From Privatization to Commodification: Tenure Conversion and New Zones of Transition in the City

From Privatization to Commodification: Tenure Conversion and New Zones of Transition in the City

RAY FORREST AND ALAN MURIE

Introduction For more than a decade, tenure conversion through the sale of state dwellings to sitting tenants has been one of the single most important elements in the restructuring of housing. Such policies have been pursued in a variety of contexts with varying impacts. They have been of particular significance in Britain and Ireland and have been an important influence on housing policy in a variety of countries including Scandinavia, the Netherlands, the USA, Hong Kong and Australia (Danermark and Jacobsen, 1988; Boelhouwer and Van Weesep, 1988; Stegman, 1990; Castells et al., 1990). The various forms of housing privatization which are a central component of the current transformation of eastern European housing systems also give prominence to sales of state housing to sitting tenants (Tosics, 1987; Tomann, 1993; Stanovnik, 1993).

While much of the published research has been concerned to chart the process and pattern of housing privatization and to analyse the distributional impact on housing opportunities and inequalities, the underlying theoretical interest has often been in processes of commodification or recommodification (Murie and Forrest, 1980; Forrest and Williams, 1984; Harloe, 1981). The sale of state housing has been seen as reducing the role of the state and bureaucratic processes in the housing market and reasserting the commodity status of housing. From this perspective, discussion and analysis of housing privatization sits within broader theoretical accounts of the pervasive and unrelenting commodification of everyday life. The transfer of state dwellings is one of the more visible aspects of a shift from decommodified to commodified forms of service provision and is typically referred to in more wide-ranging accounts of the claimed demise of Keynesian welfare structures within an evolving postfordist society (see, for example, Jessop, 1990; King, 1989).

Within these accounts of the changing nature of housing provision and the transformations of state housing sectors there has been a tendency to conflate privatization and commodification and to use the terms as interchangeable descriptions of the same process (see, e.g., Forrest and Williams, 1984; Harloe, 1981; Forrest and Murie, 1986). And in wider debates concerning state disengagement and the shifts in the structure of welfare, little distinction is made between what could be seen as the transitional phase of privatization policies and a subsequent more thoroughgoing process of commodification. With the advantage of hindsight we can now review these perspectives. In this context, an initial general observation is that the process of sale of most public sector housing has not @ Joint Editors and Blackwell Publishers Ltd 1995. Published by Blackwell Publishers, 108 Cowley Road, Oxford OX4 IJF, UK and 238 Main Street, Cambridge, MA 02142. USA.

408 Ray Forrest and Alan Murie

involved market pricing or competition but has been managed and promoted by the state, with the objective being to achieve a change in ownership rather than to create market exchange. This has been particularly true in all cases of mass privatization. These have all involved disposals at non-market prices favourable to purchasers and protecting them from risk.

Some 2 million dwellings in the UK have now been transferred from the state sector - mainly to individual home ownership - and the bulk of these have involved sitting tenant purchase. Without the existence of a large state rental sector the expansion of home ownership achieved since 1980 - from 55% in 1979 to 68% of all households in 1991 - would not have been possible or would have required a panoply of more expensive and more visible subsidies. In national terms the privatization of state housing accounts for around 46% of that rise in home ownership over the inter-censal period. And in some areas the sale of state dwellings has been the overwhelmingly dominant factor - in some localities accounting for over 80% of the growth (Forrest et al., 1995).

We now know a great deal about the distributional and fiscal consequences of such policies. A substantial body of research exists on the characteristics of purchasers and on the general social and spatial consequences of housing privatization policies (see, e.g., Forrest and Murie, 1988). In general this literature focuses on the impact on the tenants who remain in the state sector, those wishing to enter and on the changing status of public rental housing. References are made typically to processes of marginalization, social segregation and residualization.

Tenure conversion from state to market and the broader consequences of the dismantling of the Keynesian welfare state is, however, a dynamic process. There are immediate impacts and there are those which unfold over a longer period. This paper offers an analysis of some of those longer-term impacts. Specifically, it is concerned with the changes which are beginning to occur as former state-owned dwellings are exchanged through the private market. It is at this point that their social and housing market role may change. It is at this point of resale that a more profound transformation occurs - when privatization becomes commodification, and where access and occupancy are determined by market processes and ability to compete in the market. While the paper is concerned with the development of a very particular housing policy in one country, the underlying issues have a much broader relevance. This concerns the longer-term consequences of the reshaping of housing and welfare provision which is occurring in similar ways in many nation-states; and it concerns the widely observed development of a greater divergence between majorities and minorities, of a clearer demarcation between parts of cities reflecting the shifting fortunes of different groups in the labour market (Marcuse, 1989) and of a spatial restructuring of cities with new patterns of displacement and exclusion. The commodification of former state-owned dwellings is therefore more correctly seen as part of the reshaping of residential space, where the cumulative effects of these individual transactions result in the progressive commodification of neighbourhoods in which access to housing was previously determined by bureaucratic processes, at most indirectly affected by the pressures and vagaries of the market (see Boelhouwer and Van Weesep, 1988, for some related observations).

Privatization, commodification and new zones of transition In recent years the literature on neighbourhood change in Britain has tended to be preoccupied with the transformation of inner areas or with the social and economic marginality of peripheral public housing estates - with processes of gentrification, socio- tenurial polarization and residualization (e.g. Hamnett, 1984; Forrest and Murie, 1983; 1990a; Smith and Williams, 1986). Prior to that, the community studies of the 1960s and

0 Joint Editors and Blackwell Publishers Ltd 1995

From privatization to commodijcation 409

1970s tended to focus on the growth of home ownership and new council estates in the outer suburbs or the more exotic transformations of villages into commuter dormitories (Pahl, 1964; Bell, 1968). In this period these were the areas of greatest change - tenure transfers and the decline of private renting being critical in gentrification and inner city change, with the maturation and changing role of council housing affecting the social composition of council estates. Then, as now, the inner suburbs were regarded as rather dull, stable areas.

Current research and policy interest remains focused on what might be regarded as the two most obvious contrasting elements in descriptions of the dual or postfordist city - the homeless and impoverished in inner city enclaves or peripheral isolation and the new service class, whose housing experiences and aspirations have become more volatile and differentiated in the recent recession. However, in British cities the greatest changes are arguably now occurring in the state-built housing of the inner suburbs. It is these areas which have been most affected by privatization. It is in the concentrations of council housing around the core of major UK cities (and in the shire districts in their hinterland) where sales of state housing to sitting tenants have generally been highest (Dunn et al . , 1987; Forrest and Murie, 1988). It is in the higher quality council estates - those built in the 1920s, 1930s and 1950s - where some of the highest levels of sales into home ownership have occurred (Forrest and Murie, 1976; 1988). The volume of sales in many of these areas is well in excess of 1 in 3, especially in the south of England. It is these areas which potentially may experience major changes in relation to gentrification, displacement, investment, disinvestment and social recomposition. These are new zones of transition with significantly more tenure transfers and changing patterns of access and control than inner areas of cities. They are not zones of transition in the sense of being marginal, twilight areas housing people in varying degrees of permanence and containing an ethnic mix with conflicting interests. But again, to borrow from Rex and Moore (1967), they are areas where principal forms of access to housing are being transformed, where the rules of competition for housing are changing and where legitimation ‘in terms of the values of the welfare state’ is giving way to legitimation in terms of the ideal of ‘a property-owning democracy’ (ibid. : 274- 5 ) .

With the maturation of the sales policy we are now in a position to investigate what the impact of these tenure changes and new patterns of competition will be in the longer term. Who is moving in? What is the pace and scale of social transformation? Are there spatial differences? In what ways is the social role and composition of these areas changing? To what extent is the social ‘meaning’ of these areas changing both for residents and for housing market agencies and institutions?

From privatization to commodification The distinction between privatization and commodification in this context is a relatively simple one, but it is one which highlights a major difference between selling state dwellings and most other forms of privatization which have occurred. Sales of dwellings to sitting tenants involves the sale at discounted prices of assets which were allocated on non-market criteria. It is predominantly those who benefited from bureaucratic allocation processes who were able to become the new owners. Another stage is required before the dwellings purchased enter the market proper. This does not apply to the sale of shares in, for example, state-owned telecommunications, utilities or transport services. And it is certainly not the users of the service who become the new owners in privatizations of collective facilities such as schools, hospitals or prisons.

Figure 1 illustrates the process/stages of transition from state ownership, through privatization to commodification. Four variations in the process are provided to


410

State L Stale

(1) High level of privatization

Low commodification

State

Privatized

(3) High level of privatization

High commodification

Privatized

State

Privatized

Privatized

Market

Figure 1 The process of commodijcation

State

Stale E

Ray Forrest and Alan Murie

(2) Low level of privatization

LOW commodification

State

Privatized

State

Privatized

(4) Low level of privatization

High commodification

Slate

Market

demonstrate the need to distinguish between t.e phase of state privatization anc, a further phase in which market exchange may develop. The various boxes represent estates or neighbourhoods of state housing and a common timescale for the process should be assumed. Initially, the process of privatization produces two groups in an area. These are state tenants and former state tenants who have bought their dwellings as sitting tenants. Both groups occupy those dwellings through the operation of bureaucratic allocation rules and procedures. The level of privatization will vary in different neighbourhoods with some localities experiencing high take-up from sitting tenants and others with relatively low numbers of sales. Neighbourhoods with high levels of privatization are most likely to be among the most desirable parts of the state housing sector. They are likely to be saleable properties on the open market. The areas with relatively low levels of privatization are, however, likely to be lower demand neighbourhoods with less desirable, less marketable properties. The pattern may be affected by other factors such as the demographic profile of an area (e.g. high numbers of elderly or other low income people with a low propensity to purchase) or changes in housing policies and the effects of legislation (e.g. rising rents, discounts, entitlements). Whatever the pace and scale of privatization, however, the social composition of these areas has not been changed at this stage nor have the routes of access to those dwellings.

It is only in the third phase, when properties begin to be exchanged through market processes on resale, that bureaucratic processes give way to market processes. At that point, the residents in areas formerly exclusively owned and managed by local councils become split into at least three groups. These are: state tenants; former state (sitting) tenants who are now home owners; and new occupiers of dwellings purchased on the open market. This third group may be subdivided by tenure as not all properties exchanged through market processes remain owner-occupied. Some may become privately rented.

As shown in Figure 1, however, the relationship between the initial pattern of privatization and the subsequent stage of commodification may vary significantly between


From privatization to commod$cation 41 1

areas. There will be areas where sitting tenants have bought in substantial numbers but where turnover is low, perhaps because of the demographic profile or simply because people do not want to move. Here, the market will take over very slowly. Conversely, there may be neighbourhoods where privatization is limited but where property turnover is rapid. These may, for example, be less desirable parts of the council stock where one of the strong motivations to purchase is to be able to exit more easily. Here the social role of the properties which are sold to tenants may change relatively quickly.

The general point is that the initial pattern and phase of privatization conveys little about the degree of market penetration into such neighbourhoods or the subsequent social changes which may occur. Moreover, what emerges is not a simple state/market split but a more complicated sociology which develops as the initial process of privatization gathers pace. What were relatively homogeneous areas experience changes affecting their social structure and social meaning. The expectation would be that this process would be uneven between and within regions, and within cities, towns and neighbourhoods. How this process works through will have significant impact in British cities.

In this context, another difference is apparent between selling state dwellings and other disposals of state assets. Most council dwellings were purpose-built and most were traditionally built single-family houses with gardens. This is even more the case among the properties bought by sitting tenants. Nevertheless, most are distinguishable from properties built for private sale in terms of design, location and local knowledge. Over time, estates will become less identifiably council estates as more dwellings are sold and as they become less identifiably associated with the patterns of improvement, investment and disinvestment in council housing. However, the legacy of state ownership will tend to depress property values. In this sense, in the short term at least, the change of tenure status of a dwelling may only marginally affect its social status. This aspect of selling state dwellings is culturally specific and will occur to a greater or lesser degree in other countries depending on the relationship between housing tenures, class politics and class structures.

New research We are now in a position to add some substantial new empirical material to this discussion and to address some of the specific questions raised earlier. The empirical core of this paper draws on findings from the first major study of the resale of former state-owned dwellings (Forrest et al . , 1995). Previous research has been carried out on this topic but it has been small-scale and has not focused specifically on the major transfer of dwellings which occurred from English local authorities under the Thatcher governments’ right to buy policies introduced in 1980 (see, for example, Forrest and Murie, 1990a; Williams and Twine, 1993). The findings reported here are drawn from national research commissioned by the Department of the Environment. The main empirical work involved a social survey of over 3,000 former state-owned dwellings which had been resold on the private market. The survey was carried out between October 1991 and February 1992 and was designed as a representative national study for England. A sample of 35 local authorities was drawn from the 366 districts in England. The selection was random with probability of selection proportionate to the total right to buy sales in each district. In each of the selected districts, addresses of sold properties were identified from council records and reference to the electoral register established where no change in the name of occupier had occurred. A sample of addresses where a name change had occurred was taken. The overall response rate was 69%. The resulting survey of 3,048 new occupiers of former council homes represents the most substantial data for assessment of commodification and social changes in these neighbourhoods . 0 Joint Editors and Blackwell Publishers Ltd 1995


The pace of commodification The political rhetoric which has accompanied the policy of selling state dwellings would suggest a rapid exit from council housing areas once any penalties on resale had elapsed. If the purchase of a council dwelling was an expression of dissatisfaction with the kind of neighbourhood which non-market processes had created, then a higher than average rate of turnover might be expected as former tenants left to seek more ‘private’ neighbourhoods. On average, around 14% of dwellings sold by English local authorities between 1981 and 1991 have now changed hands. Comparisons across areas, however, indicate substantial variation in the rate of turnover - from 8% to 30% over the 10-year period. Translated into actual numbers of dwellings at national level and applying an average of rate of turnover of 14% would mean that around 150,000 former council dwellings have now entered the market as commodities and have been bought and sold through market processes.

Compared to turnover rates in the home ownership market generally, the turnover rate of former council dwellings appears relatively low. Why? There may not be a strong desire to move. Some limited evidence is available from previous work which suggests that tenants who buy their council dwellings are more likely to be expressing satisfaction with the property and neighbourhood than embarking on the first step of an exit strategy (Murie, 1975; Forrest and Murie, 1990b). However, there are a number of factors at work which will affect mobility rates from such areas. First, the demographic profile of sitting tenant purchasers, biased towards the middle to late stages of the family life-cycle, indicates a group with limited access to credit and a relatively low propensity to move. Second, many of the original purchasers of former council homes have limited incomes and consequently limited ability to move unless asset value was high. Third, in recent years the effect of recession in the UK property market has made it more difficult to sell and move on. This has a differential impact on properties and areas. Former state-owned dwellings are in a category of properties (along with flats and dwellings on modern estates) which have become particularly difficult to sell in a depressed market. These factors combine to mean that (with the exception of younger and more affluent purchasers) for households who bought council houses, the key to mobility is the asset value of their dwelling.

The pattern of commodification The type of properties which had come onto the market by 1993 reflects the early pattern of housing privatization. In the early phase of the policy at the beginning of the 1980s it was the more substantial, better located and most desirable dwellings which were in England over-represented in sales to sitting tenants (Forrest and Murie, 1986; 1988). In 1980, flats accounted for around a third of the public sector stock but for only a small proportion of sales in the subsequent period. As Figure 2 shows, although flat sales have grown over the last decade, it was only after 1986 that the numbers increased substantially due to a combination of higher discounts, financial deregulation and a booming property market. Not all flats are undesirable purchases and not all houses are popular and saleable. However, the highest value and most desirable public sector dwellings are generally houses, as was reflected in the early phase of privatization. It is this cohort of dwellings which has dominated the early phase of commodification. Inevitably, the pattern will change over time as cohorts of privatized dwellings feed through into subsequent phases of commodification. And in these subsequent phases the former state dwellings filtering into the market may be more diverse in quality and market value. Some caution is required, therefore, in extrapolation.


From privatization to commodi$cation 413

Social recomposition? Who is moving into these dwellings when they become available on the private market? Given the pervasive rhetoric about the superiority of market provision and the inherent defects of state provision, the expectation might be that former council dwellings would be difficult to sell because of issues of design, location or reputation. And it might be expected that they would find a market mainly among people unable to afford ‘private’ alternatives. The evidence, however, runs contrary to these expectations. As Figure 3 shows, the largest group moving into former council dwellings are existing home owners. They are typically trading up from flats and older, smaller, terraced houses. The second largest category was moves from the parental home. Among those living independently in the rental sectors, only 8% of purchasers came from the council sector. This limited flow will, however, have been affected by the operation of the right to buy. It is financially advantageous for council tenants to buy as sitting tenants rather than move to buy. It is also worth noting that 10% of existing owners had previously bought council dwellings as sitting tenants (as indicated by the dotted line in Figure 3). There is also a striking relationship between occupational class and purchase price. Figure 4 indicates that there is a statistically significant relationship between property value and occupational class. Values which fall within the confidence limits for the sample size cannot be assumed to differ from the overall average. However, for professional, managerial, partly skilled and unskilled manual groups, the average prices paid are significantly different and there is a clear polarization between the first two and latter two groups. The highest-value former state-owned dwellings are bought on the open market by those on higher incomes in higher status employment.

The starkest comparison to be made is between the profile of the new owners of these dwellings and new allocations to the council housing which remains. Had these dwellings stayed in the state sector, they would not have become available for new letting in substantial quantities and the loss of potential relets will accumulate over time. As Table 1

100

80

60

20

0 ~ ~

Year 1981a 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993

Houses 98.0 97.2 93.4 94.3 92.4 91.0 90.0 82.6 79.0 74.3 73.2 74.4 81.2

Fiats 2.0 2.8 6.6 5.7 7.6 9.0 10.0 17.4 21.0 25.7 26.8 25.6 18.8

aFigures for 1981-83 are estimates.

Figure 2 Sales of houses and jlats by local authorities and new towns, England, 1981 -93 (source: Housing and construction statistics)



Home ownership 51 O/o .. I .

Living with parentslfriends 2 5 O/o

to

Private renting/housing association 4 Private renting/housing association 4 13% Figure 3 Tenure JOWS into former council homes

shows, new tenants tend to be both younger and older than resale purchasers. And compared to right to buy purchasers and council tenants in general (Table 2), resale purchasers are heavily concentrated in the under-35 age groups. Compared to right to buy purchasers, there are considerably fewer large families or large adult households among resale purchasers. Small, young families predominate.

The most striking comparison is in relation to employment status and family circumstances. Those households purchasing former council homes on the private market are a white, employed, economically active group of young couples and families with a significant minority of chief earners in professional or managerial employment. There were few retired (4%), unemployed ( 5 % ) or ethnic minorities (3%) among resale purchasers. In contrast, a survey in 1988 (Prescott-Clarke et al., 1988) showed that 17% of new tenants were lone parents, 66% were not in paid work, 81 % were previous renters or lodgers and 38% were homeless or about to be homeless. And a more recent study of new allocations shows a similarly stark contrast. Table 1 shows that whereas two-thirds of new tenants in 1991 had no paid workers in the household, only 14% of resale purchasers had no one in full-time work. And 62% of new tenant households had gross annual incomes of less than €5000 compared with 25% of resale purchasers. It is evident, and predictable, that when sold on the open market, former council homes serve a very different population than if they had remained in the public sector. Price and affordability determine access. At the same time, their social role has shifted from providing disproportionately for lone parents, the unemployed and manual workers towards housing relatively prosperous younger couples and families, many of whom are already able to exercise housing choice in the private housing market.

What this means for the changing social composition of these areas is more complex than at first appears. It is evident that households in former state-owned dwellings on the private market have a very different socio-economic profile from new and existing tenants. However, they are replacing a group which were themselves unrepresentative of


From privatization to commodijcation 415

existing and potential public sector tenants. Right to buy purchasers were disproportionately drawn from public sector tenants in higher status, white-collar occupations. Those moving into the vacated dwellings have a similar occupationai profile but are in general much younger. Initially, therefore, the contrast is predominantly in terms of life-cycle rather than income or occupational class.

A further point concerns the assumption that the process of privatization through sitting tenant purchase necessarily contributes to the growth of individual home ownership. The privatization of council housing through sitting tenant purchase was promoted (at least in housing policy terms) as contributing to the growth of home ownership. But once dwellings become subject to market forces, there is no guarantee that they will remain in that tenure. Most do, but of the 3000 dwellings included in the study, 8% were in the private rented sector at the time of the survey. If these figures are grossed up, this would mean that some 12,000 dwellings which were in the public rental sector are now in the private rental sector. Compared with purchasers of former council homes, renters were younger, lower income households. There were more single, newly formed households and movers from other rented accommodation.

Why has this form of tenure transfer occurred? There are various reasons. In the economic and housing recession in Britain in the early 1990s, many owners have faced difficulties in selling. Owners of former state-owned dwellings wishing or needing to move may have faced additional difficulties in a depressed market. A significant proportion of ex-state dwellings currently in the private rented sector may therefore be temporary additions to that tenure. If the home ownership market revives, then many of these properties will be put up for sale.

Some former local authority dwellings may, however, be longer term additions to the

48

u)

.- 8 h C FJ

8 42

36

f000’s

X = Sub-sample mean

X2

95% Confidence

interval Mean for

whole

x5 X 6

1 2 3 4 5 6 Professional Managerial Junior Skilled Partly Unskilled

non-manual manual skilled manual manual

Figure 4 One-way analysis of mean purchase price by occupational class of head of household (source: Survey of retail purchasers)



Table 1 Resale purchasers and new tenants compared

Sample no. Resale purchasers New tenants (1991)

2796 2169 % %

Age of respondent 18-24 25 - 34 35 - 44 45 - 54 55 - 64 65 - 74 75 and over

Ethnic origin White Non-white

Paid workers in household" None One Two or more

Estimated gross annual income of respondent and partner Less than f5,OOO f5 ,OOO - f 12,999

f13,OOO-f17,500 Over f17,500 Not known

11 51 21 9 5 3 1

97 3

14 51 35

25 29 14 13 18

35 29 11 6 6 8 5

91 9

66 24 9

62 27 4 3 4

Figures for resale purchasers refer to full-time work only.

Source: Prescott-Clarke er al. (1994).

private rental sector. This may be particularly the case with multi-storey flats which may have a low resale value but which can provide a reasonable rental income. And former council houses in central locations may represent good investment properties for private landlords seeking spacious, low-priced accommodation.

Spatial differences The ways in which commodification is reshaping housing opportunities varies between regions and districts. These differences relate primarily to house prices. Former council homes fit into regional house price structures. For example, a three-bedroom, semi- detached former council home is considerably more expensive in a high-demand than in a low-demand area. And this can be translated into what is essentially a north-south contrast. Former council dwellings are most expensive in the south-east of England. And perhaps counterintuitively, they are more thoroughly and quickly absorbed into the general owner-occupied market in higher price areas. The relative price difference between former council homes and other dwellings is greatest in low price regions. How does this come about?

The most common previous tenure of buyers of former council homes was ownership. This applied in each of the three composite regions of the north, Midlands/ south-west and the south (derived from previous analysis of house price profiles). It was,


From privatization to commodijication 417

however, particularly significant in the south, with 58% of purchasers of former council homes moving within home ownership. As Table 3 shows, this compares with 48 and 47% in the north and Midlanddsouth-west respectively. Table 3 shows that purchasers in the south were also much more likely to have principal wage earners in professional or managerial employment, less likely to have no earner, to have paid considerably more and to have much higher incomes. Whereas more than a quarter of purchasers in the south paid more than &70,000, this applied to only 3% in the Midlanddsouth-west and to one in the north.

Various analyses carried out on the relationship between the prices of former council homes and other dwellings (see Forrest er al . , 1995, for full details) show that there is a consistently larger gap in the northern regions than in the south. This is explained by the higher demand for housing in the southern regions and relatively greater problems of affordability . Hence, higher income households in white-collar employment in the south are more likely to consider buying a former council home than their northern counterparts. Former council dwellings thus have a wider potential market in the south. In lower price areas, with less pressurized housing markets, former council homes remain more segmented from the general market. Middle-class households can afford to buy elsewhere and do so. This is evident in some striking contrasts at local level. For

Table 2 Resale purchasers and right to buy purchasers

Sample no.

1991 Resale Pre-1986 RTBa 1986 Tenants" purchasers purchasers

2796 1031 97 1 % % %

Age of head of household Under 25 25 - 34 35 - 44 45 - 54 55 - 64 65 and over Children Household includes: Children under 5 Children aged 5- 10 Children aged 11 - 15 No children under 16

Household t)pe One adult Two adults Small family Large family Large adult household Socio-economic group Professional/managerial Other white-collar Skilled manual Semi-skilled Unskilled Unclassifiable

6 50 24 10 5 3

35 24 12 47

9 31 42 7

11

26 13 37 15 4 2

-

1 1 26 27 23 12

9 19 26 60

5 27 16 12 40

11 11 55 18 3 2

6 15 13 12 21 32

16 16 14 68

27 29 19 10 15

5 15 43 25

8 5

Source: a Kerr (1988).



Table 3 Buyers of former council homes - north, Midlandshouth-west, south: selected characteristics - all percentages

North Midlands1 South south-west

Previous home owners Previous renters Professional/managerial employment In manual employment No earners in household Purchase price less than €30,000 Purchase price €70,000 or over Gross annual household income

Gross annual household income less than €1 1,250

f23,800 and above

48 22 22 61 17 61 -

37

11

47 19 21 60 15 31

3

31

15

58 18 34 48 12 6

26

18

30

example, in Mole Valley in the Surrey stockbroker belt, 83% of purchasers of former council homes were previous home owners. In Bromley in outer London, the equivalent figure was 73 % . By contrast, in Manchester and Knowsley, the comparable figures were 36 and 26% respectively.

Former council dwellings are therefore likely to be more thoroughly and rapidly assimilated into high-demand than low-demand housing markets. Stated differently, as state dwellings are commodified they are likely to be least accessible to poorer households in areas where good quality housing is least affordable.

Where do former state dwellings fit in the market? The pace and nature of commodification of former state-owned dwellings will vary according to a number of factors operating at regional, subregional and city levels. The key elements have been outlined elsewhere (see Forrest and Murie, 1990b) and include local house price structures, dwelling type and design, location and reputation of particular streets and estates. The evidence from this larger scale study, however, enables a more precise analysis.

First, while there is a degree of stigma attached to former council dwellings, reflected in lower valuations (c. 15 - 20% lower than similar kinds of properties elsewhere in the market), they are not generally at the bottom of local housing markets. This is evident from the high proportion of purchasers who are previous owners trading up from other cheaper flats and houses. However, the asset-stripping effects of the early phase of privatization is reflected in the generally high quality of dwellings coming onto the market in the early 1990s. This will change over time as a wider range of former council-owned dwellings, including less popular houses and flats, come into the market. The differences in saleability and value will become wider. These differences are likely to be most marked in London and other large cities in which there are the greatest variations in dwelling type and location. It is in those localities where there are sprawling purpose-built estates and significant numbers of multi-storey flats where there are substantial variations in the scale of privatization and subsequent commodification. It is in the major cities, and particularly in high price regions, where stark contrasts will emerge between estates which have rapidly acquired a private sector ‘ambience’ and others which remain strikingly council and ex-council. It is in such localities where the range of prices commanded by former state dwellings will be greatest.


From privatization to commodijkation 419

Market price differences are also apparent in more rural areas, where the market values of dwellings on the larger estates in towns are often considerably less than dwellings in attractive enclaves in the countryside. Small groups of former council homes may be in highly desirable village locations adjacent to substantial and expensive houses. In such situations, former state dwellings may be the only smaller, affordable dwellings in a village and highly sought after by middle-class purchasers.

It may be regarded as premature and an overstatement to use the term gentrification in this context. But the social changes occurring in higher price urban areas and rural districts in the south of England are significant and involve a major reshaping of housing opportunities. Even where such striking changes do not occur, it is likely that former state housing will be beyond the reach of significant sections of lower income households. In this sense, even if gentrification is too strong a term, new lines of exclusion are already emerging which will affect the life chances of poorer households and the social composition of areas. Moreover, in the future it is not inconceivable that some areas of attractive, ex-state housing will become desirable enclaves for middle-class households in search of new forms of working-class authenticity.

Concluding comments This paper has sought to draw out some of the key points from substantial new empirical research on the evolving consequences of large-scale housing privatization. It is appropriate to offer a more general assessment of what this empirical evidence conveys.

First, it would be tempting to offer a picture of dramatic change and to suggest that areas previously immune from market forces were being rapidly appropriated by a very different section of the population. The reality, however, is of a more gradual and subtle transformation. Comparisons which can now be made between the 1981 and 1991 Censuses in the UK, and which reveal major shifts in the tenure composition of areas of council housing, are likely to exaggerate the social changes which have actually occurred.

Furthermore, almost two-thirds of the moves which have occurred are moves within the same local authority district, and 1 in 5 are in the same neighbourhood. These may be moves to other dwellings formerly in state ownership. Indeed, 10% of the previous owners who bought former council homes had moved from other former council homes. Part of the explanation for this pattern may be associated with the constraints which face households which are relatively equity-rich but income-poor. Opportunities to trade up may be limited. However, it may also be associated with the ability to acquire a better house in the same street or neighbourhood. Had all dwellings remained in local authority control, there would probably have been very limited opportunity to exchange one house for a more desirable house in the same street or neighbourhood. Properties becoming vacant would probably have been allocated to a household with greater housing priority.

Second, the speed and pattern of commodification will change. In the medium term, assuming the UK housing market begins to recover, more former council-owned properties will come onto the market. The implications of greater property turnover in these neighbourhoods will vary according to the strength of the recovery, the overall house price contours of an area, and issues of design, dwelling type and reputation. For example, the most dramatic changes in the social role and composition of such areas would occur with a strong housing market recovery producing high affordability thresholds in estates which are least obviously former council estates in southern provincial towns. In such conditions, former council homes will be more thoroughly assimilated into the market, achieve relatively high prices and often be purchased by households from professional or managerial backgrounds.

A more profound change in the pace and pattern of commodification may not, however, begin to occur for another 15-20 years and will be associated with the



demographic profile of sitting tenant purchasers. At present, the majority of housing moves by the original purchasers of state dwellings are housing-led to the extent that they are about adjustments in housing size or location and are mainly the product of choice rather than necessity. Consequently, they are likely to include more households which are younger or in employment (and have access to credit to trade up) and are in properties of higher value. The age profile of sitting tenant purchasers, typically middle- to late middle- aged, means that property turnover will accelerate as increasing numbers of these households move into retirement and old age. It is when demographic factors begin to drive commodification that all areas which have been privatized will be more widely exposed to market forces. Thus, it may be well into the next century before the privatization process which began in the early 1980s begins to have a marked effect on the residential structure of British cities and especially of lower priced areas. By that time, some of the better quality, high sales areas of former council housing in the inner suburbs will have been absorbed into the general owner-occupied market. Other areas with lower sales consisting of less desirable flats or houses will have become more heterogeneous in their tenure structure with a mix of lower status home ownership, private renting and council housing. Other areas will have remained relatively untouched by the direct impact of privatization. These neighbourhoods, typically in the inner city or peripheral areas, will predominantly consist of state housing and poor people. The British city will have become more pervasively commodified and its residential structure may be nearer the US model.

The changing tenure structure of British cities involves a change in the means of access to neighbourhoods. Those who are only able to rent (including the homeless and those with lowest incomes relative to household needs) will be channelled towards the less saleable and less desirable concentrations of public rental housing and effectively displaced from areas to which they previously had access by home owners with higher incomes and social status. Households which move into the vacancies arising among former council dwellings contrast sharply with these households on the waiting list for, and new allocations to, the state housing which remains. The impact over time is to re- establish the ‘proper’ order of things in the general hierarchy of housing conditions and opportunities whereby low income people have low quality housing.

New rules of access provide opportunities for new patterns of competition for housing. In Rex and Moore’s (1969) terms, the commodification of housing opens up areas where competition was previously regulated. The data in this paper indicate the social changes which are likely to result. What is important to recognize is the significance of this for the social ecology of British cities. What happens in these zones of transition and the implications of this for patterns of displacement and social exclusion will progressively transform the residential structures of British cities, and merits some of the attention which has given gentrification and inner city changes such a prominent place in urban research in Britain since the 1960s.

It is equally important to consider the extent to which commodified state housing does not lose its separate identity. The housing market has characteristics which work against pure images of markets with substitutable products. The language of housing market analysis is littered with segments and sectors which recognize these discontinuities. In the British context, the two million former state dwellings assimilated into the private market will generally continue to be affected by their history as state dwellings. Their designs and locations are often indicators of their production by the state, and the reputation and social composition of the area reflects bureaucratic allocation processes. These elements and the process of privatization are likely to have a long-lasting impact on areas. Those who bought at discounted prices include many with low incomes who cannot sell and trade up and who will be unable to maintain their properties. In these areas, rates of mobility and dilapidation will reflect the legacy of the privatization process. These areas, and those marked by tenure mix, are likely to attract different policy interventions and to present


From privatization to commodification 42 1

different problems from neighbourhoods with different histories. All of these factors will continue to be interpreted and translated by exchange professionals who will channel particular kinds of households to particular areas and help define the way in which ex- state housing neighbourhoods acquire new social meaning. How markets and neighbourhoods develop following privatization will remain an important issue wherever state housing is sold.

This distinction between privatization and commodification is not, however, limited to the housing sphere. In housing there is an unambiguous transitional phase of sitting tenant purchase which cautions against drawing premature conclusions about the distributional impacts of such policies. But these transitional phases exist in other spheres of state disengagement. Management buyouts of various kinds may be only the precursor to very different patterns of ownership. Prices on initial deregulation and privatization of gas or electricity may be a poor indicator of subsequent trends. The pattern of share ownership in privatized industries bears little relation to the pattern once those shares are traded. Different timescales are invoived with different consequences for households and for public and private sector institutions. In housing in England, the privatization policies of the early 1980s are only now beginning to have an evident impact on the shape of housing opportunities and the residential structure of cities and neighbourhoods.

Ray Forrest, School for Advanced Urban Studies, Rodney Lodge, Grange Road, Bristol BS8 4EA, and Alan Murie, Centre for Urban and Regional Studies, University of Birmingham, Birmingham B15 2TT

Acknowledgement Thanks to David Gordon, Department of Social Policy, University of Bristol for data analysis.

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From Privatization to Commodification: Tenure Conversion and New Zones of Transition in the City

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