By Brett Christophers, Uppsala University
In March 2019, Harrogate Borough Council in North Yorkshire launched an independent, arms-length housing company called Bracewell Homes to focus on ‘the purchase, development, sale and leasing of dwellings, as a commercial venture for the borough’. The same month, at the other end of the country, but in an equally leafy milieu, West Berkshire Council announced that it had spent £60 million of a planned total new investment of £100 million in commercial property, not for the purpose of delivering council services but rather to be let to tenants; the properties it had purchased included offices, a warehouse and two supermarkets, the latter located, ironically enough, in North Yorkshire.
Since the global financial crisis of 2007–08, a string of English local authorities (‘councils’) have pursued similar initiatives: over a third are believed to have invested in commercial property to earn rental income, and nearly half are estimated to have established a private housing company.
These ventures have elicited a barrage of criticism. Councils, it is said, should not be behaving like property companies – investment in commercial property is a risky business at the best of times, and if councils are going to build residential property then it should only be social housing on a not-for-profit basis.
The first is to paint an overview picture of these initiatives. Drawing on a range of secondary sources, the article discusses how prevalent they are, the regulatory context within which they have evolved, and the different approaches used by different local authorities.
The second contribution of the article is to conceptualise the initiatives in terms of what has come to be termed the ‘financialisation’ of urban development, namely a set of processes whereby financial actors, markets and/or logics come to play an increasingly important role in the development of the urban built environment. Insofar as English local authorities have been establishing housing companies and investing in shopping centres and the like with a view specifically to earning financial returns, they can be said to be financialising both residential and commercial property.
The article’s third aim is to explain. It is to ask why local authorities are pursuing these initiatives. While there are numerous factors in play, I argue that the most important is a set of profoundly significant recent transformations in what I term local authorities’ financial ‘conjuncture’ – the nexus of circumstances and forces bearing directly on their financial wherewithal.
I highlight three such transformations: the post-financial crisis devolution of austerity from central to local government, which has seen the latter bear the brunt of public-sector funding cuts; the largely unsuccessful reform of local authority housing finance in 2012; and a progressive cheapening of council borrowing capacity, also occurring in the wake of the financial crisis.
These transformations have not so much caused local authorities’ new commercial and residential property ventures as encouraged and enabled them. They have impacted local authorities in such a way as to make those initiatives considerably more appealing and arguably, in some cases, even necessary. They have, in short, pre-disposed councils to act as they have done.
In the light of this explanatory argument the article asks, fourth and finally, whether the criticism that has greeted councils’ new property initiatives is justified and fair. My answer is that it may not be, or at least not entirely. While local authorities would not need to pursue such ventures in an ideal world – one where they were amply funded to provide the services that local communities require of them – that is not the world in which they currently find themselves. For councils desperate to maintain social care, homelessness and other key front-line services in the face of savage cuts in funding from central government, commercial and residential property ventures appear to be – and indeed, may well be – the least worst option, a more sustainable and strategic approach than say liquidating remaining assets or raising council tax.
If we are to criticise these ventures, our criticism is perhaps better targeted not at local authorities themselves, but at the central government that is primarily responsible for shaping councils’ constrained financial conjuncture and that, in the process, has motivated them to behave like property companies rather than the service-focused community caretakers that the public expects them to be.
About the Author: Brett Christophers is Professor at Department of Social and Economic Geography, Uppsala University
Christophers, B. Putting financialisation in its financial context: Transformations in local government‐led urban development in post‐financial crisis England. Trans Inst Br Geogr. 2019; 00: 1– 16. https://doi.org/10.1111/tran.12305