “accumulation by dispossession” in the everyday lives of people and places with specific focus on the role of law. It does this by drawing upon the lived experiences of residents on a public housing estate in England (UK) undergoing regeneration and gentrification through the Private Finance Initiative (PFI). Design/methodology/approach – Members of the residents association on the Myatts Field North estate, London, were engaged as action research partners, working with the researchers to collect empirical data through surveys of their neighbours, organising community events and being formally interviewed themselves. Their experiential knowledge was supplemented with an extensive review of all associated policy, planning, legal and contractual documentation, some of which was disclosed in response to requests made under the Freedom of Information Act 2000. Findings – Three specific forms of place-based dispossession were identified: the loss of consumer rights, the forcible acquisition of homes and the erasure of place identity through the estate’s rebranding. Layard’s (2010) concept of the “law of place” was shown to be broadly applicable in capturing how legal frameworks assist in enacting accumulation by dispossession in people’s lives. Equally important is the ideological power of law as a discursive practice that ultimately undermines resistance to apparent injustices. Originality/value – This paper develops Harvey’s concept of accumulation by dispossession in conversation with legal geography scholarship. It shows – via the Myatts Field North estate case study – how PFI, as a mechanism of accumulation by dispossession in the abstract, enacts dispossession in the concrete, assisted by the place-making and ideological power of law.