ØKONOMISK SEGREGERTE BYER. LONDON 2011

1. Inequality and housing in London
Chris Hamnett
Professor of Geography
King’s College London

2. 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

3. 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.

5. 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.

6. 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

7. 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.

8. 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.

9. 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?

13. 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

18. 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.

19. 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’.

20. 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.

21. 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.

22. 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.

25. 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…..

27. 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.

28. 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.

29. 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.

31. 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.