Wednesday, 19 July 2017

Work, Technology, The City, Violence


Dr John Crossan, University of Strathclyde, International Public Policy Institute (IPPI)


The bogeyman of automation thesis is once again the topic of conversation in dinner parties, cafes and bars across the developed world. In part, this latest wave of concern about the power of machines stems from numerous newspaper articles, blogs and discussion papers on the emerging 4th Industrial Revolution. This builds on the previous Digital Revolution. It represents new ways in which technology becomes more embedded within societies. The 4th Industrial Revolution is marked by breakthroughs in a number of fields, including roboticsartificial intelligence and autonomous vehicles. It is essentially a coming together of operation technologies (i.e. hardware and software that detects or causes a change through the direct monitoring and/or control of physical devices) and information technologies. The scale of this integration is captured in the term ‘internet of things’.
 
A key concern about the application of these technologies centres upon their impact on the labour force. The argument here is that technological advances of this kind will result in higher unemployment, workforce deskilling and subsequent social upheaval. Adding weight to the machine-human substitution position The Boston Consulting Group in a recent report estimates (p8) that, for Germany, by 2025, “A greater use of robotics and computerization will reduce the number of jobs in assembly and production by approximately 610,000” -. In addition, the report predicts that routine cognitive work will also be affected, with more than 20,000 jobs in production planning to be lost (ibid).
 
Another concern about the application of these technologies relates to the exponential growth of the security industry post 9/11. Using the term ‘securitization’ Minas Samatas (2011: 3348) in this journal refers to a “bourgeoning industrial complex, encompassing security, surveillance [and] military technology [that] develops and promotes a global security market of new militarized monitoring technologies for civilian applications”. Again, in this journal Volker Eick (2011: 3330) in his study of policing tactics used in the 2006 FIFA World Cup, writes about the deployment of surveillance technologies that includes “airborne warning and control system planes (AWACS), security robots, [and] closed circuit television surveillance (CCTV)”. Such technologies are in the main developed by the military and their ever-increasing use in cities points towards a worrying blurring of the boundaries between war and police (Wall 2013), civilian and enemy, city and battleground.
 
A recent paper by Ian Shaw (2017) makes explicit a connection between the dual concerns of machine-human substitution and a technologically advanced security industry. With an emphasis on the use of drones to police disenfranchised urbanites Shaw’s argument is a compelling and frightening one: “As more and more jobs are replaced by nonhuman capital, the expelled workers find themselves policed, occupied, and watched by an equally robotic security armada” (Shaw 2017: 22). In support of the first stage of this dystopian narrative (i.e. machine-human substitution) Shaw quotes David Harvey[1]: “Robots do not . . . complain, answer back, sue, get sick, go slow, lose concentration, go on strike, demand more wages, worry about conditions, want tea breaks or simply refuse to show up” (Harvey 2014:103). Harvey’s argument while also compelling is flawed, although this flaw does not detract from a core message in Shaw’s work that warns of a type of terror only the state-capitalist nexus could produce and sustain.
 
Why human labour prevails despite technological disruption
 
Harvey is mistaken. Robots metaphorically do get sick and go slow. This is because with increased complexity comes increased system vulnerability (Pfieffer 2016). In other words, “the more we depend on technology and push it to its limits, the more we need highly-skilled, well-trained, well-practiced people […] acting as the last line of defense against the failures that will inevitably occur” (Baxter et al 2012: 65). Furthermore, as David H Autor (2015) argues, humans will always have a comparative advantage over computers when it comes to cognitive tasks, which require creative thinking, good judgement and, increasingly, social intelligence. Such tasks, according to Sara de la Rica (in Dolphin (ed), 2017: 91) can be complementary to computers “and hence [she argues] computerization is likely to increase the demand for people with these skills”. In the short term, there is evidence that computerization and automation will see routine jobs lost (Coyle in Dolphin (ed) 2017). In the medium to long term, predictions about those ‘damn robots coming here and stealing our jobs’ will continue to prove inaccurate. 
 
Human labour prevails, despite technological disruption, because of our ability to adopt and develop new skills via education (Goldin and Katz, 2008[2]) – although during periods of technological disruption, without the political will to push for equality of opportunity in education, there will always be winners and losers. I witnessed a quality example of skills education recently during a visit to a factory that produced high-tech goods. There I met young people at various stages of a modern apprenticeship programme. De la Rica’s comments about humans and machines complimenting one another was evidenced when one apprentice showed me a series of electronic chips he had handmade. When expensive high-tech products breakdown, customers send them back to the manufacturer. Predicting faults in complex machinery is not easy. As such, a bespoke hands-on approach is needed to fix the problem when it occurs, hence the apprentice learning to make computer chips by hand.
 
I was struck by the level of craft that went into the production of these small high-tech products. I was also struck by the professionalism of the young apprentice whose knowledge of the technology was mirrored by his excellent interactional skills. This apprenticeship programme was obviously of a very high standard. Adding further accolade to the programme, the young apprentices I met came to their jobs through a relationship between the company and the local high school. This model of a demand-driven apprenticeship that emerges out of collaboration between local businesses and high schools is regarded by many skills policy commentators as critical to ensuring we have a future digital-ready workforce. The company has operations in cities across the UK including Edinburgh, London, Southampton and Luton. Its educational outreach programme engages several thousand school children and college students from communities within these cities and others, “to ensure the skills and knowledge which are vital to the UK are retained” (Company Website). The company’s commitment to the local urban communities within which it operates is commendable – a good example of corporate citizenship at work.
 
The company’s name is Leonardo in the UK, part of Leonardo-Finmeccancia which, according to Campaign Against Arms Trade (CAAT) is the worlds 9th largest arms company. In addition to military helicopters, fighter aircrafts, missiles, artillery and armed combat vehicles the company makes the FALCO EVO UAV – a drone. Leonardo-Finmeccancia has sold its products to, amongst others, Algeria, Libya and Turkey. The international press reported in December 2011 that 35 villagers had been misidentified by Turkish drones and bombed, killing at least 30, 17 of whom were children. Of the same incident, the Guardian (29/12/2011) reported that those killed were not Kurdish separatist fighters but smugglers of diesel and cigarettes across the Iraqi border. This is one of an increasing number of examples of what has been termed ‘collateral damage’.
 
Shaw, describing the ascendance of dronified policing, quotes Neocleous[3] (2014: 162) who writes “This is nothing less than a permanent police presence of the reproduction of order – air power as the everywhere police – in which the exercise of violence is an ever-present possibility”. I would like to forward a less spectacular narrative, which grounds the ever-present exercise of violence in a softer but no less effective form of everywhere police that hides terror behind the common aspirations of people looking for a good job so that they might pay the bills, go on holiday somewhere warm each year and live a decent life.
 
The factory I visited was in Edinburgh. The high school in this case is within twenty minutes walking distance. The locations and the relationship between the school and factory present a banal everyday urban form to the exercise of violence.  The young apprentices wake up each working morning.  I imagine they may stop by the local café for a coffee as they make their way down Pennywell Road to their place of work where they will apply their talents and learn new skills. These young people are the lucky ones. They do not live in Libya, Algeria or the Turkish-Iraqi border lands. Unlike others who went to the same school in this working class neighbourhood, their training at the factory will increase the probability of them never being part of the surplus population “policed, occupied, and watched” [by a] “robotic security armada” (Shaw 2017: 22). Notwithstanding a few minor issues with forgotten passwords or low mobile phone batteries, technology will enhance their lives.    
 
I am not a pacifist. Violent engagement can be a legitimate response to oppression and, while I have issues on both counts, there is nothing new about the military complex operating in the public sphere as a major employer or a symbol of national pride. But the military complex nowadays seems more pervasive coupled as it is with a new security economy that has its eyes firmly fixed on the urban world. War, security and violence now proliferate our everyday lives. Giorgio Agamben argued the imperative of ‘security’ now ‘imposes itself on the basic principle of state activity’ including skills development. This discourse of military urbanism tells us that parts of the city need to be protected – e.g. strategic financial districts, respectable neighbourhoods, tourist spaces. Equally, parts of the city must be subject to pre-emptive action – e.g. BME neighbourhoods and political protests. The bogeyman of automation thesis takes on a different more sinister hue here. We are developing the technologies and the skilled people necessary to ensure that those of us in the right parts of the city need not fear the disenfranchised others. 


 



[1] Harvey, D (2014) Seventeen Contradictions and the End of Capitalism, Profile Books: London.
 
[2] Goldin C. and Katz L.F (2008). The Race between education and technology. Harvard University Press: Cambridge.
 
 
[3] Neocleous, M.(2014) War Power, Police Power, Edinburgh University Press, Edinburgh.
 

Friday, 30 June 2017

How Family Networks Drive Residential Location Choices: Evidence from a stated preference field experiment in Bogotá, Colombia

Aiga Stokenberga - Stanford University



Full article available here


Rosa lives in the Patio Bonito settlement on the southwestern periphery of Bogota. Each day she travels over an hour each way to reach her workplace in a well-off family’s home near the Central Business District. There are reasons to stay in the neighborhood, however. One of the main among many: she rarely feels like she is on her own here in this community of neighbors and extended family with whom she moved here many years ago when Patio Bonito was just beginning to form.
Figure 1. Largely informal housing in the Kennedy locality (Source: Aiga Stokenberga)

For households with low or unreliable incomes, informal networks of social relationships can help increase day-to-day wellbeing and make it easier to cope with crises. Partly for this reason, networks have been found to influence the decisions of households to migrate from rural areas to cities and to continue to drive their subsequent intra-urban mobility.
 
Taking into account the roles and the spatial distribution of relational networks can improve our understanding of housing consumption decisions and inform urban policies. As I found out through early interviews with Bogota’s public officials in charge of housing policies, the importance of personal support networks for the quality of life of low-income households is a major influence and constraint on their willingness to relocate and can therefore also affect the rate of uptake and long-term economic sustainability of public housing projects.
 
To understand what are the trade-offs that low-income households in Bogota are willing to make between living near their extended family networks and improving their residential environment along other dimensions, I implemented an original choice experiment and a survey in two of Bogota’s low-to-medium income localities, Bosa and Kennedy, an area where the majority of residents rely on informal or unstable incomes and where dense informal residential settlements surround one of the first formally planned affordable housing communities.
 
The choice experiment showed that the surveyed individuals prioritize proximity to their extended family more than accessibility to the Central Business District. As might be expected, those who have relied on help from extended family members in a personal or economic crisis situation have a stronger preference for living near extended family compared to those who have not, as do those who are able to rely on extended family ties for various resources.
 
New urban realities, such as the urbanization of poverty in developing countries, call for residential location choice explanations that are not restricted to physical housing quality and transport costs to the workplace but also take into account factors related to the decision-makers’ social preferences and dependencies. By combining quantitative location choice modeling and social network analysis, my research places an important economic decision – that of housing consumption – in a social context and expands the notion of ‘economic rationality’ by more thoroughly characterizing the livelihood strategies of the poor.
 
The empirical evidence on the high value placed on proximity to family networks can help inform a number of urban policy decisions, for example, the choice between in-situ slum upgrading and large-scale population resettlement and the design and spatial location of formal affordable housing to ensure that they are able to accommodate ‘extended households’ or at least provide good connectivity to those parts of town where most of their new residents are likely to relocate from.

Tuesday, 27 June 2017

Strategies of cities in globalized interurban competition: the locational policies framework

David Kaufmann, University of Bern, KPM Center for Public Management
Tobias Arnold, University of Bern, Institute of Political Science


Full article available here

Economic globalization pushes a variety of cities into a rapidly changing and globalized playing field. Cities of various sizes and in various locations formulate policies in order to become competitive nodes in interurban competition. Such efforts have been mainly studied in cities or regions of global importance. For example, Brenner (1999) studied locational politics and locational policies following German re-unification or Jessop and Sum (2000) analysed the policies and governance structures of Hong Kong in its attempts to become an entrepreneurial city. The strategies of smaller cities, however, have been neglected so far. The aim of our paper is to present a typology of locational policies and to apply it to two medium-sized cities – Lucerne (Switzerland) and Ulm (Germany).

For practitioners as well as scholars, there is an immense interest in the strategies of cities to position the locality in this increasingly knowledge-intensive, interurban competition. These efforts of local officials can be conceptualized as locational policies. Locational policies aim to enhance the economic competiveness of a locality by identifying, developing and exploiting the place-specific assets that are considered to be most competitive.

There is a lack of systematic research about locational policies in general because it is difficult to identify, distinguish and categorize them. Such strategies often appear in complex bundles, do not occupy a narrow policy domain and do not operate in isolation from each other (Uyarra, 2010: 132). Therefore, a relatively rich catalogue of possible locational policies is needed. In this paper, we develop an analytical framework of locational policies that is interdisciplinary informed by theories of urban studies, economic geography, and political science. Our framework consists of six categories of locational policies bringing order to the wide variety of policies that cities formulate to strengthen their competitiveness (see figure 1).

Figure 1: The locational policies framework

By applying this locational policies framework to the two medium-sized European cities – Ulm in Germany and Lucerne in Switzerland – we are able to illustrate the added value of the framework. We chose these cases because we want to study two comparable cities that are not an economic powerhouse of their nations. Such cities are specifically challenged to position themselves in the globalized interurban competition.

We found two very different locational policies agendas in the two cases. In Lucerne, tourism is the most important economic sector that is reflected in a lot of locational policies. Furthermore, low corporate income tax rates should attract firms to Lucerne. Ulm focuses on innovation enhancing policies in its “City of Science”, a cluster of research organizations, universities and firms. Furthermore, Ulm is positioning itself as an “Urban Micropolis” between the two metropolises Stuttgart and Munich.


Picture 1: Tourism is the most important economic sector in Lucerne – The Kapellbrücke in Lucerne
We suggest that place-specific factors enable and constrain the formulation of locational policies and that these place-specific factors can explain these variations in the two locational policies agendas. We outline three possible venues to tentatively explain these different locational policies, namely the economic sector mix, the national tax system, and politics.


Picture 2: A building in the Science Park Ulm
The paper shows that the locational policies framework is able to capture a wide range of policies that aim to enhance the competiveness of a city. Thus, the locational policies framework is a tool that can be used to reveal how cities face the globalized, and increasingly knowledge-intensive, interurban competition. Locational policies are formulated based on place-specific assets and constraints that can be economic, political, or geographical. The paper is thus a plea for an emphasis on such contextual variables in comparative urban research. It contributes to the scientific debate as it takes a clear stance against the somewhat deterministic perspective of a large body of literature studying city strategies in interurban competition.

References

Brenner N (1999) Globalisation as reterritorialisation: The re-scaling of urban governance in the European Union. Urban Studies 36(3): 431–451.

Jessop B and Sum NL (2000). An entrepreneurial city in action: Hongkong’s emerging strategies in and for (inter) urban competition. Urban Studies 37(12): 2287–2313.

Uyarra E (2010) What is evolutionary about ‘regional systems of innovation’? Implications for regional policy. Journal of Evolutionary Economics 20(1): 115–137.

Tuesday, 20 June 2017

Understanding international students beyond studentification: A new class of transnational urban consumers. The example of Erasmus students in Lisbon (Portugal)

Daniel Malet Calvo


The growing presence of international students in the city of Lisbon attracted my attention ten years ago, when I started my PhD on the occupation by different social groups of the most emblematic central square in Lisbon: Praça do Rossio. As a foreigner, I shared several apartments with international students, at a time when the city of Lisbon was not renowned as a tourist or student destination. I got to know a group of exchange students that had developed a particular alternative lifestyle in the patio where they lived. They organized several meals outside and installed improvised benches to spend time in the patio, as well as sharing a communitarian style of living with their Portuguese neighbours. Next year, when the students left, the next-door Hostel bought those apartments and converted them into suites for tourists. Replicating the students, they installed permanent benches and even imitated their new-age tastes in the decoration. In other words, the hostel reproduced the students’ creative ways, making products for tourists. When I started to study Erasmus students back in 2013, I borrowed the term ‘studentification’ to assess the significance and impact of those populations in Lisbon. However, as an anthropologist, it was unsettling for me to isolate the housing question from the wide variety of practices and relations that students established within Lisbon’s urban processes.
 
In the present article I discuss the applicability of the studentification literature to other geographies other than UK’s, stressing that the main effects on the urban form (spatial concentration, segregation and density of student populations) are missing in the case of Lisbon. Taking the study of Francis Collins about South Korean international students in Auckland, I started to use ‘studentification’ in a wider sense, considering the agency of students and their ability to reproduce their own cultural practices when abroad. In this sense, my idea was to present three different cultures of Erasmus students (the most significant population of international students in Lisbon) to understand their role and involvement in different processes of urban change.
 
First, I identify the party-centred practices of the so-called ‘typical’ Erasmus students, and their participation -along with young tourists- in the production and consumption of Lisbon’s tourism gentrification. Then, I recognize that a group of ‘alternative’ Erasmus students who rejected a ‘typical’ Erasmus life are working as marginal gentrifiers, whose political and aesthetic orientations lead them to the discovery of new urban territories for consumption. Finally, there are the ‘scholar’ or hard-working Erasmus students, who seem to be engaged with entrepreneurial activities, echoing the emphasis on the knowledge-economy that prevails in today’s urban policies of European capital cities.
 
To summarize, international students could be considered a new class of transnational urban consumers that express collectively a diversified repertory of practices, cultures and lifestyles. Wealthier than the average of college students, they are relevant consumers (and occasionally clever producers) in the travel economy (as foreigners), in lthe eisure economy (as youth), and in the knowledge economy (as students). Therefore, they become central actors at the core of the cognitive-cultural, visitor-centred system of production in contemporary cities.

Friday, 9 June 2017

Temporary use of space: Urban processes between flexibility, opportunity and precarity


Ali Madanipour


From popup shops and restaurants to container buildings and gardens, there has been a growing trend in the temporary use of urban space. This trend is celebrated by many observers, who see it as novel, progressive and exciting, making the underused space available for activities that would otherwise be unable to flourish, while adding colour, vitality and spontaneity to the urban environment. Such flexibilities in the use of space may open a door to new possibilities, but I wanted to go beyond the apparent aesthetic excitement and understand the trend more fully, to see where it fits within the broader context of urban processes and how it can be critically analysed.
Empty spaces are the outcome of fluctuations and crises in capitalism, which have reached unprecedented dimensions through globalization, and the associated technological and economic changes, as reflected in large numbers of empty shops, offices, and housing units in different parts of the world. The temporary use of space has been one of the key responses to this crisis of overproduction, introducing flexibilities in the control and use of land and property, which go past the traditional ways of rent adjustment. As I once discussed with Kira Cochrane of the Guardian newspaper[1], temporary spaces can be understood in contrasting ways: on the one hand making productive use of empty spaces for a variety of locally useful activities, and on the other hand a disguise for consumerism. Their flexibility offers new opportunities to creative entrepreneurs as well as civil society groups and local activities, but also normalizes the sense of precarity for these users, while it is being transmuted into a cultural instrument of branding and marketing, which is used profitably by large companies.
Elsewhere, I have investigated temporary parks and gardens that turn the city into an ephemeral event[2]. My focus in this article is on the temporary use of private space. I have used the example of Chesterfield House in Wembley, London, which provided the opportunity for temporary use of space offered at low cost to creative entrepreneurs, facilitated by the authorities and welcomed by the local media and community groups. By locating the temporary use within the longer period of property development, however, we gain a fuller picture of the initiative. In a project of converting an empty office space to high density housing, the other face of the temporary use of space becomes visible: an interim measure for reducing the costs and improving the local acceptability of the impending development. It is through this wider, mobile lens that we can see the different sides of temporary urbanism.
The ancient Greeks called a moment that captures many possibilities Kairos, a particular concept of time. I was interested in understanding whether the temporary use of space reflects a broader change in the concepts and character of time in urban society today. This is a subject I explored in a book, Cities in Time [3](Published by Bloomsbury in 2017), in which I have studied temporary urbanism in the context of the philosophy of time, at the intersection of instrumental, existential and experimental concepts of time.

Thursday, 8 June 2017

Not just the super-rich: The role of the middle-classes in transforming London


Hang Kei Ho, Department of Social and Economic Geography, Uppsala University

Rowland Atkinson, Department of Urban Studies and Planning, University of Sheffield

How do we make sense of the current housing crisis in London? Existing academic research and the popular press tends to tell us two things. Frist, the introduction of the Right to Buy scheme in the 1980s by the Conservative government that allowed council tenants to purchase their homes from the state at a heavily subsidised rate created a shortage in public housing. Coupled with the lack of political will to build more residential properties in the last three decades as well as the high demand from the national and international workers and students the rental market and property prices have been pushed to record high levels. Second, global cities like London have long been a playground for the wealthy. Subsequently, the super-rich from Europe, Russia, the Middle East, and most recently, mainland China have been purchasing luxury residential properties in prime locations such as Kingsbridge for capital growth or to store assets in property which can be released when it is needed.

Cranes on London's skyline. Photo: Hang Kei Ho 

While both of these observations are important they tend to neglect the role of middle-class investors. In cities like Hong Kong many middle-income households have been buying properties in the UK for more than quarter of a century. Here financial literacy combined with high savings rates and increasing anxieties about the future are driving these capital flows.
Our research approach has been to follow the money – examining capital investments and motives via interviews, attending property fairs, and visiting development sites in Hong Kong, London, Aberdeen and Liverpool. Our informants included investors, real estate directors, brokers, property developers; regional government strategists and town planners. We also analysed marketing and housing related materials published in both Chinese and English. Here a grounded and linguistic insider position enabled us to learn much about these flows and understand more about Hongkongers’ social status, anxieties and investment strategies.
 
We suggest that there have been three broad waves of investment from Hong Kong to UK’s housing market. The first wave, which we call the ‘pre-handover migration wave’ or the buy-to-live trend, began in the late 1980s when Hong Kong’s sovereignty was about to be transferred back to mainland China in 1997. Based on the uncertain politics of Hong Kong, citizens relocated to countries such as Australia, Canada, New Zealand and the US. However, the 1989 student protest in Tiananmen Square in particular triggered emigration to the UK with around 50,000 families granted British citizenship under the British Nationality (Hong Kong) Act of 1990. During this period some Hong Kong citizens bought properties, mostly in London, with the intention of relocating. However, the reality was that many remained in Hong Kong, with some parents buying properties for housing their children while at university.
The second wave of investment which we identify as a process of buying to ‘fry’. We choose this term, based on a Hong Kong colloquialism, to describe the way in which investors speculated off-plan properties to generate a quick profit (the frying) and the impact this made on housing pressures in London alongside with those generated by the global super-rich. These processes began in the early 2000s where wealthy middle class Hongkongers sought alternative investment vehicles at the time when local banks offer almost zero interest rates on money deposited.
The ‘post-London investment wave’, which we introduce as the third investment pattern, started when property prices rose in London after the credit crunch in 2009. Investors explored buy-to-let options in northern cities including Liverpool, Manchester and Birmingham with a significant rental yield of up to 8%.
From our work we suggest that there are two important reasons as to why Hongkongers continue to invest in global real estate. First, experienced through waves of financial crises and that the state pension in Hong Kong being insignificant, they understand financial insecurity is generated via transnational instabilities and is, to some extent, unavoidable. Thinking like the super-rich, buying properties is a secure way to safeguard the possible depreciation of their cash, outperform close to zero bank interest rates on deposits and generate a regular rental income. More surprisingly perhaps, some investors are not as wealthy as the popular media suggest, they save hard and access loans to invest for long-term growth, sometimes with friends and family members in ways that resemble Confucian capitalism which intergrades the notions of familial and intergenerational loyalty, thrift and an ethic of hard work.
The second key factor relates to the geopolitical uncertainties surrounding Hong Kong itself and which has been impacted by mainland China. Here we see renewed debates on issues of emigration rights and the potential role of off-shore residential properties which may offer buyers a sense of political stability should the political context deteriorate.
Perhaps it is also important to acknowledge here that the current housing crisis in London is deepened by the UK government’s inability to implement a strategy to build more affordable housing and the avoidance of creating policies to deter non-UK citizens from buying properties. However, not all investments lead to financial rewards as around 1,000 investors from Hong Kong, mainland China, Taiwan and Malaysia who have invested with a total of HK$500 million (US$64 million, £52 million) have seen their properties fail to complete or remain unbuilt.
Finally, despite Britain’s plans to leave the European Union that has appeared to reduce investment from other countries, capital from Hong Kong and mainland China continues to flow into London’s real estate market. Hong Kong investors alone have around £4.5bn of live equity which is aimed at London. These indicators suggest that long-term flows of capital between Hong Kong and London are unlikely to dissipate anytime soon despite the questions that these and related forms of investment raise about what is good for the wider population of the destination of such investment.

Tuesday, 9 May 2017

Differing House Price Linkages Across UK Regions: A Multi-Dimensional Recursive Ripple Model



By Chris Hudson, John Hudson and Bruce Morley
Link to paper



The dynamics of the UK housing market have become increasingly topical following its role in the financial crisis of 2008. This study analyses the ripple effect across the UK’s regional housing market covering different housing types, whilst also incorporating any reverse effects back to the origin in London. This effect refers to the rippling out of changes in house prices in London to the surrounding regions and potentially also then reversing the ripple back to London. This ripple effect is important to the UK housing market as a whole, as movements in house prices usually originate in London, and recently London’s house prices have risen substantially after capital inflows from overseas were directed at the capital’s housing market. This has made the London market more volatile and thus more risky for investment purposes, but it is important to determine how this volatility in London could affect the rest of the UK housing market. 


The 2008 financial crisis initially started in the housing market when assets backed by the sub-prime housing sector collapsed in price, undermining the solvency of the international banking sector. As a result all central banks now monitor the relationship between financial stability and the housing market more closely, especially through macroprudential policies which are specifically targeted at housing, such as the loan to house value ratios. This also requires some idea about how house prices are likely to evolve over the near future, which is why the understanding of house price dynamics and the ripple effect have become so important.

House prices across types and regions

We can see in the Figure that the three types of house prices tend to move together, but there are differences. In particular in the period between 1990 and 2008, old and modern house prices caught up the new house prices. The Figure also shows the trend in old prices as we move north from London. Again there are similarities between the curves, but also substantial differences. For example, as we move northwards, and compared to London, the decline in prices in the early 1990s tended to be delayed and more muted, but the slowdown was then more prolonged. This gives plausibility to the hypothesis that shocks emanate in London and then spread out through the country. But our analysis suggests it is not that simple. Firstly, if there is some shock in another part of the country, we would anticipate it also rippling outwards including towards London and the South East. But secondly for the shock that does begin in London, as it ripples outwards so there will also be a recursive ripple back to London itself. The analogy can be made to a stone which is thrown into a pool of water. Waves will ripple outwards, but once they meet an obstacle they will begin to ripple back again.


This is complex enough, but our analysis, and this is one of its main contributions to the literature, suggests it is more complex still. It is as if there are three interconnected pools of water, with ripples from one impacting on the other two. A regional shock to new house prices will impact mostly on new prices in neighbouring regions and thence their neighbours. But there will also be some interaction between old, and in particular, modern house prices, both in the same region and neighbouring ones. A similar analysis applies to shocks to old and modern house prices.
  

Thus, a positive shock to new houses in London and Outer Metropolitan, will first impact on the South East and thence on the South West, the West and East Midlands and East Anglia. There will then be further knock on effects on e.g. the North West, all with differing speeds. Initially the largest impacts will be on other house types in London and new houses in adjacent regions. But the impact will eventually spread across all house types and regions. There will then be ripples, or echoes, back, from these regions to new, and other, house types in London. Hence the ripple acts recursively on at least two dimensions, firstly the spatial dimension and secondly the house vintage dimension. In effect there are multi-dimensional recursive ripples between different house types both within the same region and between regions.


There are lessons for policy makers in this. For example, if they introduce a policy which impacts on new houses, either across the UK or in a single region. Then there will be repercussions across all regions and all house types and it will take several years before the full effects have worked their way through the system. Policy makers should be aware of these repercussions and not just focus their attention on the new housing market or one particular region.