Housing Profiteers and their Facilitators

Corporate Watch takes a look at some of the main companies profiting from the housing crisis, as well as the lobbyists, think tanks and law firms that facilitate this profit-making.

Property Companies: Crisis? What crisis?

"It is an unfortunate fact of life that many individuals and companies are facing the all too real threat of repossession on their properties at this time," Nick Hopkinson, director of PPR Estates, said in 2010. Indeed it is, but it seems to be working out for some. Hopkinson's company, which specialises in buying up properties from those no longer able to afford to keep them, has already gained 200 properties in this way and aims to become one of the UK's leading residential landlords. And that's the problem; the more assets you have, the easier it is to wait for the good times to come back, and the larger and more influential the surviving companies become.

Not that the good times went away for long for the big property companies, 2011 saw them getting over the effects of the credit crunch with strong profits and their public relations teams have been working furiously to make sure the good times continue. Their lobbying has been directed as much at the media as it has been the government. Planning minister Greg Clark said, in a leaked email to other property developers, that he was “delighted” at the lobbying efforts of housing companies and warned that they could not afford to “let up”.[1] The property developers were also reported to have privately admitted that the minister's objectives have "align[ed] with ours" and said they had "earned more brownie points than we could ever imagine" by helping him.

Some property companies have gone even further and are drafting the policies themselves. The government's proposal to reform the planning system was based on a draft prepared by a four-strong panel, three of whom had direct involvement in building development, including Peter Andrew, director of land and planning at house builder Taylor Wimpey. They were all appointed by Greg Clark, the planning minister, to prepare the draft, key parts of which have been repeated in the government's bill, including the line: “At the heart of the planning system is a presumption in favour of sustainable development, which should be seen as a golden thread running through both plan making and decision taking.” This means that much previously-preserved green-belt land will be made available to build on and the “presumption” to say yes will make this much harder to stop. As Kevin Singleton, Head of Strategic Planning at Herefordshire County Council previously told Corporate Watch, for all the talk of giving power to local communities, it only applies “if a community wants to choose more ‘growth’, not less.”

When this is questioned the government's usual response is the need to build more homes. Announcing the government will sell off enough public land to build 83,500 homes, housing minister Grant Shapps said the only way to solve the housing “crisis” is by “building more homes”.[2] In which case he needs to tell his friends in the housing companies; according to the charity PlaceShapers, a recent report estimates the major developers already own enough land to build 620,000 homes and have planning permission to build on more than 50%, yet they allow it to remain vacant to keep prices for the homes they have already built high.

And the houses the companies are building are not intended to be homes the majority of people can afford. The recent upsurge in their profits has been from 'prime' properties. Mark Clare, CEO of Barratt, said that while in the good times they were building a variety of homes, “what we have gone back to now is sites that sell well in a tough market”,[3] which explains how Barratt has actually managed to increase the average selling price of its properties by 9% over the last year, despite the market being flat. The company is already preparing three projects on newly accessible greenbelt land, with Taylor Wimpey planning two of its own. So will these be the so-called affordable homes the reformed planning system promises? Not quite. Barratt describes the 300 houses it plans to build in farmland near Middlesbrough as “executive” homes, suggesting the people who will benefit from the housing crisis will be the same people who benefited from the financial one.

Big Players: Bellway

Bellway Plc has built over 100,000 homes since its creation in 1946. With revenues in the 12 month period to July 31, 2011, of £886m, it is one of the UK's largest house builders. Initially operating in Newcastle-upon-Tyne, where the company's head office is still based, the company capitalised on the huge increase in demand for private housing following World War II. Bellway now has offices across the UK and employs around 1,400 people. Bellway is active in various areas within the house building sector, including land acquisition, finance, planning, architecture, design, marketing, and customer services. The company provides various house types, but specialises in 'affordable' homes with a range of financing schemes aimed at first time home buyers. Although affected by the Northern Rock crisis in 2007, it has recently faired better. In October 2011, announcing a more than 50% rise in profits to a full-year pre-tax profit of £67.2m. The results are due to higher than expected selling prices in the South East, particularly London, with 61% of total revenues now coming from the South of England.

Lobbyists: The British Property Federation

The British Property Federation (BPF) promotes the interests of companies involved in property ownership and investment. It is a membership organisation, incorporated in 1963 as a limited company. Roughly a third of its members are property companies, and roughly another third are professional firms, such as agents, lawyers and accountants. The remainder is made up of fund managers, investment bankers, housing associations, and other companies with property assets or other interests in property, such as insurers.[4] BPF acts to improve the image of the industry and at the same time help create a beneficial legislative and regulatory environment by lobbying government and influencing policy decisions.[5] The BPF have recently come out strongly in support of proposed reforms to planning regulations, which will transfer decision making power to local authorities. They argue that by easing restrictions on property development, this will provide additional jobs and economic stimulus, as well as more profits for their members.

Company Profile: Grainger

Grainger Plc is the UK's largest residential landlord. It owns or manages more than 40,000 homes in the UK and is hoovering up smaller companies wherever it can, most recently acquiring PHA Limited[6] and its 162 residential properties in Devon and, in March 2011, Genesis Housing Group's 50% stake in their, previously joint, venture Grainger Geninvest.[7] This left Grainger with complete ownership of a huge portfolio of 1,500 residential housing units in Walworth, Vauxhall and Waterloo, just the latest acquisition for a company determined to keep getting bigger.

In fact, much of Grainger's success has been built on buying up other property companies. Established in 1912 in Newcastle, it grew steadily to be listed on the London stock exchange in 1983. After buying the 700 London flats of Channel Hotels and Properties in 1989, it really hit the big time with the acquisition of Bradford Property Trust in 2001, when it became the biggest quoted residential landlord in the UK.

As well as actually owning the properties, it manages and controls them through its GraingerLets[8] and GraingerSells[9] subsidiaries, as well as providing estate and asset management through Grainger Property Services.[10] And, ever alert to opportunity, Grainger is directly profiting from the financial hardship of others too. In April 2011 it signed a deal with Lloyd's to deal with its Residential Asset Management Portfolio, a “vehicle to restore the value of its troubled housing assets.”

Grainger even plans to get into social housing, taking advantage of the changing definition of so-called affordable rent, allowing landlords to charge up to 80% of the market rate. Grainger is already in a joint venture with housing association Genesis to take over the ownership and management of 1,100 Church of England homes and it is planning to build 7,000 homes over the next ten years, of which 30 to 40% will be 'affordable'. Some or all of these could be managed by a new housing association arm or handed to existing social landlords. Nick Jopling, the executive director of Grainger, said, ominously: “Over the coming months and years, we might find that these changes have led to a sea change, where the world of social housing and the world of the private rented sector come together.”[11]
Resistance to Grainger

Save Our Skyline[12] are resisting the demolition of many prominent heritage buildings and the building of 300 private flats In Hammersmith, which includes space for a supermarket but no affordable housing. Resisting an almost identical proposal in Seven Sisters, Tottenham, the Wards Corner Community Coalition (WCC) has managed to stop Grainger's plans, for now at least.[13] Permission for Grainger's scheme was originally granted in 2008, but the WCC took Haringey Council to the High Court of appeal and in June 2010 got the permission overturned on equalities grounds, setting a precedent in the process. In August 2011, Grainger's plans were heard again by the council's Planning Committee and were refused permission in a narrow 5-4 victory. The WCC has always worked towards a community-led restoration of the site that would keep rents affordable and give space for the unique character of the Wards Corner site to grow. Despite constant resistance from the council, the WCC is close to submitting the first community plan for a part of the site and, in preparation for the Localism Bill, is starting work on a Neighbourhood Plan that covers a wider area. The community's commitment to grassroots community planning and consensus from local people has proved that big developers aren't the only ones that can engage in planning.

Law Firm: Trowers & Hamlins LLP
Trowers & Hamlins LLP is an international law firm with offices throughout the UK and Middle East, over 100 partners and approximately 700 employees. The firm's main office is in the City of London with three UK regional offices in Birmingham, Exeter and Manchester. Trowers & Hamlins has a well-established ‘brand’ as top legal experts in the UK social housing sector, a reputation garnered through their central role in facilitating privatisation, principally through the stock transfer process. The firm works with more than 200 local authorities and 250 social landlords, and as their website boasts, has “acted on about half of all completed housing PFIs”[14] and “been involved in the creation of the very first ALMOs[15], and the majority of new ALMOs since then”.[16] Trowers & Hamlins broke new legal ground when they acted for AVIVA Investments in the unprecedented transfer of 839 properties from Home Group to Derwent Living, a registered social landlord. For the first time in the UK the £45m worth of finance was provided by a pension fund. Under the scheme, AVIVA bought the stock and now lease it to Derwent Living over 50 years, and will receive a return linked to the retail price index. Indicative of the ever-increasing involvement of the private sector in the social housing market, this also highlights the increasingly complicated ways in which we are tied into the market. With a pension company essentially owning social housing, the worth and profitability of ordinary people's pensions become staked on the continued rise in inflation in order to maintain increasing rent prices and a good return for the pension company. Trowers & Hamlins has an annual turnover of between £80m and £90m, and makes most of its money in the UK from property deals and litigation.[17]

Think Tanks: Policy Exchange and Localis

During the 1970s, Conservative free market 'think tanks' like the Institute for Economic Affairs (IEA) and the Centre for Policy Studies (CPS) prepared the ideological ground for Thatcherism's privatisation programme. Today's Conservatives running the Coalition government are also dependent on think tanks, and two in particular stand out for helping to generate the key principles and policy ideas now shaping the government's housing privatisation agenda. Localis, officially Localis Research Ltd, focuses on developing, promoting and legitimising Tory thinking on 'localism', reducing the role and powers of central government in local government affairs. Localis is closely associated with Policy Exchange, a like-minded organisation whose mission is to modernise the Conservative Party and apply free market approaches to solving 'social problems'. To this end, both: organise events and write headline-grabbing reports, often together; staff key political offices, such as Number 10, Ministerial aides and the Mayor of London; and “provide a link between local government and the key figures in business, academia, the third sector, parliament and the media”.[18]

Born around the same time in 2002, they could be considered Tory surrogate twins, the brainchildren of supporters of Michael Portillo who quit frontline politics after his failed leadership bid in 2001 to become a media-savvy moderniser. Within a decade, the pair has gained huge influence over the Conservative Party's machinery and received major financial backing from wealthy business people. London Mayor Boris Johnson’s current policy advisor, Anthony Browne, is a Localis board member and previously served as director of Policy Exchange. Colin Barrow, a multi-millionaire hedge fund manager and co-founder of the Conservative City Circle, a group that links the Conservative Party with the City of London, co-founded Localis and is a former trustee of Policy Exchange. Nick Boles MP, who was Policy Exchange’s first director and went on to become head of David Cameron's Implementation Unit responsible for drawing up plans for government, is a current board member of Localis.[19] Just to complete the historical connections, Policy Exchange trustee, Rachael Whetstone, currently Google Vice President for Global Communications & Public Affairs but previously a special advisor to the Conservatives, is not only married to David Cameron’s special advisor, former PR man, Steve Hilton (the one who recently proposed abolishing workers' rights), she just happens to come from the free market family of Antony Fisher (grandfather), who founded the IEA in 1955, and Linda Whetstone (mother) who has worked for many neoliberal think tanks at national and international levels for decades.[20]

Using their growing influence over the Conservative leadership, together, Localis and Policy Exchange have written a number of reports on housing policy whose ideas are now featuring in current government legislation, including abolition of secure tenancies and near-market rents for new social housing tenants, liberalisation of the planning system and a new era of privatisation. The most controversial yet influential being Localis' 2009 report Principles for Social Housing Reform, co-written by Conservative Leader of Hammersmith and Fulham Council, Stephen Greenhalgh. This argued that secure and affordable social housing should only be for the “young and at risk, elderly, severely disabled, mentally and physically ill, as well as those suffering from drug and alcohol dependency problems”, and that local authorities and RSLs should be allowed to set rents at market levels and offer short-term tenancies as a substitute for government subsidy, which would be removed. As a key proponent of ‘localism’, Greenhalgh is a highly controversial figure, not least because as Leader of Hammersmith and Fulham Council, he is trying to prevent his own constituents, living on the West Kensington and Gibbs Green council estate, from exercising powers under the government’s localism agenda to take over the management and ownership of their estates. This is because he wants to demolish their homes and sell off the land as part of the re-development of Earls Court[21].

References:

[1] www.localis.org.uk/page/53/About-Localis.htm
[2] See www.powerbase.info/index.php/Localis and www.powerbase.info/index.php/Policy_Exchange
[3] www.bbc.co.uk/blogs/adamcurtis/2011/09/the_curse_of_tina.html
[4] www.guardian.co.uk/politics/davehillblog/2011/jun/06/tory-minister-disappoints-stephen-greenhalgh-on-earls-court
[5] Email sent by Ghislaine Trehearne, policy officer at the British Property Federation to members including senior managment at Land Securities, Grovesnor Estates and Quintain Estates, leaked by The Telegraph.

[6] www.ft.com/cms/s/0/fe302f44-0b97-11e1-9a61-00144feabdc0.html#axzz1ei7rXVpV
[7]www.telegraph.co.uk/finance/newsbysector/constructionandproperty/8223033/Mark-Clare-interview-The-moneys-in-high-end-properties-for-Britains-biggest-housebuilder-Barratt-Developments.html
[8] www.bpf.org.uk/en/about_us/who_we_are.php
[9] http://whoslobbying.com/uk/british_property_federation
[10] - www.nebusiness.co.uk/business-news/latest-business-news/2010/04/01/
grainger-pays-15-3m-for-new-addition-51140-26154734/

[11] - www.london-se1.co.uk/news/view/5174 / http://geoconger.wordpress.com/2011/
04/11/octavia-hill-estates-sold-the-church-of-england-newspaper-april-8-2011-p-7/

[12] - www.graingerlets.co.uk/
[13] - www.graingersells.co.uk/
[14] - www.graingerplc.co.uk/property-services.asp
[15] - www.insidehousing.co.uk/tenancies/grainger-mulling-social-housing-arm/6516284.article
[16] www.saveourskyline.co.uk/index.php
[17] www.wardscornercommunity.org.uk
[18] www.trowers.com/services/housingregeneration/pfi
[19] ALMOs are Arms Length Management Organisations, see box on ALMOs on p.6

[20] www.trowers.com/services/housingregeneration/almos
[21] www.thelawyer.com/directory/t/Trowers-and-Hamlins