Inequality and housing in London Chris Hamnett Professor of Geography King’s College London
London: international financial centre• London is one of the world’s major financial centres, and the premier financial centre in Europe. Like Paris and New York, it is also an attractive place to live and to invest with many wealthy international property owners• It has a lot of very highly paid jobs in financial and business services such as corporate law. • It has unequal earnings and income distribution which has implications for access to housing
London in the C19th• London today is very different from London in the C19th which, like other major European cities, had major concentrations of the poor in the central areas of the city. Because of poor transportation, the poor had to live in close proximity to potential jobs, many of which were casual. As a result central London had many large slum areas of poor housing as well as rich areas of luxury housing.
The Changing Economic Structure• The economic structure of London, like Paris and New York, has changed greatly in recent decades. Go back 50 years, to 1961, and over a third of the working population of London were employed in manufacturing industry and just 10% in banking, finance and business services. Today the proportions have reversed. About 1/3 in finance and business services and less than 7% in manufacturing industry.
The Changing Employment Structure of Greater London, 1961-1998 35 30 25 20 1961% 1981%% 1991% 15 1998% 10 5 0 Finance, Transport and Public Admin, Manufacturing Other Services Construction Primary and Business Distribution Health, Educ Industry Utilities Services
Changes in occupational structure• The change in industrial structure has had a major effect on the structure of occupations and incomes. There are a lot more high skilled and highly paid professional and managerial workers and a much smaller industrial working class today than in the past. This has had big implications for the housing market and the growth of home ownership and rising prices.
Social polarisation or….• There has been major debate in recent years about the nature of social changes in global and world cities like London. Some writers think that such cities are becomingincreasingly socially polarized between a growing highly skilled and high income group and a growing low skill and low income group, with a major decrease in the size of the middle class and income groups. In this view there are more rich and more poor and less in the middle.
Proletarianisation or professionalisatio• Others take a different view. Some traditional marxists argue that there is a process of job de‐ skilling and growth of low income working population. This is called proletarianisation. • My view is that the growth of high skilled and professional managerial and technical jobs in some cities has been accompanied by decline in working class jobs, though there may have been some increase in low paid service jobs. I term this professionalisation. What has happened is Oslo?
A desirable place to live• Not surprisingly, London is an expensive city, particularly in terms of its desirable residential areas like Kensington and Westminster where prices are very high. • A report in last weeks Financial Times ‘A World Apart’ said that ‘financial capitals constitute a prime property market that is decoupled from national economies’• Foreign buyers account for 60% of all buyers in the prime central London market and 70% >£10m• The most expensive development is 1, Hyde Park
Spatially displaced demand• You might think that this is good news, but is it really good news for most Londoners, and for middle and low income groups? • I do not think it is good news because high income groups who push up residential property prices at the top end have an effect on the rest of the market, making housing less affordable in the city as their high incomes and purchasing power push up prices across the city as a whole.
The survival of the fittest?• In 1964 ruth glass, an émigré German social scientist, coined the term gentrification to describe what was happening in some parts of inner London. She said that:• ‘One by one, many of the working class quarters of London have been invaded by the middle classes – upper and lower…Once this process of gentrification starts in a district it goes on rapidly until all or most of the original working class occupiers are displaced and the whole social character of the district is displaced’.
The survival of the fittest• She added: ‘any district in or near London, however dingy or unfashionable, is likely to become expensive, and London may quite soon be a city which illustrates the principle of the survival of the financially fittest, who can still afford to work and live there’. • The notion of the survival of the financially fittest is fascinating one, and if we look at the changing structure of house prices in London, New York or Paris or the other major world cities, it is clear that prices in the expensive areas have risen over the last 30 years so fast that, without social or rent controlled housing, it is almost impossible for any bar the affluent to live there.
Spatially displaced demand• The increase in property prices, and rents, in the most expensive areas also has an impact in other areas through spatially displaced demand. • People who would like to live in most expensive areas but can’t afford to look for property in adjacent, but slightly cheaper areas, pushing up prices there. Then, in turn the people who would like to buy in these areas get forced further out to cheaper areas where they also help to push up prices.
The multi‐bowl water fountain• The best analogy of the city housing market is a multi‐bowl water fountain where the jet of water at the top fills the top bowl. The water then spills over into the next bigger bowl, and so on down into the bottom and biggest bowl. • Each bowl is bigger in diameter and they are filled progressively by water from the topmost bowl. The same with property prices which cascade downwards from the top.
Pushed out or into social housing• The process of growing gentrification in inner London has meant that property prices have risen more rapidly in inner London than in outer London as a result, lower income buyers have been forced further out to find property which is affordable. The main areas of low income residents in inner London are now social housing which now houses the poor, economically inactive and unemployed etc. But social housing has been shrinking…..
Cuts to housing benefits in London• The displacement of low income groups from inner London as a result of rising prices will be compounded by the changes which are taking place in government welfare policy, especially the level of housing benefits. • Because of high rents in london, a proportion of low income residents depend on HB which is paid by central government to bridge the gap between their income and their rents.
Cutting housing benefit• The overall cost of HB has risen dramatically in Britain in recent years, from £2.5bn to £21bn. London takes a large share of the overall cost.• The government have decided that they must cut this and have put in place various policies to do so including capping benefits, reducing the sector of the market that low income families can live in, and capping overall benefit payments to median post tax earnings.
Pushing out the poor?• The implication of the cuts is that many low income households who currently live in inner or central London will find that the level of hB will no longer pay their rents. They will have to move out of the central expensive areas into cheaper areas in outer London. We are thus seeing a process of large scale displacement of low income groups out of the expensive parts of central and inner London. This will increase social segregation.
Lessons for Oslo• You need to decide whether you want to have a reasonable degree of socialmix in the central and inner city, with both low income and high income residents or whether you want the market to decide this for you. If the decision is that you want a mix of residents in the more expensive areas, this may require a degree of financial help to low income households. This may already occur. Be grateful you are not like London with a high proportion of big earners.