London - the money-laundering capital of the world

Politicians are acting as “ushers and butlers” to the world’s wealthy, allowing the seemingly unstoppable construction of mansions, mega-basements and luxury apartments in London at the expense of housing for the poor and middle classes. These are the claims made by researchers from Goldsmiths, Sheffield and York universities following a two-year study of the capital’s super-rich neighbourhoods. They conclude that London has become one of a handful of international havens for the very wealthy, thanks to central and local government kowtowing to their demands.

The deference of the UK government has facilitated the construction and extension of mega-mansions for the several thousand ultra-high net worth individuals, with assets of at least £21m, and the 80 billionaires who now live in London. This has driven up house prices, leaving the “majority of precarious white collar and manual service class workers unable to afford a mortgage”

The researchers write: “The real wealth and power of global capital is expressed in the compliance of politicians who have come to act as ushers and butlers to the wealthy, often in the service of foreign sovereign and high net private wealth individuals…The mayor of London, Boris Johnson, has been a notable cheerleader for the super-rich in this regard.”

The research blames the shortage of affordable housing in the capital on three factors.

First, the ruling political class is compliant towards the super-rich and distanced not only from the housing conditions of the poor but also the middle classes, who now feel displaced by the global uber-wealthy.

Second, the government’s welfare cuts have been used to make prime neighbourhoods more attractive to rich foreign investors, “as tenants and low-income households are priced out of spaces previously reserved for them by the state”.

Third, the unregulated private housing market “disadvantages those who are already struggling to survive its excesses”.

The Observer show a widening gap between house prices in those London neighbourhoods inhabited by the very affluent such as Knightsbridge and Mayfair – and the rest of the city. In 1995, the average house price in the alpha territory was £126,000, compared with £96,000 in the rest of London (a 31% difference). But by 2015, the average home in super-rich neighbourhoods cost £690,000, compared with £419,000 in the rest of the city (a 64% difference).

Between 1995 and 2015, a total of 20,587 properties were sold for at least £2m in England and Wales, with more than half of those in the neighbourhoods of the alpha territory in London. Almost 75% of the 2,438 homes sold for at least £5m and more than 60% of the 502 properties sold for at least £10m were in these same neighbourhoods. In central London, overseas buyers bought as much as 85% of “prime’” properties worth at least £5m in 2012-13 and nearly all those worth more than £10m. Almost half the foreign buyers of new builds in the prime central London market in 2011-13 were not resident in the UK – raising fears that homes have been bought solely as an investment and may be left empty. The researchers pointed to the royal borough of Kensington and Chelsea, which granted permission for 450 “mega-basement excavations” in 2013, compared with 46 in 2001, while planning to build no new social housing. Instead, they note, the council agreed to invest “a very modest” £2.9m in a Peabody Trust Housing project, which will provide 112 homes, although the number of social housing units is not specified.

Professor Rowland Atkinson, of Sheffield University, said politicians’ subservience to the super-rich led them to see the poor as “inefficiently placed” in prime neighbourhoods and a deterrent to foreign investment. “The austerity policy is allied with that,” said Atkinson, an expert in gentrification and social exclusion. “Being in thrall to people with money and to money itself while poorer constituents have no voice.”

The researchers said London’s poor have seen their conditions “attacked in the name of austerity programmes, through welfare spending caps, bedroom taxes and state-led gentrification and clearance of the last filaments of affordable and public housing in more expensive areas”.

This had led to “several million retired, unemployed and underemployed people living on bare subsistence incomes in private rental or social housing.

“The city appears to have sold its poorer residents down the river (almost literally, as many are displaced to properties beyond the capital) while opening its arms [to the global super rich],” the researchers state. “You can argue that the rich are a tax on everybody [else] in London,” Atkinson added.

Journalist Peter Pomerentsev, author of 'The Surreal Heart of the New Russia', told the Sun: “London now has a reputation for being the money-laundering capital of the world. If you want to become acceptable and legitimate, if you’re a Russian you buy something in London.”