Cities, Housing and Profits

Flat Break-Up and the Decline of Private Renting

Chris Hamnett, Bill Randolph

• Publisher: Routledge
• Year: 2021
• ISBN:
  9781000300437
• Edition: 1
• Topic: Social Sciences
• Subtopic: Poverty in Sociology
• Index: Social Sciences

Originally published in 1988, this book documents and explains the emergence of flat 'break-ups' – the sale of individual owner occupation of blocks of flats which were previously privately rented and which played a major role in the transformation of the private housing market in London since the 1960s. The book shows that the flat break-up market in London was not a unique phenomenon but one of the most geographically concentrated manifestations of the trend for sales from private renting to owner occupation which has been established in the UK since the 1920s. The interrelationship between the causes of the decline of the privately rented sector in Britain and the features specific to the flat market comprises the second theme of the book.

1 The production and transformation of urban residential space

Introduction

Central London is rightly renowned for its many squares and terraces of fine period houses. It is much less well known for its numerous blocks of late-nineteenth and early-twentieth century private flats. Discreet and anonymous, frequently built above a row of shops, and bearing more than a passing similarity to the late-nineteenth century and interwar office blocks, central London’s purpose-built blocks of flats for long remained largely unknown and their crucial role in central London’s private rented housing market went largely unappreciated to all but those who either lived in them or owned them.

During the course of the last 15 to 20 years, this picture has changed dramatically. Since the late 1960s London’s privately rented blocks of flats and the problems which surround them have become a focus of increasing resident unrest, media attention and political concern as a result of the ‘break-up’ and sale of the blocks. The term ‘break-up’ refers not to the physical demolition of the blocks, but to a more subtle but none the less important form of change: the tenurial transformation of the blocks from private renting to individual owner occupation as a result of landlords’ decisions to sell. The ‘break-up’ is therefore one of ownership and control and the effects have been traumatic. What had, for years, been a rather sleepy backwater of up-market residential landlordism was transformed in just a few years into an area of intense speculation in search of quick capital gains.

Although break-up and sale has transformed the tenurial and social structure of London’s privately owned purpose-built flat market over the last 15 to 20 years (see Chapter 2), it has had few visible external manifestations apart from the growth of a forest of ‘flat for sale’ boards throughout central London and the almost complete disappearance of ‘flat for rent’ advertisements in London papers. It has had a number of major—if less directly visible – social consequences. Not only has the functioning, unfurnished, purpose-built flat sector in London been almost totally destroyed, but the traditional residential investment companies which had owned the blocks for many years have been replaced by a new, aggressive breed of speculative break-up companies whose principal interest is not long-term rental income but the short-term capital gains to be derived from flat sales. This, indeed, is the sole reason they have acquired the flats. The term ‘landlord’ is a misnomer for what are, in effect, no more than residential asset strippers.

The break-up process is not unique to London, however. Nor is it unique to blocks of flats or to Britain alone. On the contrary, flat break-up is merely one expression of a wider process of tenurial transformation from renting to owning which has been common to many Western capitalist societies over the last 30 years. To this extent, flat break-ups serve as a particularly interesting and illuminating vehicle for the consideration of a series of wider questions concerning the decline of the privately rented sector in Britain and the production and transformation of urban residential space in general. We therefore see this book not just as a specific study of the causes and consequences of the transformation of the residential structure of London, but as a contribution to a series of much wider questions and debates concerning the production and transformation of urban space.

Understanding the production and transformation of urban residential space

How and why does urban residential segregation arise and persist? This question has intrigued and fascinated social observers and social scientists ever since the advent of capitalist industrial urbanization in late-eighteenth and early-nineteenth century Britain led to the creation of both a large urban proletariat and the rise of residential class segregation. Unfortunately, the answers have often been far from satisfactory. Although a wide variety of nineteenth century commentators, from Cooke Taylor to Engels, Booth and Masterman, clearly recognized the class character of much residential segregation, this perspective was never systematically developed. Although Engels identified and described the concentric class zoning of Manchester and other large cities as early as 1844, he made no attempt to analyse the causes of this ‘hypocritical plan’ apart from recognizing the role of land values and voicing his suspicions that: ‘the liberal manufacturers, the Big Whigs of Manchester, are not so innocent after all, in the matter of this sensitive method of construction’ (Engels, 1969).

This lack of attention to the actual processes by which urban class segregation was produced and maintained was continued when attention shifted in the early decades of the twentieth century to the burgeoning cities of the New World. In his classic essay ‘The growth of a city’, Burgess (1925) outlined his famous concentric model of residential differentiation based on Chicago. But, although he attempted to describe the way in which different areas were differentiated in the process of urban expansion, the discussion of the process of segregation was confined to passing references to ‘invasion and succession’ and the ‘sifting and sorting of individuals and groups by residence and occupation’. As Firey commented as early as 1945: ‘nowhere in this theory is there a definite statement of the modus operandi by which people are propelled to their appointed niches in space’. By focusing on the geographical pattern of residential differentiation, Burgess fostered a concern ‘with the isolation of models per se, rather than with the isolation of those forces which operate within the urban area to produce residential patterns’ (Robson, 1969, p.132).

As Harvey (1973, p.133) has observed:

The line of approach adopted by Engels in 1844 was and still is far more consistent with hard economic and social realities than was the essentially cultural approach adopted by Park and Burgess. It seems a pity that contemporary geographers have looked to Park and Burgess rather than Engels for their inspiration.

Given that urban social areas are composed of ‘people, living in houses distributed in space’ (Robson, 1975, p.13), it follows that an analysis of the structure and operation of the housing market is crucial to an understanding of the processes of residential differentiation in cities. Unfortunately, the absence of such an analysis is now seen to have constituted a glaring lacuna at the heart of Burgess’s model. As Bassett and Short (1980, p. 24) commented:

by considering the nature of housing supply and allocation in early twentieth century North America as a constant, given and often ‘natural’ variable,(it)is unable to say anything meaningful about the structure of the housing market and consequently has little explanation to offer for the patterns of residential differentiation which it describes.

This concern with the identification and analysis of geographical patterns of differentiation at the expense of process persisted for decades as successive generations of urban geographers and sociologists continued their attempt to ‘hunt the Chicago model’. Where attempts were made at explanation, the focus was almost exclusively on demand-oriented, behavioural explanations which stressed the role of choice and preference in residential decision making and intra-urban migration. It is now generally accepted that such explanations are of only limited value, not least because they fail to locate individual choices within the context of the different structures of opportunity and constraint within which such choices are made. As Short (1978) put it: ‘The decisions of individual households are more adequately explained as a form of adaptive behaviour in relation to the nature of the housing system..than by...consumer preference argument”(pp. 545-6). The first major break with this behavioual form of analysis was pioneered by Rex and Moore’s (1967) study of housing allocation, race and segregation in Birmingham, but it was not until the early 1970s that the focus of attention finally moved from the identification and description of static residential patterns to the analysis of housing market processes.

Initially, most studies dealt with the consumption and allocation of housing rather than with its production. The realization that housing in capitalist economies was a commodity produced and exchanged for profit was slow to dawn. Although the central role of landownership and investment in the production of residential space had long been recognized by urban historians (Cannadine, 1980; Chalklin, 1968; Dyos, 1961, 1968; Kellett, 1961; Parry Lewis, 1965; Reeder, 1965; Thompson, 1974), it was not generally appreciated by contemporary urban geographers until the mid 1970s. (Lamarche, 1976; Massey and Catalano, 1978; Boddy, 1981; Badcock, 1984). So vast was the intellectual gulf separating the contemporary focus on abstract general models of urban residential land use from the historical analysis of specific development processes that it could easily have been concluded that the role of capital investment in the production and transformation of the environment ceased around 1945. The intellectual hegemony of ecological and neo-classical demand-oriented economic approaches to residential structure was so great and all-pervasive that, with few exceptions (e.g. Form, 1954), the built environment was treated as though it had sprung, fully formed, out of nothing. The social relations of ownership and production were almost entirely ignored and one of the principal goals of this book is to reassert their importance.

It is only relatively recently that the realities of investment and profitability have been brought into the forefront of concern from the historical backwater in which they had languished. Not until 1974, when Harvey and Chatterjee’s work on the structuring of residential space by government and financial institutions in Baltimore was published, was the role of investment and disinvestment pushed back into the centre of the contemporary urban residential stage. Their analysis of the geographical impact of mortgage finance and mortgage guarantee policies is too well known to merit repetition here, but it can be argued that the most important aspect of their work lay in their attempt to relate residential differentiation, housing choice and the structure and operation of the housing market. Having established the geographical structure of the housing finance and mortgage market, they suggested that this structure forms a ‘decision environment’ in which individual households make housing choices which largely conform to and reinforce the existing structure. They concluded:

This geographic structure is continuously being transformed by the ebb and flow of market forces, the operations of speculators and realtors, the changing potential for home-ownership, the changing profitability of landlordism, the pressures emanating from community action, the interventions and disruptions brought about by changing governmental and institutional policies, and the like. It is this process of transformation of and within a structure that must be the focus for understanding residential differentiation. (p.25)

We believe this statement to be of considerable importance for a number of reasons. First, it sets the analysis of socio-spatial structure firmly within the wider social context as a basis for understanding and explanation. Second, it embodies a historical perspective which stresses the essentially dynamic nature of socio-spatial structure and accords priority to the processes of change. Third, it does not exclude the role of housing choice. Instead, it places ‘choice’ within the framework of a spatially and socially structured housing market produced and shaped in its broad lineaments by financial, economic and political forces. The statement also avoids the crude and functionalist supply-side determinism which has characterized some of the recent literature on housing markets.

Although the actual decision to move or not to move house is taken by the individual household unit, this ‘direct’ decision cannot be examined independently from the ‘decision environment’ within which the decision is taken. One of the most important aspects of this decision environment is the interaction between the structure of housing demand, particularly the distribution of income and wealth between households, and the structure and characteristics of the available dwelling stock, particularly tenure, price and location. As anybody who has ever tried to buy or rent somewhere to live knows very well, the final ‘decision’ is generally as much or more determined by the constraints on what is available, where and at what price, than it is by household choice and preference.

Choices and preferences, for those fortunate enough to possess them, are invariably exercised within the constraints of what is available and affordable. Tenure plays a crucial role in this and, to the extent that the tenure structure of central London – or, indeed, of any other residential area – is significantly changed by supply-side decisions such as the decision to sell blocks of flats for owner occupation, this will have profound implications for the nature of residential choices. Whilst some increasingly affluent people will be able to afford to move in and buy, many potential residents will find themselves effectively debarred by the change in tenure and its associated price structure. They become priced out of the market and, over time, such changes in the tenure and price structure of housing supply can and do effect radical changes in the social composition of residential areas of cities independently of any changes in the structure of household demand or choice or preference.

The tenurial transformation of the city

The residential structure of most Western capitalist cities has undergone a variety of transformations during the course of the last 40 years but it is no exaggeration to say that, with the exception of suburbanization, none has been more fundamental and far reaching than the transformation from renting to owning and, in Britain, from private renting to public housing (Bourne, 1981; Kemeny, 1981; Harloe, 1985). Nowhere has the scale of this tenure transformation been greater than in Britain. On the eve of the First World War approximately 90 per cent of households in Britain rented their accommodation from a private landlord. Britain may have been ‘two nations’ in terms of class and living standards, but private renting in some form was the major housing tenure across all social classes from the Gorbals of Glasgow to London’s Mayfair. Council housing scarcely existed and no more than 10 per cent of households owned their own homes. Today, the picture is radically different. Over 60 per cent of households either own their own home outright or are buying it on a mortgage, and another 30 per cent rent from a local authority. Outside the older inner areas of the larger towns and cities, private renting has been reduced to a small and relatively insignificant residual tenure and, even in the inner areas, it rarely accounts for more than a third of all households. In the space of just 70 years the tenure structure of housing provision in Britain has undergone a radical and dramatic transformation.

This transformation has had two components. First, virtually all housing in Britain built subsequent to 1945 has been for owner occupation or council renting. New building for private renting has been very limited since 1945 and, with the exception of a short period during the 1930s, there was little new building for private renting after the turn of the century. But not all the growth of owner occupation and council renting has arisen from new building. The growth of owner occupation also involved a massive shift from the existing rental stock and it is the explanation of this shift which forms a major theme of this book. The privately rented sector in Britain fell from 7.1 million units in 1914 to 2.9 million in 1975. Of the loss of 4.2 million dwellings, no less than 3.7 million, or 88 per cent, were sold for owner occupation and these sales accounted for 41 per cent of the growth of owner occupation between 1914 (0.8 mil...