Global Landlords in Post-Crisis Manchester

blocks.” (Collins, 2019:online)

In addition to domestic commercial confidentiality, Loom Holdings is registered as an offshore company domiciled in Jersey, (Manchester Life Development Company 2 Limited, 2020) hence granted further financial benefits applicable for laterally traded assets. This financial tactic results in avoidance of three substantial tax payments to HMRC (Her Majesty’s Revenue and Customs): (1) Capital Gains Tax (CGT), which “is paid on the profit made due to the difference in the price of buying and selling an asset.” (Bower, 2018:online emphasis added) (2) Stamp Duty Land Tax, which “is payable in England on residential property costing over £125,000, and rates range from 5% to up to 15% for properties over £2 million.” (Bower, 2018:online) And (3) Inheritance tax, “which currently stands at 40%” (Bower, 2018:online). Using Collin’s acquired valuation data for the current Manchester Life property portfolio, a conservative estimate for avoided tax calculated on Stamp Duty alone amounts to £49.5 million (see appendix for calculation). Please note that this calculation assumes the sale of the entire property portfolio at once, and is being used to demonstrate potential financial gains through deployment of financial apparatus.

Connecting Manchester Life to global theories which propel the central argument of post-crisis housing financialisation radicality, financially motivated institutional investors reconfiguring housing as a mode of capital existence “vastly transcends the territoriality of extraction and wholly blends into the circulatory system of capital, which now transverses the entire geography of the earth.” (Arboleda, 2020:14) Connecting usufructuary land rights to geographies of extraction, and acknowledging State complicity in the development acquisitional infrastructure, as:

“The acquisition of foreign land is not a lone-wolf event. It requires, and in turn stimulates, the making of a vast global market for land. It entails the development of an also vast specialised servicing infrastructure to enable sales and acquisitions, secure property or leasing rights, develop appropriate legal instruments, and even push for the making of new laws to accommodate such purchases.” (Sassen, 2018:73)

Sassen’s argument is evidenced in the primary evidence presented thus far, as the tracing of institutional investment (and marketisation of public land) has been enacted through legislative revisions, prominently materialising leasing securitisation under the stewardship of Manchester

Life. The Manchester Model of delivery has thus pushed proposed alterations to legislation to the nth degree. On the marketisation of land, the Montague report recommends a planning system revision “to ensure that new homes remain in the rental sector for a fixed period of years” (Montague, 2012: 20) where the report recommends 20-30 years, (Montague, 2012) Manchester Life are leasing public land for almost a millenia. In 2015 the Weaver’s Quay site was sold “for £420,000 to a company owned by Loom [Holdings] on a 999-year lease. The plot is now worth £44m.” (Collins, 2019:online) Despite clear profitability, there is no inclusion of affordable housing in any of their schemes, in response to an enquiry sent by Collins, Manchester Life states:

“None of the schemes would have been “financially viable” had Manchester Life been obliged to meet standard requirements on affordable housing or financial contributions.” (Collins, 2019:online)

Despite their own guidance states “that 20% should be a “starting point”” (Collins, 2019:online) Additionally, no Section 106 contributions were made and viability assessments proving inviability remained closed to the public, despite the financial involvement of a democratically elected body. Regarding claims of ‘financial unviability’, the entire Manchester Life property portfolio generates “up to £10m a year in rent” (Collins, 2019:online) of which MCC “receives none of the income”. (Collins, 2019:online) Funnelling rental income towards tax havens further reveals the reformulation of post-crisis housing beyond a spatial fix and towards a site of financial extraction. These sites of extraction, or ‘mines’, are typically identified with traditional industry but are re-defined by Arboleda as:

“not a discrete sociotechnical object but a dense network of territorial infrastructures and spatial technologies vastly dispersed across space.” (Arboleda, 2020:14)

Within these dense networks, further expansions of post-crisis financialisation can be extracted through the organisational structure of Manchester Life itself, self-marketed as “the Investor, developer, landlord, agent, and manager” (Manchester Life, 2020:online) Notably, the Montague report states that transitioning “to a long-term residential investment market dependent only on income returns is therefore likely to require higher rents, or lower land, construction and management costs.” (Montague, 2012:15)

The operation of Manchester Life activates all these criteria through marketisation of above average rent, automation of rent collection, and self-integration into construction and property management processes. (Manchester Life, 2020) All of which financially optimises the extraction process through centralisation (Fields 2019). Drawing parallels with Fields’ research on Single Family Rentals in the US post-crisis, the organisational structure of Manchester Life utilises Fordist approaches to housing marketisation, (Fields, 2019) where availability of units, lease length, and additional rental features (e.g. bike and car parking) can be accessed and selfcompleted using their online platform. (Manchester Life, 2020) Whilst Fields’ research centres upon the use of automated processes for the acquisition of property from the investor side client side deployment similarly optimises capital extraction processes through centralisation (Fields 2019), albeit at a smaller financial scale. Yet still perpetuating capitalist modes of urban (re)production by “centralising the means of production” (Marx and Engels, 1977:85), and concentrating property ownership. (Marx and Engels, 1977)

Manifestations of Institutional Investors

Utilisation of Institutional Literature for Build-to-Rent Identification

The Montague report details legislative operations of BtR schemes, but limits direct design guidance as architectural characteristics impinges upon a developers ‘brand’ (Montague, 2012) the sole recommendation of architectural materialisations is that: “the market would benefit from

a clearer understanding of what tenants should have the right to expect as regards:

the quality of the accommodation and the standards of construction, the level of energy efficiency and sustainability of the building, the building owner’s promises as regards the maintenance and refurbishment of the premises, and the professionalism of the management service.” (Montague, 2012:28)

Purposeful limitation of governmental architectural guidance has resulted in a vast pool of literature offering general guidance for BtR profit maximisation, therefore institutional advice has been leveraged to formulate a checklist for BtR identification in Manchester. The following articles have been used to construct these criteria:

‘Optimising Build to Rent Returns’ authored by Klingholz, of International architectural and engineering firm, AECOM; ‘What is ‘Build-to-Rent’ or ‘PRS’ and how can developers capitalise on’ by International architectural and master planning firm, by Cook and Barton of Chapman Taylor and; ‘The 8 Ingredients for the Perfect Build to Rent Recipe’ by Donati, of North American finance magazine, Forbes.

Build-to-Rent Formula

All three articles stress “the most successful BtR schemes are in urban locations” (Klingholz, 2020:online) with “easy access to good transport nodes,” (Cook and Barton, 2020:online) as “the location needs to be right to support the density and sustain the community.” (Donati, 2018:online) Emphasis of urbanity in development reveals the expected demographic of BtR schemes, as “[i]ndustry reports indicate today’s typical BTR tenants are young professionals” (Cook and Barton, 2020:online) as “[t]he average age of people looking to move into a first home in the UK was between 25 and 35 years old in 2016”. (Klingholz, 2020:online) This demographic is currently underserved in the post-crisis housing markets “as most new home developments across the UK are 3-4-bed houses.” (Klingholz, 2020:online) To counter the current market offering, “[l]eases and designs should allow flexibility for tenants, and potential future changes in living trends, such as moves towards more co-living or micro units.” (Cook

and Barton, 2020:online) Further securitisation of income through diversification is encouraged through combining housing with “retail space or other commercial uses. It can be part of the ‘co’ revolution with co-working and co-living creating outward facing communities.” (Donati, 2018:online)

The provision of a range of tenures is identified as a safer investment as tenant requirements change in accordance with their lifecycles. A BtR scheme can therefore be identified if buildings are (1) mixed use (e.g., ground floor retail space with housing above) or (2) contain a blend of apartment types to cater to a range of lifestyles. Additional amenities encourage residents to mix with one another as “[s]tudies show that people who know one other person in a building are 75% more likely to renew their tenancy. For people who know two other people, this rises to 90%.” (Klingholz, 2020:online) these amenities “should be factored in as part of initial proposals and ongoing operational assumptions.” (Cook and Barton, 2020:online) These ‘secondary amenities’ are mentioned in the Montague report as ‘brand specific’ configurations of BtR schemes (Montague, 2012) where “[a]dded amenities, such as a concierge, are part of the BtR lifestyle formula, and this is where BtR distinguishes itself from the Build-for-Sale sector.” (Cook and Barton, 2020:online emphasis added) These “facilities might include workspaces, a club room, communal lounges, roof terraces and gyms.” (Cook and Barton, 2020:online) Evidently, these amenities encourage longer term rents through maximisation of the building use and fostering ‘community’, crucially distinguishing BtR from other forms of housing provision. To effectively manufacture profitable communities “200 units is deemed to be the minimum ‘critical mass'’” (Klingholz, 2020:online) but “most operators/investors seem to target 250” (Donati, 2018:online) therefore prescribing an architectural massing of a BtR project as medium or high density. (Klingholz, 2020)

In addition to critical mass making financially viable secondary amenities, construction quality is increased as these long term assets retain their value through minimisation of operational costs. “BTRs with reduced fixed running costs will offer investors a greater chance of delivering expected returns over the development’s lifetime.” (Cook and Barton, 2020:online) To achieve predicted returns “finishes need to be high-quality, robust, easily maintainable, readily accessible and designed to last.” (Klingholz, 2020:online) As a novel asset class, “BTR is particularly suited for modern methods of construction, such as volumetric modular. This has a range of benefits, including faster build rates so investors can open up rental income streams sooner”. (Donati, 2020:online)