Chapter Title: Planning in the shadow of the market: the emergence of a London model
Book Title: London
Book Author(s): Mike Raco and Frances Brill
Published by: Agenda Publishing. (2022)
Stable URL: https://www.jstor.org/stable/j.ctv2tjdhh1.4
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Planning in the shadow of the market: the emergence of a London model
This book addresses what, on the face of it, seems a straightforward question: who is governing London and how? Similar questions are being asked in cities and societies across the world in an era that is shaped by relentless processes of globalization, multiple crises and insecurities. The book is therefore an assessment of the governance arrangements that shape the city’s planning and development, who controls them and whose interests they serve (and whose they do not). We show that over recent decades there has been a slow but steady corrosion of the public realm, in which powers, resources and responsibilities have been voluntarily ceded to a range of players at multiple scales, found mainly in the private sector. There is a lot to be learned from London. It is a context in which there has been a deliberate and purposeful agenda to generate dependency on private finance and service providers. All planning deliberations and political choices are now conducted in the shadow of the market, with an eye to what these new groups of players – what we term the parastate – want and need. There is nothing inevitable about what has happened. We begin by setting out the “simple story” that dominates policy and (some) academic thinking about London before turning to some of the wider difficulties that policymakers, businesses and citizens increasingly face in the wake of decades of change.
London’s simple story: from the city of decline to the triumphant city
During the 2000s many hailed London’s economic and demographic expansion as an archetype of a broader narrative of urban triumphalism. For a range of commentators, politicians, academics and planners its recent experiences can be captured in a simple story of change that explains the much-lauded
transformation from an earlier period of structural decline. The story begins with a view of its imperial past that acted as a driver of growth in the early modern and industrial eras but left the city ill-suited to the demands of postwar economic and social change. Its urban environments were characterized by poorly planned and maintained infrastructure, with dilapidated housing and commercial property stock and a misfunctioning postwar welfare state that had been responsible for the delivery of poor-quality modernist estates and declining private sector dynamism.
By the 1980s critics presented London’s governance arrangements as sclerotic, unable to cope with the demands of the modern political economy, particularly the role of finance, and lacking the technical and managerial capacities to bring about a much-needed transformation of the city’s infrastructure. Its politics was perceived as being over-dominated by left-of-centre political elites, hostile to globally oriented forms of investment and overfocused on “old-fashioned”, municipalist approaches to urban management (see Hatherley 2020 for a wider discussion). These elites, it was claimed, were unable to grasp the opportunities opened up by the internationalization of trade and associated flows of people and commerce. Worse, London was seen to be falling behind competitors, with a persistent seeping away of people and economic and cultural activity. There were serious discussions in the 1970s and 1980s over its position as a leading example of cyclical counterurbanization: the world’s first million-plus city in the nineteenth century and the first to decline in the twentieth (Hall 1982). Its experiences seemed to chime with the visions of urban commentators on the political right who predicted the end of “ungovernable” large cities (Buchanan & Tollison 1984; Yates 1977). As political entities, cities were simultaneously portrayed as too centralizing to enable effective citizen control and too decentralized to facilitate strategic and effective planning interventions. Moreover, London’s politics could be captured by elite interests who posed as “representatives” of urban populations, but in practice consisted of local oligarchies for whom urban politics was a vehicle for the pursuit of political power. At the same time, many analysts saw the economic future of cities as belonging to “small and mediumsized” places, in the same way that command-and-control Fordist economies had given way to post-Fordist forms of flexible specialization (Porter & Sölvell 1998). Megacities had had their day.
This simple story then goes on to describe an era of turnaround and triumph.
In the mid-1980s following the abolition of the left-of-centre Greater London Council (GLC), a new set of entrepreneurial thinking began to emerge. There was a reformed and updated global outlook on the part of policymakers, who were increasingly prepared to reach out to elite actors and business organizations to help transform the city’s fortunes. Population levels first stabilized and
then began to grow again; the economy saw rapid expansion, especially in the service and financial sectors following the “big bang” of financial deregulation and technological transformation in the mid-1980s; investment into the built environment increased relentlessly in both commercial and residential property sectors; old-fashioned “sunset” industries, mainly in the manufacturing sector, disappeared as the economy modernized and transformed into a service sector-based powerhouse of globally oriented growth; and restrictions on London’s expansion were removed by the dismantling of national spatial policies and a neoliberal focus on supporting global winners. A new era of development thinking emerged underpinned by theories of “competitive advantage” and the purposeful selection and boosting of “successful” locations, from which development gains would trickle down to all people and places within a given territory (Porter 1990).
The rise of third-way politics at the national level in the 1990s opened the door to a new role for London as the centre of a “Cool Britannia” politics, with an intensified growth strategy built on the city’s perceived strengths in financial and business services. A growing economic orthodoxy was used to give credence to such approaches culminating in the work of writers such as Glaeser (2011) who celebrated the “triumph” of global cities and their emergence as the drivers of twentieth-century economic and population growth. Cities, it was argued, were benefiting from opportunities created by enhanced globalization and would act as spearheads for innovative capitalism. The introduction of elected mayors from 2000 gave London a further boost, acting as focus for public and private coordination and the development of shared projects. London’s built environments boomed, fuelled by national and international investment and a supportive planning system. Even in the wake of the global financial crisis of 2007–08, the city thrived, protected by national government bailouts on an unprecedented scale. By 2020 it had become the archetypal triumphant city.
Within this wider narrative a “London model” of governing was hailed as a template for others to follow (Moore, Raco & Clifford 2018). Rather than a concrete programme, the model consisted of a loose set of ideas and assumptions about priorities for development planning and who should govern and deliver it. It both described and prescribed how modern metropolises should be planned and by whom, and propagated recipes of good governing for national and city authorities. This model has become increasingly concerned with managing growth rather than arresting decline and dealing with the associated economic, social and environmental costs of expansion, especially in relation to housing and rising inequalities (Florida 2017). During this era London took on an iconic role, surging to the top of global rankings such as the influential Global Power City Index (Mori Memorial Foundation 2019), driven by the presence of some of the world’s highest-ranked universities, a dynamic and
highly skilled labour force, agglomerations of successful industries (especially finance, insurance and real estate) and a vibrant and dynamic cultural sector. Its economy grew by 3.5 per cent in 2018–19, much higher than comparable European cities such as Paris (0.5 per cent) or Madrid (1 per cent), and corporate executives scored London as the number-one location for professional and legal services and availability of talented labour. For Atkinson, Parker and Burrows (2017) it became an alpha centre for global elites and associated forms of urban development and investment. Its economy is now a mass generator of employment and the city has become a magnet for in-migration.
The transformation of the city’s built environments is at the heart of this turnaround. Landmark flagship urban projects have been powerful in delivering and sustaining the triumphant city narrative, in particular:
• the regeneration of the iconic Olympic 2012 location around Stratford to showcase how major sporting events can act as a springboard for urban investment;
• the evolution of mixed-use projects in areas with long and complex development histories such as those of King’s Cross or London’s South Bank (Brill & Robin 2019); and
• the identification and development of major regeneration programmes, most notably the long-running redevelopment of the London Docklands, Europe’s largest project of its type.
At the same time, the planning system has been able to deliver some of the most complex infrastructure projects in western Europe, including public transportled developments around rail stations, the building of new metro lines and the construction of utility infrastructure. All these projects are seen as templates for policymakers and built environment professionals elsewhere, and are promoted by UK and London policymakers to showcase the city’s governance structures and planning system (UK Government & Mayor of London 2013).
The simple story and new urban realities
During this period of much-trumpeted success, the seeds of new crises have been sown and the simple story is being challenged, even on its own terms. Relentless economic and demographic expansion generated structural tensions that are common to megacities across the world, most notably:
• a failure to provide enough accessible and available housing and employment for a growing population;
• a market-driven modernization of planning systems, making them reliant on private investment and expertise, therefore vulnerable to downturns and the changing needs of private firms;
• a hollowing-out of local government and state powers and resources, leaving welfare systems unable to address mounting and unprecedented inequalities between groups;
• the broader mass-privatization of welfare provision and social infrastructure; and
• shifts in government finance that undermine the capacity of state agencies to establish coordinated forms of intervention.
All of these challenges are emerging as public authorities face unprecedented funding cuts in the wake of the 2008 global financial crisis, geopolitical uncertainties in the shadow of Brexit, growing global protectionism and a creeping awareness of the environmental limits of current policies as the climate emergency gathers pace (Wallace-Wells 2020).
These threats and insecurities were emerging before the Covid-19 pandemic sent a further shockwave through the city’s economy, infrastructure, financial models and communities in 2020. From a narrative of triumph, London is suddenly being spoken of as a megacity facing a future of uncertainty and instability. Some commentators talk in an excited way of the possibility of an era of “peak-urbanism”, or a pivotal moment in which there is a discernible shift of people and investment away from central urban areas to the suburbs or rural locations (Florida 2020). The very factors that have driven the city’s development are seen as potential risks that could make it unattractive to future investors and/or the groups of migrant workers who sustain it (Žižek 2020). In 2021 London residents spent a staggering £55 billion on property outside the city, in a rush for more living space and “healthier” living environments (Hammond 2021). These trends are in direct contrast to those predicted by the triumphalist narratives of the 2000s and 2010s, and while they should not be exaggerated or taken as certainties, the impacts of the pandemic have, at the very least, highlighted the hubristic character of simple stories and expectations of perpetual growth.
It is in these contexts that this book is situated. It challenges the notion that megacities such as London are somehow “ungovernable”, or too large and complex to manage through traditional territorial policy and planning instruments. Instead, it argues that despite an internationalization of economic systems, public policy still matters and makes a significant difference to material outcomes and development trajectories (Le Galès 1998). It will show how policy interventions and agendas, allied to broader changes in the form and character of investment, have played a direct part in London’s recent economic
and social growth. The findings reflect Le Galès and Vitale’s (2013: 1) claim “that modes of governance have long-term consequences for their inhabitants and governing failures may have severe negative effects (e.g. housing shortages, low levels of educational attainment, crime, low productivity, health)”. Urban societies and economies are more or less governed, and that may change from one city to the next or from one period to the next. Research on contemporary megacities should articulate the question of “what is governed?” within a broader set of questions over “who is governed?” and “who is governing?” As we show in later chapters, in the case of London, purposeful approaches to governing have been introduced that seek to create new forms of control and coordination beyond the state and in the hands of elites, albeit subject to challenges. In turn, this highlights wider questions over what is not governed and who governs beyond the gaze of governing agencies and systems.
We use this approach and the questions it raises to set up the core structure and argument of the book. We examine how and why London’s governance structures and development planning systems have undergone a profound transformation since the 1980s, who is governing these processes, and with what effects. Fainstein (2001) famously talked about London’s “city builders” in the 1980s and 1990s: the networks of property developers, policymakers and planners responsible for reshaping urban development. Here, we develop the argument that a new generation of city builders has emerged representing a much more complex, relational and multi-scalar assemblage of regulators, policymakers, private financiers, consultants, lawyers and built environment specialists. Projects are implemented in a highly fragmented and inefficient manner. Fainstein and others concentrated on the power of development elites but also drew on a longer tradition of Anglo-American scholarship in which the state is represented as a relatively coherent set of institutions, operating with a degree of political legitimacy and authority when negotiating with private sector actors. Even US-based writers who talked of “dependent cities” in the 1980s and 1990s (Savitch, Kantor & Vicari 2002) maintained a liberal separation between public and private sectors and highlighted the ways in which the former were increasingly dependent on decisions made by the latter (Kantor 1987). In contemporary London there has been a shift away from hierarchical, imperative-driven modes of government-led planning to one where state agencies seek to coordinate different agents and actors, each seeking to steer development priorities and opportunities in their own direction.
The book sets out some of the costs of this success both for London and places and regions beyond. It argues that megacities have become test beds for new forms of planning and selective state (in)action, with political and
economic consequences that go beyond their borders. There has been a shift in the definition and purpose of planning interventions. Rather than acting as a mechanism for resolving tensions between development and social and environmental needs, it has been retooled to become a driver of development in which the state has been restructured and repurposed to meet these ends.
Changing economies, financialization and the emergence of the London model
What has happened in the twenty-first century is the result of multiple interconnected processes. First, urban built environments have attracted finance on a scale that dwarfs those of property investments in the 1990s, in both relative and absolute terms. What Rolnik (2019) terms a wall of money has been invested into residential and commercial property and land, with The Economist (2020a) estimating that globally these were worth in excess of $200 trillion in 2020 (see Ward & Aalbers 2016; Ward & Swyngedouw 2018). For investors, growing megacities like London are central locations for this mass investment. Moreover, the types of real estate investor have diversified in ways that were difficult to foresee in earlier periods to include:
• state-led firms and wealth funds now exist on an unprecedented scale;
• a new global elite of oligarchs and super-wealthy individuals see London’s high-end property markets as a “must-have” acquisition;
• as populations in the global North age, their pension funds have been active agents, looking for high and stable returns from the most successful property markets; and
• mass home-ownership has created a growing class of property-owning citizens for whom investment in the housing assets is seen as the key to longer-term financial stability (The Economist 2022).
Alongside the growth of new investment groups that we will chart through the book, the welfare state itself has become a lucrative market for private profiteering. The default option in the London model, enshrined in planning and policy regulations, is to turn to the private sector for expertise, finance, resources and project delivery skills. There is an inbuilt tendency to return to “trusted” experts used before, many of whom are powerful and vertically integrated multinational firms. This is reflective of broader trends in many western countries in which welfare states have become vehicles for investment profits and/or direct private sector control (Braithwaite 2008).
The new city builders therefore partly consist of a range of private sector regulators and what we term parastate actors, who govern and regulate with or even on behalf of the state. The planning of urban development and infrastructure is no longer a matter of established public/private partnerships or regimes. Private expertise is now working alongside or in place of the state, with their own private codes of conduct. As we show, regulatory capture and delivery has become a lucrative market for parastate firms. This generates governance paradoxes. In contrast to neoliberal-focused accounts that highlight trends towards liberalization and deregulation (see Pinson & Morel Journel 2016; Sager 2015), a new breed of corporations exists that benefit from the presence of greater complexity in planning processes and the presence of more regulations that they help establish, govern and deliver. We return to this paradox in different fields of public policy throughout the book.
A consequence of these shifts is the growing dependence on private sector resources and expertise by state authorities. Agencies become subject to an expanded managerialism reliant on private sector-type targets, quantitative calculations, established professional codes, private laws and (international) accounting standards. These forms of parastate governance have emerged alongside, and at times in place of, formal state structures, and yet within existing literatures on urban development and planning in London (and elsewhere) there is little direct reference to the more liquid and relational acceptance of private norms, regulations and standards in shaping the building of cities (Black 2017; Krisch 2017). While some have focused on what Pistor (2019) calls the “codes of capital” written by lawyers and accountants that facilitate private sector practices and global privatization programmes, these are rarely applied directly to urban development planning and practice.
At the same time, the presence of a clear model does ideological work in that it seeks to overcome the antagonisms associated with a greater reliance on market actors and market knowledge. There is an attempt to showcase the benefits of private sector inclusion while minimizing any downsides. The most significant manifestation of this is through a retooling of the planning system with a new role for value-capture mechanisms – interventions that seek to capture financial surpluses for public gain. The two most significant policies, Section 106 agreements and Community Infrastructure Levies, are outlined in Table 1.1. Reliance on these mechanisms generates a deep dependency on development activity. And as Pike et al. (2019) note, added to this policy mix is the trend for state agencies and local authorities to become financial actors themselves, adopting (risky) future-oriented policies that are contingent on financial gains delivered through infrastructural projects and consequential land value uplift (Penny 2021; Weber 2016).
Table 1.1 Value- capture mechanisms in the London planning system
Policy Key elements
Section 106 agreements
Section 106 agreements are a mechanism that make a development proposal acceptable in planning terms, which would not otherwise be acceptable. They are focused on site-specific mitigation of the impact of development.
An obligation can:
a. restrict the development or use of the land in any specified way;
b. require specified operations or activities to be carried out in, on, under or over the land;
c. require the land to be used in any specified way; or
d. require a sum or sums to be paid to the authority (or to the Greater London Authority) on a specified date or dates or periodically.
A planning obligation can be subject to conditions, it can specify restrictions definitely or indefinitely, and in terms of payments the timing of these can be specified in the obligation.
If the Section 106 is not complied with, it is enforceable against the person that entered into the obligation and any subsequent owner. The Section 106 can be enforced by injunction (Source: Local Government Association 2021).
Mayor Community Infrastructure Levy (MCIL)
Local planning authorities in London are responsible for calculating the MCIL charge and collecting MCIL payments on behalf of the mayor. The charge is calculated once a planning application is submitted to the local planning authority. MCIL is payable when work on the new development commences and, for major developments with a large CIL liability, the payment can be made in instalments. In 2021 these payments ranged from £20–£50/sq. metre (Source: Mayor of London 2021a).
Such policies more deeply intertwine the public and private sectors – increasing the co-dependency of investors, private sector actors and the state. This has significant impacts on all elements of who is governing and what is governed in London, and the mechanisms of control, accountability and responsibility that shape these relations. The model promises to establish forms of governance that are effective and efficient in these changing contexts, while also being legitimate and inclusive. It diverts attention away from fundamental political questions over who development is for and what purposes it serves and converts them into a series of assumptions: that growth is inevitable and it is the role of public policy to manage and direct it.
A particularly important dimension of this growth is the role of finance and its global competitiveness. As Shaxson (2018) argues, public policy, and we would argue the London model, has been captured by what economists term a
Policy field Regulatory priorities Coordinating mechanisms Outcomes
Strategic planning
Maintaining a competitive economy. Creating a deliveryfocused, investorfriendly planning system. Identifying key sites for development to support globally oriented growth. Pushing for more growth within London and the attraction of more public.
Use of targets to drive planning deliberations. Plans at nested scales – city, borough and neighbourhood level to support planning delivery. Unclear separations between public and private interests. Greater reliance on professional knowledge practices and legal codes. Increased use of consultancies for expertise and deliberations.
Construction of a collective model of London plc. Growing inequalities within population. Lack of attention to questions of redistribution, with financial and material benefits trickling up to asset owners.
Growing disconnect between Londonfocused agendas and national economy/polity. The creation of markets for new classes of experts.
Housing Supply-side delivery of more housing units to meet a perceived “crisis”. Transformation of existing housing stock into an asset for rental extraction. Creation of new asset classes to attract institutional investors and patient capital. Using development to generate financial surpluses for welfare spending.
Target-setting assessments. Focus on creating certainty and investor confidence within private sector. Use public assets, institutions and finance to support house building. Establishment of priority partnerships and joint ventures with major house builders.
Leverage public sector land for new development.
New asset classes dominating house building –especially student housing and build to rent (BTR). Construction of higher- density housing in taller blocks. Reduced home- ownership. Increased intergenerational inequality. Increased empty units. Weak tenant rights.
Policy field Regulatory priorities Coordinating mechanisms Outcomes
Major infrastructure
Create effective institutional accommodations to channel finance into key infrastructure.
Ensure that the risks of private finance are minimized.
Use of Treasury guarantees to underwrite schemes. Encourage private firms to coordinate and manage key infrastructure projects. Plan by project – the use of large-scale interventions to deliver change.
Land and development projects
Convert public land into an asset class. Identify networks of ownership to bring land into development use.
Land utilization and release strategies by public authorities. Presumptions in favour of development. Thresholds and targets to mould private developments to the public interests. Attracting patient financial capital.
Major infrastructure delivered by international companies and policy experts. Favouring replacement over maintenance. Provide income streams to financial companies at the expense of reinvestment and/ or lower costs for consumers.
Opening up of development opportunities for private firms. Inflows of capital from a variety of sources.
fallacy of composition: “what is true of a part is, on that account alone, alleged to be also true on the whole” (Caballero 1991: 3). In other words, the economic health of the city is elided with the performance of selected companies and sectors that are resident within it. The term has been much used in studies in the Global South that examine national economic development projects and the ways in which core sectors are prioritized in the name of national progress. This, in turn, generates heightened levels of impoverishment and precludes the development of a broad economic base (Mayer 2003; Razmi & Blecker 2008).
Similar arguments can be applied to the London model and its focus on meeting the needs of “competitive” global firms and sectors, whatever the wider impacts on economic diversity or inequality. The presence of global businesses is represented as a collective good and their competitiveness equated with London’s competitiveness and well-being. As writers such as Mitchell (2002)
have shown, the production of development strategies requires active work to both mobilize descriptions of how economies operate and establish prescriptions for the types of policy responses required. In this case, representations of “London plc” construct the idea of a collective endeavour – a corporate-like view of the city but one that that in reality privileges the needs of the few.
We summarize our characterization of the London model in Table 1.2 above and will develop our argument through subsequent chapters. In the remainder of this introduction, we examine three broader contextual factors that the model both reflects and has helped reproduce: the politics of contemporary urban development and the right to regulate; the growth of mass inequalities; and national/local state relations and London.
The politics of contemporary urban development and the right to regulate
In megacities across the world there are growing concerns over the balance between territorial control and global flows of investment and corporate profiteering. The United Nations Conference on Trade and Development claims that safeguarding “the right to regulate” on the part of governments and citizens has become an urgent priority and could even be considered a human right (UNCTAD 2015). It is not only the scale of global investment that is threatening the relevance of territorial structures, but the types of investment now taking place – focusing on welfare systems and the fabric of the places in which citizens live. But these calls for greater rights have come alongside wider reforms in which supranational agencies simultaneously push for local and national governments to make their planning systems more flexible to encourage cross-national investment and adapt to new “realities”.
A recent World Bank-sponsored report, for instance, notes that “cities from all regions and income levels have mobilized private investment to transform struggling areas into liveable, prosperous neighbourhoods” and that “private investment is key to securing the necessary financial resources, while the viability of regeneration efforts relies largely on buy-in from the community and private sector” (Amirtahmasebi et al. 2019: 1). The OECD (2019: 94) similarly calls on city governments to put in place measures that “create the incentive to convert low value land to higher value uses and to attract new residents and businesses”. The messages are clear. Regulatory reform is required if city and national governments want to boost investment and solve the challenges associated with managing growth and boosting supply. At the same time, they must do this while ensuring that they do not sacrifice regulatory powers and
responsibilities. This structural ambiguity is left to planning systems, policymakers and citizens to resolve.
In the twenty-first century, there have also been systematic changes in the nature of investment processes, or how and why investments move into the real estate markets of cities. Hall (2018) has highlighted the increasingly relational forms of regulation that shape investment processes and the ways in which decisions taken in “source” and “host” locations need to be understood as part of a mutually constitutive system. This has become more significant with the growth of international property investment by sovereign wealth funds (including Norges Bank from Norway and the Qatari SWF) and state-owned or influenced enterprises. These investors are crucial in the mobilization of cross-border investments, but their activities are state-led (through ownership or regulatory control) and are therefore subject to the political and economic priorities established in countries of origin as well as those of recipient territories (Alami & Dixon 2020). The built environments of megacities such as London have become core locations for their activities, and we return to these in Chapter 5.
Moreover, contemporary regulations established on a territorial basis have been unable to enforce priorities in this wider landscape of internationalization. Reforms have often been written with the assumption that previous rounds of regulation have failed and are in need of reform (Cochrane 2007). Some have been more market-oriented in seeking to influence the actions of individuals and organizations and/or developed alongside legal codes and private law regulations (Pistor 2019). Others are more hierarchical and legalistic, and involve criminal enforcement and/or application of disciplinary measures (Calor & Alterman 2017). In some ways their implementation, and their obvious limitations, reflect a wider international trend in which regulators are locked into a restless search to find effective mechanisms for controlling and channelling developer and investor practices. Rather than exercising the right to regulate on behalf of citizens, city and national authorities have been tempted to reduce regulatory oversight in a strategic and carefully crafted manner.
The shift towards more clandestine forms of regulation in megacities is not confined to the London case. As Moreno Zacarés’s (2020) powerful analysis of the Spanish planning system shows, clientism and corruption have long been a phenomenon of urban development systems in the Global North and reflect Le Galès and Vitale’s (2013) insight that what is purposefully not governed (or regulated) is often as significant as what is.
While much of the writing on corruption and illegality is predominantly focused on the Global South, or in Mediterranean or eastern European countries, the reality is that the built environments of megacities like London have become anchors for much of the informal/illegal global activity that surrounds
urban development. The city’s relatively lax corporate accounting laws, allied to an assemblage of loose regulations designed principally to support the global competitiveness of financial industries, have encouraged inflows of global finance, especially from elites and those seeking to find a safe haven for their investments (Shaxson 2018).
Recent research shows that property investors are attracted by the legal and governmental certainties of the English planning system, along with the cultural appeal of London’s more exclusive neighbourhoods (Raco, Livingstone & Durrant 2019). However, the same conditions are attractive for illicit finance. Transparency International (2017: 4) found that “corruption causes high levels of instability abroad leading to ‘crisis capital’ being placed in safe havens like London” and that “the London property market is highly vulnerable to corrupt wealth flowing into it. Analysis of open-source material found over £4.2 billion worth of properties bought with suspicious wealth”, a figure that the organization demonstrates to be a significant underestimate (see National Crime Agency 2020).
At the same time as illegal and illicit money has been flowing into the city, other forms of informality are emerging as housing and land prices have risen dramatically and are becoming increasingly unaffordable for a range of groups. The 2010s saw the rise of what Standing (2014) labels a new “precariat”, whose position within the economies and societies of modern cities have become increasingly marginalized.
Alongside this, irregular housing, known colloquially as “beds in sheds”, has emerged in which a growing section of the population, often recently arrived migrants, now live. London Councils (2012: 1) describes these as buildings “in contravention of local planning rules, as they will have been built (or adapted for use) as dwellings without planning permission. They are often also in breach of environmental health law, either because of unsafe electrical wiring, inadequate plumbing and/or through overcrowding.” It is estimated that 9,000 beds in sheds exist in London and the issue has emerged as a significant urban planning “problem” over the last decade driven by the twin processes of reduced levels of expenditure on local government and the growth of severe housing market pressures and inequalities (Lembo-Schiller & Raco 2021). Their emergence challenges stereotypes of planning and development systems across Europe in which England is often presented as a space of formalized, transparent and open planning, in contrast to the “transition zones” of southern Europe in which informality and corruption are viewed as endemic (Chiodelli 2019).
These trends have not gone unchallenged and local politicians and civil society groups have played a part in contesting them. As we see in Chapter 2 the election of Mayor Sadiq Khan in 2016 and 2021 was, in part, a result of his
wider territorially focused campaign to govern “on behalf” of London residents and citizens, and to affirm their regulatory and governmental rights.
There has also been a wider challenge to the legitimacy of what is happening across the city, especially in relation to a widely experienced housing crisis of availability and affordability (Edwards 2016). Journalists and academics have led campaigns, characterizing the situation as an attack on the quality of life of the city’s residents and its built environments (Minton 2017; Moore 2016). Across and within the city, conflicts have arisen over planning developments and projects and there is evidence of strong coordination now emerging across the city (Sendra & Sennett 2020). But the ability of such groups to assert their regulatory rights is becoming increasingly difficult, and as the next section will show, they are being made in a context of growing structural inequality.
Mass inequality and governing the unequal city
The introduction of a growth-oriented London model has played a key role in producing mass inequality within the city and across the urban spatial economy of the UK. Massey’s (2007) work on the rise of the world city narrative in the 1990s and early 2000s demonstrated how the presence of spatial and social inequalities became a less important priority, compared to the wider objective of boosting growth.
In line with broader shifts in urban policy under Labour administrations, both national government and Mayor Livingstone (2000–08) embraced global projects and saw inequality as a price worth paying to make London as a whole a “successful” site for development. There was a need to create urban environments that would attract and support the needs of creative, skilled workers, with forms of gentrification becoming a core focus of policy, rather than a negative consequence of growth. An optimistic reading of the changed approach was that the benefits would trickle down to residents and workers across the city. A more realistic interpretation is that inequality became accepted as a driver of a new growth model. Worse, the promise that benefits would trickle up to asset owners and creative workers became an important component of a wider attempt to attract new investment and investors.
Throughout the book we document the ways in which inequalities of different types – material, place-based, socio-cultural – have emerged and the serious challenges this poses for contemporary planning and governance programmes. May et al.’s (2007) study showed that the world city economy could only function effectively with the presence of a reserve army of low-paid,
largely migrant labour, living in poor-quality or even informal housing. The formal economy was parasitic on the presence of the informal and the marginalized – a finding that reflects the work of anthropological writers such as Scott (1998) on cities in the Global South.
In line with our wider focus on asking what is governed, who and how, we show that public policy decisions have played a foundational role in creating the conditions for a divergence in outcomes and opportunities. At the same time, planning priorities ostensibly seek to address the negative consequences of growth by promoting mixed communities policies, an expansion of affordable housing and a series of welfare interventions that recognize the “diversity” of different types that exist in the city.
But the most significant driver of inequalities is asset ownership patterns and real estate property. While much of the focus of equalities-driven policy narratives is on incomes, this deflects attention away from the growing divergence over asset control and its impacts (Piketty 2018). The two are, of course, interconnected. High and stable incomes have allowed some groups to invest in assets. But the language of “income replacement” through property ownership and/or rent has come to dominate and provide wealthier individuals with alternative sources of finance in ways that recycle and entrench material privilege (Ryan-Collins 2019; Ward & Aalbers 2016).
The consequences of these forms of inequality go beyond quantitative measures. Much of the financial benefit of ownership goes to millions of residents who own their own properties, creating political pressure to increase asset prices further. Crouch (2009) argues that the proliferation of housing ownership has created a “privatized Keynesianism” in which individuals fund their own welfare using property price increases (Saunders 2021). This fuels an ecosystem of private welfare in which growing numbers of citizens are financially dependent on their own wealth streams, especially housing, land assets and investment funds (notably pensions), rather than collective provision. Conflicts over housing, land and asset prices and ownership are therefore increasingly politicized and multi-directional. Even under a more leftward leadership the opposition national Labour Party in 2018 shied away from a housing policy approach that would reduce prices – calling instead for “stabilization” and other forms of regulation (The Labour Party 2018).
These trends have powerful effects. Inequality is increasing as the wealth of the top 10 per cent of the population grows faster than the rests, as shown in Figure 1.1. A Trust for London (2020) report demonstrates that “those in the top wealth decile (i.e. the 10 per cent of people with the highest wealth) hold 42.5 per cent of London’s total net wealth” (p. 1). Citizens in lower quartiles have simultaneously become systematically impoverished – with 30 per cent of the population possessing collectively less than 1 per cent of the total wealth.
These figures also exclude informal practices at both ends of the spectrum discussed above, including those living in a clandestine manner and those with properties that are beyond the formal regulatory and governance system.
A third type of inequality has emerged over access to political power and influence, and the ability of different groups to exercise their rights to regulate. The rise of the London model is predicated on the containment of political conflict and contestation, and the freeing-up of elite expert networks to get on with the task of delivering projects. For some, there has been a gradual but relentless move towards the privileging of private knowledge and control over urban development processes, and a growing role for a “shadow set of elite practices” (cf. Chipkin 2018) and public/private networks in driving policy reform. The opportunity to influence the public sphere has become increasingly contested, with decisions becoming more and more technical in character and driven by hidden financial calculations (Savini & Aalbers 2016).
Keeping down what is widely termed the “noise” of political protest and civil society engagement has been a growing trend in the governance of London since the 1990s. As Swyngedouw (2018) argues, the ability to articulate alternative perspectives and to have access to decision-making systems and structures represents a fundamental prerequisite of a functioning democracy, but it can also increase perceptions of what is increasingly termed “political risk” on the part of private sector actors.
National/local state relations and London as an undergoverned city
Finally, we turn to questions of the spatial distribution of power within the highly centralized UK system and its importance to the London model. Despite acting as the centre for national government, London remains one of the most undergoverned megacities in Europe. Its formal institutions lack the resources and powers to implement programmes without the financial and regulatory support of others. OECD (2019) data shows that UK’s local government has some of the most limited fiscal autonomy over discretionary spending within rich economies (see Table 1.3). As the UK’s Institute for Government (2020: 1) points out, this is principally because “local government in England has very limited revenue-raising powers compared to other wealthy countries”.
The situation has been compounded by recent austerity measures. National government grants “were cut 38 per cent in real terms between 2009/10 and 2018/19, from £34.6bn to £24.8bn in cash terms” (p. 1) but not replaced with new local taxes or fiscal autonomy. Between 2010 and 2020 local authorities in England collectively had their funding reduced by £16 billion, with grants gradually phased, leaving local authorities with the incentive to raise more revenue through the planning system (Local Government Association 2020). As we show in later chapters, this growing dependence on development-led finance has major implications for the planning and development of London’s built environments.
In addition, city authorities must contend with the legacies of earlier private finance initiatives (PFIs) in which private firms took responsibility for
Sources: OECD, 2019: accessed at: www.oecd-ilibrary.org/sites/f9117991- en/index.html?itemId=
/content/component/f9117991- en
the financing, building, maintenance and operation of welfare infrastructure under long-term contracts (see Hodkinson 2019). PFIs were used primarily by national Labour governments from 1997 to 2010 to fund projects at the local level, but local authorities were also compelled to initiate schemes. PFIs opened up an enormous market for private investors and project managers, with the short-term political advantage that infrastructure would be provided without up-front costs. In the longer-term they are proving to be damagingly expensive. They were eventually abolished by the coalition government, but existing contracts incorporating repayments of over £300 billion have been retained and continue to exercise a corrosive influence on planning and welfare systems. Over the long-term, repayments to private companies are much more expensive and contracts are inflexible – meaning that much of the welfare infrastructure in London that appears to be publicly owned is in fact controlled by private firms, sometimes with contracts lasting over 30 years.
It is estimated that between 1998 and 2060 public authorities in London will have to repay £45 billion to private investors, even though the up-front capital costs of projects were approximately £8 billion (Raco 2016).
Investment-based specialist firms involved, such as Semperian or InnisFree, have become key parastate players in the governance of the city as direct longterm asset holders of what are viewed in common-sense terms as “public” assets – such as hospitals, schools and government buildings. However, they remain firmly in the background, often hidden from public gaze and only become visible when challenged by auditors or social movements. The corrosive effects of PFIs and direct budget cuts on the capacities of public agencies to govern in London form the backdrop to much of the discussion in the rest of the book.
Book structure
It is in these broader contexts that the book is set. The first part develops our approach to the evolution of a London model and the emergence of the parastate. We begin by discussing historic shifts in governance and the relationships between reforms to government structures and development, and welfare planning agendas. We focus on how a globally focused approach emerged and who governs it. We then turn to a discussion of the parastate. While many studies highlight the partnerships that emerge around development schemes and/or highlight the roles of specific groups of actors, we call for a broader approach that takes seriously some of the structural changes that have taken place to the state itself. Private actors increasingly govern through the direct
delivery of state regulations and the implementation of professional codes and private law frameworks. We explore the various dimensions and contours of this transformation. We then address the role of formal political bodies and demonstrate their transformation and endurance within these new relationships with parastate firms.
Following this, we examine how the emergence of the parastate and the London model shape a range of policy fields. We begin with a discussion of the landscapes of investment that now exist in London, highlighting the structural changes in who invests and what aspects of built environments they are most attracted to. The analysis then turns to the governance of London’s housing crisis, before addressing one specific manifestation of the London model – the mushrooming of tall buildings across the city.
Chapter 8 explores in detail the financing, management and delivery of the two biggest infrastructure projects in London – the Thames Tideway Tunnel and Crossrail. Each reflects and helps reproduce the London model, while entrenching private sector finance and expertise directly into the functioning of the city for decades to come. We conclude with a discussion of the risks associated with the London model and broader research agendas for megacities.
The book is based on the collective findings developed through a decade of funded research that has included interviews with hundreds of actors (including policymakers, planners, real estate professionals, charities, social movements, academics and others) and the analysis and collection of documents and quantitative databases. At times, we also draw on real estate investment data purchased from the company Real Capital Analytics-MSCI.
Collectively, it calls for a fundamental reorientation of governance systems away from the parastate and its replacement by a well-resourced, public interest-focused and confident state, able to establish and implement integrated and carefully deliberated planning agendas. Reforms should be mindful of a wider concern that eliding public interests with those of state bureaucracies carries the danger of empowering state actors and oligarchs under the cover of democratization. Nonetheless, the systematic corrosion of state capacities during the 2000s has, we argue, shifted power and responsibility to private oligarchies and cliques. As Du Gay (2005) argues, there is no necessary ambiguity between better resourced, functioning bureaucracies and individual freedoms, in fact the empowerment of the former can go hand in hand with the latter, a point we will return to consistently through later chapters.