The other financial crisis

I imagine most anthropologists – and not a few others – are pretty fed up of hearing about the financial crisis these days. We are now living the after-effects. British universities have been implementing savage cuts (or trying to) for over a year, and all are holding their breaths over the cuts to be announced in the government’s spending review in October. More on that later. What I want to peek at is the financial crisis that didn’t happen, which was the one I’d been expecting.

The story we do know goes (bearing in mind I’m being incredibly brief here) that the crisis was fuelled by unsustainable lending by banks to poor people who couldn’t pay back their debts. Whipped round the financial markets with a few clever recalculations and repackaging, bad debts escalated, and eventually the hot air deflated and banks collapsed. But there was another shuffle going on in the background. In Britain, the major part of the economy that was not about the City (of London, i.e. financial markets) was about the construction industry1. As manufacturing collapsed, governments saw construction as a replacement sector – it produces stuff and keeps people employed.

The expansion really took off in the 1990s2, when government statisticians reckoned that the number of households was increasing even if the population was falling3. With people marrying later, an increase in the number of students, and more widows and widowers living longer there were more one-person households who apparently needed (or wanted?) small flats. And lo, small flats there came. An urban regeneration based on posh – read overpriced – flats in city centres around the country took off. The cities looked more lively, old buildings were ripped down and new oversized blocks of flats appeared (oversized in height to make more money out of each plot). But after a while it became clear that most of them were empty. Some cities, like Leeds, had up to 70% vacancy rates. Yet the prices didn’t come down. What was happening was not that unfortunate landlords couldn’t find tenants, but that investors were buying property to put on their portfolio, as an asset that automatically increased in value from year to year along with the housing market. They never intended anyone to live in them. Clever stuff. So the financial crisis I was expecting was the one where investors decided they needed to realise their assets and sell their flats. Finding the market flooded, the value of the property crashes and they’re all left with empty assets and cities with empty flats. The other crash intervened, but this one is still there waiting to happen. You don’t have to be an anthropologist to see this (and the issue of vacancy and investment were spotted by property analysts). What anthropology can do is tie together the central statistics, the activities of investors, and the local politics of house-building on the ground.

The housing market’s been an odd beast for many years, yet anthropologists have mostly ignored it. Much more glamorous the bear pits of the City, yet  in my view, the the ins and outs of housing can be just as odd and fascinating. The numericization of social issues drives the whole process, and leads to the kinds of unexpected consequences that anthropologists love to recount. We end up with thousands of empty houses, and more thousands of people who are homeless – either with no place of their own, or no place at all. But because the houses have been built to make a profit, and not to house people who need them, we cannot put the two together. In other words, the problem of housing is not about buildings. It’s about money, class, geography and ethnicity and other usual suspects. The problem for anthropology is that we need to look at the bigger picture, and not only tell stories about the people in the houses. We need to accept that stories about our own politicians and policies can also be anthropology.

1Margaret Thatcher was notoriously close to the owner of the MacAlpine construction corporation – later Lord MacAlpine. It was rumoured she and her ministers owned substantial shares in construction companies.

2 Bear with me here, John, I know there were booms before, but let’s just look at the last time round for now…

3For a somewhat fuller explanation, see Murdoch and Abram 2002: ‘Rationalities of Planning’.


Simone is a discipline-crossing anthropologist, having worked in planning, geography and anthropology departments. She is currently Reader in Cultural Tourism at Leeds Met University, and Reader in Energy Studies at Durham University, Department of Anthropology, where she is Director of the MSc in Energy and Society.

3 thoughts on “The other financial crisis

  1. WARNING: the people behind Demographia are politically well to the right, enthusiastic advocates for suburban housing, and openly hostile to recent opposition movements that advocate higher-density city living.

    That said, there is still lots of data at the site. How we read it is, of course, up to us.

  2. “The story we do know goes (bearing in mind I’m being incredibly brief here) that the crisis was fuelled by unsustainable lending by banks to poor people who couldn’t pay back their debts.”

    It was never only subprime lending. In 2006 subprime reached a high of 21% of the market in the US. ARM’s and HELOC’s, predatory lending to the middle class and mindless speculation above payed a major part. You can see the absurdity looking at areas where rental income and property values had no logical relation to one another. Also “Fannie and Freddie” were priced out at the height of the market. In 2006 84% of subprime mortgages were private. It was a real estate bubble not a subprime bubble.

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