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17 August 2023

Down with free market urbanism

London is more than an economic engine.

By Wessie du Toit

One measure of London’s housing shortage is that estate agents don’t even bother to sugar-coat their offerings anymore. I remember one saying to me, as we stood in a rainy car park outside a Whitechapel tower block, “Jack the Ripper killed someone over there.” That was years ago; such a comment would be an unusual courtesy in the rental market today. Presumably that flat, having doubled in cost, would now be auctioned off to the highest bidder via Facetime.  

Responding to this mayhem, some on the right have now moved past the simple mantra of build more and build it faster. It is time, they argue, to rethink how we use the stock London already has.

In a much-debated recent article for CapX, the digital publication of the Centre for Policy Studies, Henry Hill argues the state is accommodating too many people in the capital through social housing, and too many, in particular, who are not looking for work. He suggests these tenants be offered some of the proceeds from the privatisation of their homes, allowing them to find better accommodation elsewhere.

Hill sees this as in the interests of the country as a whole. London, he points out, is “the UK’s most dynamic and productive region, generating the wealth upon which our increasingly rickety state depends”. And yet, “sky-high living costs make it harder to attract talent and deliver growth”.  

Last week the Telegraph’s Sam Ashworth-Hayes made the same argument on his Substack, stating that “each hour worked in the capital city produces 33 per cent more than the average hour worked across the country”. Why, then, are we constraining this productivity by locking up 20-odd per cent of London’s housing in the social sector, where almost half of households are “economically inactive”? Back in June, Catherine Kerr made a similar case in The Critic.

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This isn’t a hypothetical debate: overstretched local authorities in London and elsewhere have been relocating households for years. But Hill and the other free market urbanists are suggesting more of them should be given this option, as a matter of deliberate policy, with their homes in the capital made available to private tenants.

For what it’s worth, I don’t think this has much chance of being enacted. During the 14 years I lived in London, I don’t recall hearing anyone complain that some people have access to subsidised housing. Whatever the economic theory says, many renters instinctively regard the London market as a form of price gouging – profiteering based on scarcity – and see state intervention as protective. A recent YouGov survey found that 61 per cent of Londoners want more social housing.   

[See also: Why is there a shortage of affordable housing?]

Still, leaving aside the familiar arguments about decency to the poor versus fairness to the private sector, these critics of social housing raise important questions about the role and character of Britain’s megalopolis. What they are saying, essentially, is that we should recognise London as the nation’s economic engine, and optimise it accordingly.

This reflects a way of thinking about cities that is increasingly popular among free-market enthusiasts. It is an economic geography inspired by Hong Kong and Canary Wharf; one that prizes hubs, clusters and zones, special enclaves where talent and investment can be concentrated and private enterprise allowed to flourish. Married to this is an obdurate growth-at-all-costs mentality, driven by deep frustration with Britain’s stagnation and a planning system that stymies development.

Liz Truss showed these same tendencies with her plans to pepper the country with an unlimited number of “investment zones,” areas enjoying exemptions from taxes, planning laws and environmental regulations. The problem with this outlook, as the debacle of Truss premiership demonstrated, is its haughty disregard for the constraints of the existing political economy, which it wrongly imagines can simply be sidestepped or bulldozed in pursuit of enlightened management. In truth, things are always more messy than “bold growth policies” allow.

On paper, privatising some portion of London’s social housing could be presented as a “levelling-up” measure, generating funds for investment elsewhere in the UK. The reality would more likely be one of even greater resentment towards the capital, as the provinces are reduced to storage for its unwanted benefits claimants. In London itself, local authorities would be forced to rent housing back from private landlords to accommodate those who cannot and do not want to move.

Besides, if we are treating London as a growth engine, where do we draw the line? Consider this eight-point plan presented by Patrik Schumacher, director of Zaha Hadid Architects, in 2016. Schumacher suggested not only abolishing all forms of social and affordable housing in the capital, but scrapping minimum-space standards for dwellings, privatising all public spaces and building a new city on Hyde Park.

To be clear, I’m not saying those wanting to redistribute social housing subscribe to this plan (though anyone familiar with hardcore “yimby” discourse will know Schumacher’s ideas are not as fringe as they might sound). The point is that measures to boost productivity and innovation do not automatically make cities a nicer place to live.

It is not just mindless diversity talk to suggest that Londoners want their city to sustain people of different means and backgrounds, and to allow for some continuity amid the constant churn of redevelopment. The market itself reflects these preferences: yuppies seek out gentrifying areas for their mixed neighbourhoods as much as their cheap rent.

Clearly unemployment is a major problem, in the capital and elsewhere. But if London is going to exist as a GDP-juicing metropolis, chaotically sucking in money and people from around the globe, then we can’t also expect a theoretically optimal allocation of resources. The interests of real estate investors and property developers don’t align with those of the city’s inhabitants, and the state must inevitably play a role in helping those the market does not. This is our capital city, not a special economic zone.

Yes, London’s rental market is a nightmare, but that is all the more reason to hurry up with regenerating the country’s other urban centres.  

[See also: Oxford Street’s decline is a parable for the UK]

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