Homes for All is a video series commissioned by Stadsleven in which correspondents from all over the world report on the state of the housing market in their city. In episode 11, Sarah and Benjamin Barfield Marks show how London has become an enclave for the rich.
Blog by Sanne van der Beek
Housing as an asset instead of a home
London, a city in which fewer and fewer people can afford a home, has become the nightmare scenario of everybody who thinks about the housing market. Housing in London has become more about making a living from a home, than about living in a home: a property market instead of a housing market. In her book Expulsion (2015), sociologist Saskia Sassen already described this development which exists – to be fair – not only in London, but in many popular cities around the world such as New York, Shanghai and Amsterdam. The total sum of foreign investments in the top 100 of the most popular cities was in 2015 more than a billion dollars.
This changes the dynamics of the city enormously, writes Sassen. It dictates new rules: “[…] Today’s large-scale corporate buying of urban space in its diverse instantiations introduces a de-urbanizing dynamic. It is not adding to mixity and diversity. Instead it implants a whole new formation in our cities – in the shape of a tedious multiplication of high-rise luxury buildings.”
And so cities like London become an enclave for the rich, as Sarah and Benjamin Barfield Marks also show in their ‘Homes for All’ video. Because all the incoming money does not create a so-called trickle-down effect from which everyone can profit. Often, the argument is that new money brings an urban renaissance, and makes derelict neighborhoods livable again. But the places that bring new life in the streets – the restaurants, bars and shops – are unaffordable for many, writes sociologist David Madden. Moreover, “far from being model citizens contributing to the public good, many urban elites use their wealth to insulate themselves from common challenges. Illustrations of this include private schools, separate transportation networks, gated communities, private security forces and tax avoidance.”
And so the (foreign) investments create spatial segregation and gentrification and ‘heightened inequality becomes the new norm‘, as Susan Fainstein, author of The Just City, describes it.
Could Brexit be a positive influence?
But the tables may turn, as the Financial Times writes that buy-to-let is not the asset it once was. “Concerned about overheating in the sector, politicians and regulators have made serious incursions into the ability of landlords to profit from or leverage their rental holdings, bringing in tighter rules on tax relief and borrowings. This April, measures to phase out higher rate tax relief on mortgage interest began — a process that will be completed by 2020.”
Also, in September it became known that London housing prices fell for the first time since the height of the financial crisis eight years ago. While London still remains the most expensive place to buy a house, the gap between housing price growth in the various regions of the UK is closing. While the unsustainable growth in housing prices and the higher stamp duty on second homes – of which London has more than any other region – are also to blame, analysts say Brexit fears are a cause of this decrease in prices.
When the Brexit vote was cast, many experts warned that Britain’s planned departure from the European Union would hurt London’s real estate market because shifts in for example law-making, immigration, investment and trade could scare off buyers. Till now, the market stayed quite robust, with “sales being supported by ultra-low interest rates, a robust job market and government programs designed to encourage purchases”, reports CNN. And The Bank of England has recently hinted that it will raise interest rates, so mortgages will become more expensive. But “continued uncertainty over Brexit and the UK’s future trading relationship appears to have taken its toll”. Many analysts predict, however, that the prices will increase again once Britain’s divorce from the EU is complete.
While Brexit might make London less popular for foreign investors, it impacts other inhabitants of the city too – and worsens the existing inequality. And so the only solution, as Sarah and Ben Barfield Marks also conclude in their ‘Homes for All’ video: the only way to really turn this around is for the government to make a choice for a city in which wealth can be shared by everybody.
Want to know more?
- You can find other episodes of our Homes for All video series here.
- Tracy Metz interviewed Saskia Sassen on her book Expulsions. You can watch the video here
- Last year, we produced a talkshow ‘HEYU! Urbans’ about London with Richard Sennett and sociologist David Madden as our guests. Watch the video here.