Tag Archives: financial crisis

Why are English local authorities behaving like property companies?

By Brett Christophers, Uppsala University

Flickr user Balmain

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 initiatives in question are the focus of my new Transactions article, which is targeted toward a general audience as well as a scholarly one. It tries to do four main things.

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

Urban plans lost but not forgotten in a time of financial crisis

by Cian O’ Callaghan

'Balloon', Sorcha O'Brien and Eli Caamano, commissioned by the National Sculpture Factory, Cork. Photo by Cian O'Callaghan.

One of the impacts of the financial crisis that began in late 2008 is that the strategies, plans, and visions underpinning the development of cities do not speak to current realities.  Many of these strategies project twenty or thirty years into the future, a future they seek to build from a present that no longer exists.

The art installation depicted in the photograph above, which was produced in Cork city, Ireland during September 2008, captures the mood of this period very well.  It caught the city at a pivotal moment when the aspirations of the Cork Docklands Development Strategy – a plan initiated around the start of the millennium, which came to fruition in unison with the collapse of the property market – were about to be swallowed up the recession.  At the time these industrial buildings were slated for demolition to make way for three million sq ft of offices and over 1,200 apartments.  The installation was, in a way, like an elegy for these buildings and the version of industrial Cork they represented.  Due to the property crash, the intended development never happened, and these industrial buildings are still sitting on the quays.

The Celtic Tiger period in Ireland was characterised by optimism and growth.  But Ireland is now characterised by a very different narrative; that of banking collapse, sovereign debt, failed speculation, and ghost estates.  This confrontation between the exuberance of the Celtic Tiger and the miasma of the current period is expressed in those strategies that bridge the rupture between these two very different eras.  Now, rather than the population growth that was anticipated as a result of the Docklands project, Cork has to contend with halted developments and vacant properties, the loans of which are owned by Ireland’s ‘toxic’ bank, the National Asset Management Agency (NAMA).  One of the city’s landmark buildings, the Elysian, for example, is now also one of Ireland’s most iconic ghost estates with reputably only twenty five units in the complex sold.  Meanwhile, the local Occupy Cork movement recently moved their camp off the streets and into another NAMA owned building in the city centre.

The dilemma currently faced by Cork is not unique to that city.  This conundrum raises a number of important questions for urban geographers.  One, which I address in my paper, is what happens to all those powerful urban visions underpinning aborted growth plans?  As we enter into a new era of capitalism, a key research question for urban geographers will not only be to address how to move the development of cities forward, but also to understand the latent affects of the plans and visions now lost but not forgotten.

The author: Dr Cian O’ Callaghan is Postdoctoral Fellow at the Department of Geography and NIRSA (National Institute for Regional and Spatial Analysis), National University of Ireland, Maynooth.

O’Callaghan C 2012 Lightness and weight: (re)reading urban potentialities through photographs Area doi: 10.1111/j.1475-4762.2011.01078.x

O’Connell B 2011 The high-rise and the downturn The Irish Times 25 June

A Christmas gift to Cork YouTube video 2 Jan 2012

“Goldman Sachs rules the world”, Islam-style?

by David Bassens

Goldman Sachs New World Headquarters (photo by Z4dude via Wikimedia Commons)

Last October, Goldman Sachs registered Islamic bonds – sukuk as these are called – for a total value of US$2 billion on the Irish Stock Exchange. Remembering the sobering BBC-statement late September by independent trader Alessio Rastani that “Goldman Sachs rules the world”, this paradoxical feat inevitably triggers the question of how it can be that a global investment bank renowned for its speculative behavior tries to attract ‘Shari’a-compliant’ capital that shuns interest, uncertainty, and speculation to finance its day-to-day business.

Our recent study, published in Area, which focused on office networks of transnational Islamic Finance (IF) firms and which produced empirical insights with regard to the heavy entanglement of IF and conventional financial circuits, makes the above far less counterintuitive. IF firms have indeed emerged as an answer to faith-based demands for Shari’a-compliant finance, when during the oil-boom of the 1970s Gulf bankers laid the basis for a domestic sector. However, next to full-fledged Islamic banks, ‘conventional’ banks with a strong historical presence in the Muslim World have developed ‘Islamic windows’ to cater to the growing demand for Shari’a-compliant products. This globalization of IF has produced a geography that is marked by the emergence of a number of financial centers in the Gulf (e.g., Abu Dhabi, Dubai, and Manama), where IF is gradually becoming a dominant finance form, but which are in turn heavily interconnected with ‘conventional’ financial centers that are striving to attract business in growing sukuk markets.

The recent engagement between IF and Wall Street investment bankers, then, allows us to conclude that these geographical entanglements imply that IF’s acclaimed ‘alterity’ is largely inflated. While the increased involvement of IF actors in ‘mainstream’ global financial circuits could potentially import a ‘new world’ of customs, values, demands, and ideologies into the realm of global finance, even in times of financial turmoil global finance is being persistently reproduced from Wall Street and The City through a formal, but not substantial adaptation of financial techniques to demands from ‘new’ places. Indeed, although much is done to present the bonds as Shari’a-compliant, a thorough investigation of the prospectus by Khnifer shows that Goldman Sachs has, put simply, issued conventional debt.

The motives for such formal adaptations are grounded in the current phase of capitalist crisis since it is mainly aimed at channeling surplus oil-liquidity through conventional financial centers, while still not actually adapting the ‘nature’ of global finance itself. This means that IF can also be understood as a manifestation of global finance as it reaches out and integrates ‘new and exciting’ emerging markets. In times when liquidity has become a scarce good, such engagements are likely to proliferate, but whether it will mean that Wall Street’s – or The City’s for that matter – investment banking community will start to limit its speculative behavior to conform to the Shari’a remains largely a rhetorical question.

The author: David Bassens is postdoctoral fellow of the Research Foundation – Flanders at Ghent University’s Geography Department. He was the winner of the 2010 Area prize for new researchers.

Bassens D, Derudder B and Witlox F 2010 Searching for the Mecca of finance: Islamic financial services and the world city network Area 42 35-46

BBC 2011 ‘Anyone can make money from a crash,’ says market trader 26 September

Khnifer M 2011 Disclosure of three likely flaws in Goldman Sachs’ milestone sukuk 9 December

Geographies of Occupation

Sarah Mills

Occupy Wall Street, a protest movement against corporate greed and social and economic inequality which began in September 2011, continues to grow and inspire occupations across the world.  The original occupation in New York describes itself as a “leaderless resistance movement with people of many colors, genders and political persuasions. The one thing we all have in common is that We Are The 99% that will no longer tolerate the greed and corruption of the 1%”.  The claiming of space, whether St Paul’s Cathedral in London or in Madrid Square, has been central to the identity and nature of the demonstrations.   Furthermore, the role of social media and digital communications remains vital in organising and documenting the protests.  The complex geographies and demographics of the occupy movement are still unravelling and emerging, with mainstream media only recently focusing on events.

In their commentary in The Geographical Journal published online last week, Peter Hopkins, Liz Todd and Newcastle Occupation document the occupation at Newcastle University, UK that took place during November-December 2010 in response to government spending cuts and increased tuition fees.  Here, the authors discuss characteristics of the Newcastle Occupation (the claiming of space, alternative governance structure, cyberspace and social media) that are currently being played out in different contexts through this month’s global occupations.  This article gives an important insight into one example of occupation and the actions of students involved in the process and politics of protest.

 Read Hopkins, P., Todd, L. and Newcastle Occupation (2011) Occupying Newcastle University: student resistance to government spending cuts in England The Geographical Journal

 Read the latest news on the global Occupy movement via The Guardian website

 Follow the latest on Occupy Wall Street  / Occupy London / We are the 99% campaign

The Geography of International Banking

by Fiona Ferbrache

St Peter Port, the heart of Guernsey's finance industry. Source: E.Ferbrache

The 2008 global financial crisis has had major impact on the geography of international banking centres (IBCs).  In a forthcoming Area article, Derudder et al. analyse how leading IBCs have fared as a result of this financial crisis.  While they argue that a broad geographical pattern emerges, revealing a shift from West to East (where IBCs faring best are located outside North America and Europe, and inside Asia ), they also provide a more nuanced analysis that indicates certain western centres hosting some of the strongest performing banks (e.g. Sydney and Santander).  The rise or fall of IBCs is often connected to the collapse or take over of specific banks, for example Derudder et al.’s article is entitled “Goodbye Reykjavik”, as this city disappears from the IBC map after the collapse of all three of its major banks (Kaupthing, Landsbanki and Glitnir).

Other IBCs have been impacted by the Icelandic collapse and I was left pondering how international offshore financial centres (OFCs) might fit onto this map?  The Channel Island of Guernsey is one such OFC with a finance industry reported to be in “good health” and “robust shape”, with financial funds reaching record highs in 2010 (Guernsey Finance, 2010).  However, the Island’s relative resilience during and after the financial crisis is connected with its diversity of financial industries; fiduciary services, insurances, investments funds, asset management, and banking.  It is banking, however, that presents the most varied scenario with some banks reporting increased deposit levels and others reporting lower levels (see, GFSC, below).

Derudder et al. reveal how mapping the global financial crisis is a complex and important process for financial centres (OFCs in particular) (should) remain closely connected to territorial states.

Derudder, B., Hoyler, M. & Taylor, P. (Forthcoming) Goodbye Reykjavik: international banking centres and the global financial crisis.  Area.

Guernsey Finance (2010) Guernsey’s finance industry ‘is in good health’ http://www.guernseyfinance.com/news_room/guernseys-finance-industry-good-health 08 August, 2010

Guernsey Financial Services Commission (GFSC) www.gfsc.gg

Sell this: the geography of stock markets

In May 2010 the German government banned “naked short selling” of eurozone government bonds, their credit default swaps (CDS) and the shares of the country’s 10 biggest financial institutions. “Short selling” (selling shares borrowed for a fee from investors that actually own them) is a common investment strategy, in which the investor aims to sell the borrowed shares and then buy them back at a lower price, and then return them. “Naked short selling” is a variation in which the shares are not actually borrowed before being sold, with the seller relying on agreements to be able to buy the shares if necessary.

In response to the global financial crisis, government regulators in different countries have on several occasions banned naked short-selling of shares to limit speculation and possible market manipulation. Due to the interconnected nature of stock markets, particularly within Europe, this measure may not necessarily have the effects intended. For example the German naked short-selling ban in May 2010 could not affect eurozone debt traded in New York and London. As a result the German government has pushed for an EU-wide ban, although the move would be opposed by the City of London in particular.

A 2009 paper by Dariusz Wójcik surveys the literature on the relationship between stock markets and geography. Wójcik notes that in the nineteenth century stock markets were much more localised, with many cities having their own. With the adoption of the telegraph and telephone, markets became increasingly national, and since the 1970s they have become increasingly globalised, with multi-national enterprises often listed on exchanges in different countries. However despite growing globalisation and virtualisation, the importance of geography remains, with for example closer proximity to stock markets making firms more likely to raise capital in this way. One issue is that the media often treats stock prices as “neutral, benign barometers of the economy”; Wójcik warns that “stock markets do not equal transparency”. Whether it is trading through alternative systems out of reach of regulation, the risk of market manipulation by investors, or fraud or near-fraud by executives, there are many ways in which the prices of stocks (and of other financial instruments similarly traded) may be deceptive.

View the Wójcik (2009) article here Wójcik, Dariusz (2009), “Geography of Stock Markets”Geography Compass, Volume 3, Issue 4, Pages 1499-1514

Elena Moya, The Guardian: Europe bars Wall Street banks from government bond sales Dan Roberts, guardian.co.uk, 19 May 2010, “Germans are not posturing on short-selling: they’re deadly serious

Robin de la Motte

Mortgaged: geographies of the financial crisis

A 2009 paper by Manuel Aalbers surveys the geographies of the global financial crisis, the impacts of which continue to be felt. The crisis began with failures in the market for US residential mortgage-backed securities (RMBS), where so-called “subprime mortgages” issued to higher-risk borrowers were re-packaged and re-sold as groups of mortgages, with under-priced risk and over-estimated returns. Grouping the mortgages was supposed to average out the risk attached to individual mortgages, but Wall Street banks originating the securities had little incentive to take sufficient account of the economy-wide risks involved. In addition, much subprime lending took the form of predatory lending to vulnerable communities, with higher interest rates and fees, abusive terms and conditions, and failure to take account of the borrower’s ability to repay. As a result the economic downturn turned into a financial and foreclosure crisis hitting the poorest US communities hardest.

Outside the US, many RMBS were sold to institutional investors without sufficient explanation of the risks, and Aalbers gives the small Norwegian town of Narvik as an example, losing millions of dollars of investments which had been intended to support the construction of new municipal facilities. Much larger sums have been lost by other European institutional investors. There is relatively little Europe can do in the short term to counter these losses; one reaction has been to restrict access of US banks to the bond sales of European governments, so that these lose the relevant commission.

View the Aalbers (2009) article here Aalbers, Manuel (2009), “Geographies of the financial crisis“, Area, Volume 41, Issue 1, Pages 34-42

Elena Moya, The Guardian: Europe bars Wall Street banks from government bond sales Elena Moya, The Guardian, 8 March 2010, “Europe bars Wall Street banks from government bond sales

Robin de la Motte