Cory Doctorow: How startups of Silicon Roundabout are gradually being flattened
theguardian.comNothing in London is quite so profitable as property development. I suppose this is the continuation of the process of sweeping away the derelict bits of Hackney for the 2012 Olympics.
It would be nice if economic activity wasn't quite so concentrated in unaffordable London. But I can feel the wave of money washing over the built environment even out here in Cambridge ("Silicon Fen"); it's just about commutable to North London, so buildings have been going up with the clear aim of selling to middle eastern or Chinese investors. It has its positive aspects - many of the cleared buildings were in terrible condition, ugly, or (as in Hackney) suffering from asbestos. But the new ones are still unaffordable. I'm fleeing to Edinburgh while watching professional couple friends get priced out of buying their first home.
Property booms cannot go on forever: http://www.theguardian.com/world/2014/feb/28/home-ownership-... but we lack the leadership to resist this or to try and distribute industries more evenly across the country. (Mediacity is a token attempt at building a media cluster in Manchester while kneecapping the BBC and looting its buildings).
It's actually interesting to note that office property in SV is anything but cheap and as a construction project (I believe) is just as attractive for developers as a typical derelict block in East London. However, this does not stop SV from being SV.
Let's face it: some of the offices around Old City Roundabout are pretty grim. Bad plumbing, windows overlooking someone's wall or a dumpyard, barely working HVAC, you name it. What is that the startups have to lose? If all those old office blocks will be demolished and will be replaced with a shiny new one, that's fine. Sure, Last.fm will need to move elsewhere and a new tenant in the building most likely will be KPMG, DLA Piper or RBS, but it's not that that hypothetical Last.fm will have nowhere to move. There are still plenty of cheap grim office property around (in Croydon, for example) but the borough only wins from getting rid of the old ones.
All in all, if a London startup ecosystem is here to stay, gentrification is too unimportant of a problem to kill it.
Britain does seem to be getting balkanised into areas where economic development is allowed and areas where it is not. The planning system compartmentalises everything so that marginal development is impossible. Places like Silicon Fen are great, but you also need the crappy industrial estate that have cheap rents and access to transport links.
Industry goes where it wants - if we try and stop these companies from basing themselves in London, the competition isn't other parts of the UK, it's Berlin or Singapore or Shanghai. Central planning of industry has a pretty poor history.
It's less about industry than about foreign investors seeing London property as a store of value. There's a whole class of people living in properties as "guardians" at discounted rent simply to avoid the property seeming abandoned:
http://online.wsj.com/news/articles/SB1000142405270230454950...
Yes and no; a lot depends on the competence with which it's done. It's not turned out too badly for China or South Korea.
There's a strong case for having a proper property tax (to central govt) in London. If we're going to have a boom then then at least we should benefit from it.
Admittedly there's hardly anyone in Parliament I trust even to be basically competent in this kind of planning, let alone honest.
I'm in UK and I've been eyeing Berlin for a while now. The rent prices for offices/accommodation seems to be a fraction of those in London. Also startup community in Berlin seems to be booming.
This is only happening through the looking glass of 0.5% rates - 3% on property seems attractive. If the economy ever re-inflates and rates go up a couple of points all this building wont seem so attractive anymore...
The lack of a combination of affordable property and decent jobs in areas within a reasonable distance is definitely causing increasing problems in this country, and only worsening social inequality. Remote working is one solution that I think very slowly will become more mainstream. I mean really why do start-ups have to grow in a 'technology hub'? Most small/start-up companies in these areas I know of rarely collaborate or seem to benefit from proximity with each other.
"we lack the leadership to resist this"
Many of our 'leadership' (1/3 of MPs in fact: http://pastebin.com/1249K1N4) have large buy to let portfolios and don't give a toss if the economy crumbles if it makes them richer.
What is the value of a building? To me it seems obvious that a building is an asset and what you want from it is the income from the rents, and the value of it is the NPV of future rents. Anything else is bubbly.
The source of the value is mostly the land, rather than the building. When prices rise, it's actually the land value rising, but we talk about it like 'house prices' are going up.
Causes a guaranteed bubble as you can't make more land, so price rises are not followed by increased production causing the price to fall again.
An excellent point, that is almost universally ignored. NPV of future rents is ignored almost totally in the domestic housing market, and it seems that commercial property is riven with debt fuelled purchases that need another purchase to work.
"I'm fleeing to Edinburgh"
And Edinburgh isn't exactly cheap.... (compared to London it is though!)
Article was removed - but google is all-seeing:
http://webcache.googleusercontent.com/search?q=cache:www.the...
Well, I guess some editor's being grilled for letting this paragraph pass through.
>Maybe not one as hot as Silicon Valley, but a least something to add much-needed diversity to the capital's industrial base – which presently consists largely of companies that launder war criminals' money, and companies that exchange this laundered money for empty luxury flats.
While one can agree, Doctorow's sarcasm isn't clear and that sounds like a pretty unsubstantiated claim, even by the guardian's admirably liberal standards.
That sentence is still present in today's published version of this article, http://www.theguardian.com/cities/2014/mar/10/slow-death-of-... .
That's a good thing. Still wondering why it was pulled, then
Gentrifiers complaining that they've been out-gentrified.
There were people living in Hackney and Dalston before the hipsters moved in and starting pricing them out of the neighbourhoods they grew up in, but what goes around, comes around.
Also, silicon roundabout is at 5 min walking distance of the heart of the city of London, so any kind of success would have priced them out. The council is doing what their own success would have been doing in a few years.
It would have required tremendous effort by the government to maintain the right balance of cheap business place and accommodation required to let the community survive. 100 meters away from one of the world finance capital ( and only sector still working in the UK ) that's an impossible challenge.
You cannot bootstrap a startup community too close to such location. You need some room for the community to create a culture and some momentum.
We have had a lot of Silicon-whatsits in the UK. Silicon Fen in Cambridgeshire and Silicon Glen somewhere in Scotland. There's a big electronics scene in Bristol.
Tho' this is something that it's impossible for governments to do, really, all the money will be creamed off by "advisers" and "consultants", small companies given impossible bureaucratic hoops to jump through, etc. The best thing the government can do is just take a step back.
Or my pet harebrained scheme: resurrect the original Acorn Archimedes and buy a million of then, requiring that all govt departments use indigenous British computing technology...
Acorn machines were great.... ah happy days. The A3010s with their stylish green function keys!
On a serious note, I dispute that government can't have a positive impact in stimulating the technology industry in the UK. In fact if we held on to more manufacturing businesses (through state-ownership, tax cuts etc.) we'd have a more diverse and robust economy. But the current government's so called schemes to foster business and innovation are typical of this administration - there's little substance to them at all. And successive British governments have failed to truly work with businesses and really listen to their needs rather than launching grand initiatives without prior consultation to real business owners.
Could you describe the electronics scene in Bristol? That sounds interesting.
RiscOS will run on the Raspberry Pi (made in Wales) if that counts :)
Moving the UK govt to Archimedes would certainly slow down GCHQ for a while.
I agree that startups in central London is pretty daft. Bit like choosing Manhattan with good views of the park.
I like Bristol. 90 mins from the big smoke, decent airport and railway hub, more chilled and counter-culture than South/South-East, closer to countryside, climbing and surfing. Has a history of new and high-tech like chip fabs and renewables. Oh and its not the North :)
I second Bristol as a recommendation. Great city, good university, decent rents and a long history of great engineering. They could call it Silicon Hill...
There's some effort going on in Croydon (that's South London, and one of the cheapest parts of London for those of you not in the UK): http://croydontechcity.com/ (heh - just noticed I'm in one of the pics on their site)
They run regular event to try to pull together a startup community, and it's extremely well attended, to the point where they've had to restrict numbers for some of the meetings. It'll be interesting to see what comes out of it - it's only been going for a year or so, but seems to be growing rapidly and it does seem like there's an increasing number of actual startups rather than just people talking about it.
Croydon, despite its reputation has the advantage of lots of cheap low grade office space (though the cheapest stuff in the main business district is gradually being demolished to create space for new high grade expensive high rises, but there are also a couple of "retail parks" in the midst of a sea of cheap office buildings and warehouses a few minutes walk/bus out of the town centre), there's at least one local data centre from a good provider, and it's very well connected to central London and the South coast.
This is what is wrong with the UK. Bubble property prices all over the country. And relative to incomes it is ALL OVER the country.
Everyone over 40 has a buy to let portfolio and those under 40 are stuck in rented property with few rights. Did you know in the uk if you rent you can be evicted for no reason at all? And if you will not or can not pay bubble prices for property you have to rent, live in poorly maintained housing and presumably never have children.
This is happening NOW and it is a disgrace.
Unbelievably it is being encouraged by the government with schemes to prop the bubble up further! But they are only a year away from an election now and its the older people renting out property who are most likely to vote and so the young just have to deal with it.
Actual wealth creation that can come from government support of startup hubs is the furthest thing from this governments mind. We're all too busy getting rich from doing nothing all day in someone else's office and waiting for the young to pay off our multiple properties mortgages for us to actually do anything creative or beneficial.
Im here and it makes me sick.
This government by the way, which is manipulating the housing market in such an anti capitalist way, is actually the more capitalist party of the two.
> Everyone over 40 has a buy to let portfolio and those under 40 are stuck in rented property with few rights.
Never seen it put so pithily, and yes, that's exactly how it feels.
Norway is mostly the same these days. Maybe it's a Northern European phenomenon. Of course, there is an upside to this: By renting, you are not taking on the risk of a fall in real estate prices. But I'm not sure if the fewer rights make up for it. You can't be "evicted" for no reason over here, but to my understanding it is legal to have renting contracts with a 1-month notice to termination. So it's more or less the same situation.
I get the feeling that the government in the UK is managing the economy solely to make sure house prices do not fall as that would cause a national crisis at this point. Under any other circumstances they would surely have collapsed by now.
The other problem is that the rental stock in the UK is managed almost exclusively by amateur landlords, which leads to petty restrictions (no pets, no smoking, no drilling, no decorating etc), attempts to sell houses out from under the occupier ("You don't mind if we show some people round every now and then, do you?" The hell I don't!) and hard-to-quantify risks (I know somebody with an older landlord who is now undergoing another round of treatment for cancer; putting the human tragedy aside, should they start looking for another place now, or can they wait a while?)
er, some of us over 40s are renting too. If you did a startup rather than getting a mortgage when younger and so didn't buy a house you can't now.
I fully agree with most of what you're saying, but I'm not sure where the degree of capitalism involved comes in. I think it has much more to do with the lack of creativity in government that you mention. Ultimately it does feel like younger generations are the fuel for the engines that drive the UK economy.
It is perhaps more accurate to say the prevention of allowing a free market to operate in housing is the problem. Government meddling. What the UK desperately needs is for these artificial props to be removed from the housing market and for the market to operate. This will lead to a correction which at this point actually benefits more people than it harms.
Selling piles of bricks to one another for ever increasing prices is plainly unsustainable and yet it has become the basis for the UK economy.
We need that money to go into entrepreneurial activity the likes of which a startup hub is well placed to encourage.
This story of property investment trumping entrepreneurial activity is a microcosm of the story of the UK economy as a whole since the housing bubble started 10+ years ago.
The UK desperately needs a free market oriented government. Traditionally the conservatives were that party but it appears no longer. They have just continued to damage the UK as the party before them.
It is appalling.
I think one of the first things we need to look at is the poor quality of a lot of new housing developments and the number of unoccupied / 'brown-field' that could be renovated and provide much more affordable housing than the over inflated prices of new properties. I still fail to see why the ideology of a more unrestricted free market economy would be of any benefit to the property market. In fact I think fewer restrictions would worsen the situation with many buying new houses that could become effectively worthless where for example they have been built in high flood risk areas.
I agree the economy should be less reliant on the housing bubble, but I'm not convinced that technology / start-ups are the only way to achieve this. The 'start-up' hubs you mention are just as likely to become another black-hole which the government throws money at with no real strategy in place.
Did you know in the uk if you rent you can be evicted for no reason at all?
That is simply not true. Evicting anyone is a long, drawn-out process, even if they stop paying the rent!
After the Assured Shorthold Tenancy period you can be given 2 months notice at any time. Regardless of what kind of tenant you have been, whether you paid your rent on time, etc etc etc.
I know it has happened to me and many others I have spoken to. What sort of an environment is that in which to lead a settled life? Many many priced out tenants have had to move their kids from school to school as incompetent landlords discover they got their sums wrong and have to sell up.
If you are a 'problem tenant' and stop paying rent there are difficult processes to go through in order to force an eviction. But I am not talking about the far less common case of non payment of rent from a difficult person. I am talking about decent families being forced out of their home as the norm.
That is a disgrace.
That is not the same thing as "being evicted".
The relationship between you and the landlord is the same as any buyer and seller of goods. If say Cadbury's decided to stop making your favourite chocolate bar, would you feel your rights had been trampled? Or if a shop decided to stop carrying some product you loved. Or if your favourite TV show got cancelled.
Or perhaps if the macro environment changes, should the landlord subsidize you when the bank is charging him more? Will the plumber give him a discount because he is a good guy? Will the supplier also give the plumber that discount because he's doing some work for a good guy who charges his tenants less than the going rate?
And what if the landlord's personal circumstances change and he or she desperately needs the money? Say they are no longer able to work?
I know that it is disruptive to move house, but in all likelihood the landlord isn't a monster, just someone who's trying to save for their retirement and has been scared out of pension funds by the smash and grab raid launched in 1997 (which I'll note the current lot haven't reversed).
Forced to leave your home at someone else's request is the same as being evicted.
Housing is not optional so the relationship is not the same as anything else.
There is a choice. Buy what you cannot afford and pray the cost of borrowing doesn't increase or live at the mercy of an amateur landlord. Some choice.
A correction is sorely needed so that choice instead becomes rent or buy. Not as it currently is, rent or commit financial suicide.
While buying is not an option for the financially responsible renting should be more like it is on the continent. Rent increases there can only be as high as inflation and the tenant is treated like a paying customer.
The situation is shocking here, that is undeniable.
Now you are just making words up. But I will continue my analogy. Food is not optional, but you have no "right" to force the supermarket to stock what you want regardless of its own decisions.
Eviction
noun 1. the action of expelling someone from a property; expulsion. "the forced eviction of residents" synonyms: expulsion, ejection, ousting, throwing out, drumming out, driving out, banishing, banishment, removal, dislodgement, displacement, clearance;
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You're plainly part of the over 40 cohort with buy to let property otherwise you wouldn't be so keen to bend rational thought in knots in order to make yourself feel better about the damage you cause to decent people.
If anyone else is reading this, here we see an example of how the damage continues to be done. There are many with a vested interest in the harmful status quo and so they pretend everything is fine for as long as they benefit.
I note you make no mention of societies in the rest of europe where renting is the norm and where work has been done to help remove exploitation from the system. Presumably you aren't in favour of that either so long as you're alright jack.
You are quite a sick individual and you will waste no more of my time. Your tenants have my sympathy.
You're plainly part of the over 40 cohort with buy to let property
Nope, neither. Just, umm, sane. I suppose you blame all this on Thatcher too...
It's the same as the neutral meaning of "being evicted" (per the dictionary) but not at all the same as the emotional meaning of "being evicted" (which generally brings up images of force, crying children, drama, etc.)
Ah, language.
Nice little bit of criticism of the Hackney council and I like the summary of the startup scene in general:
A common pattern in startups is to go to work for one,
watch it implode and team up with a colleague or two to
move on to another startup; repeat several times until you
have agglomerated a bunch of people you know, like and
trust; then do your own startup with them. As far as I can tell this is on the rise and is central to most university budgets. What could happen to "burst" this supposed "bubble"?
International students pay full fees here, whereas UK/EU students are subsidised somewhat. I don't know if international student fees are "central" to university budgets, in comparison with domestic fees and funding, but they're obviously very important. Increasingly so, in recent years, as domestic fees have gone up considerably, which has seen a decrease in home student numbers.
Anyway, the bubble would burst when the decreasing value of a UK (or any) degree is overtaken by the increasing cost of it. Bear in mind that the cost of a degree isn't just the tuition; the cost of living is substantial in the UK (particularly in London) and that's making the option of studying here less and less attractive.
When I started uni, the home/EU fees were £1000 a year[1]. My friends in class who were applying as international (non-EU) students had to pay £24k per year to attend the same courses.
The Government did pay universities the "teaching grant" per home student, to top up the fees, but when tuition fees settled at £9k per year that number was chosen in order to eliminate most of the teaching grant[2], so assuming that universities were getting topped up to £9k per home student, foreign students were worth 2.5x the home ones.
I know for sure that the universities compete to get as many foreign students in as possible, which was why all the fuss when they revoked London Met's ability to give student visas - they were attacking their funding, basically.
[1] they have since tripled twice, although remember repayments are like a sort of tax (the government lends you the money in the first place, and you pay back 9% of your income above £15k).
[2] I think science students still get it and arts students don't, or something, because this government is insane.
Yes, I should have said "integral to university budgets" rather than "central".
The thing is, the perceived value of education is largely based around prestige. Unless the cost of studying in the UK suddenly sky-rockets or there is some scandal that damages the reputability of all UK universities there isn't going to be a "bust" scenario.
It just doesn't seem very likely. I can envision a slow decline but no sudden fluctuations. Maybe I am mis-interpreting what "bubble" means?
Restricting the number of visas so that they go elsewhere would probably burst the bubble.
I've worked in the area since 2004. Although I agree with the points he is making, I don't really see the author coming up with any solutions. The problems are rooted in the right to private property.
I'm also fairly certain that Hackney have an issue with corruption. The way to flip properties in the area is to buy up a building with a B1 use (office), then apply to planning permission to build a residential penthouse or two on the top of the building. Build the flats, sell them for an insane amount of money to a couple of bankers, job done. I've been told off the record by estate agents that certain people have "more luck" with these applications than others, but what can you do?
This is nothing new and its been like that since the early 80s when Thatcher sold off the council housing stock at rock bottom prices. An area of London gets popular, money moves in pushing prices up and people out. City government does nothing. Rinse and repeat. All this has happened before, all this will happen again.
At the end of the 90s it was Notting Hill, now its Shoreditch, Spitalfields and Whitechapel with the gentrification wave pushing itself out east with Bethnal Green next in line.
Ultimately this will be the demise of the UK economy as all the money and jobs will focus on the southeast leaving the rest to fend for themselves.
"This article has been removed as it was launched early. It will be reinstated at the correct launch time."
Looks like it's been memory-holed.
http://webcache.googleusercontent.com/search?q=cache:www.the...
They're also throwing out all the communities who are living "unauthorized" in warehouses and commercial units.
This is not some weird oddity due to council mismanagement, it's just the latest example of one of the greatest naturally occurring scams in history.
The process that's occurring is Ricardo's law of rent: https://en.wikipedia.org/wiki/Law_of_Rent#The_Law_of_Rent
It's counter intuitive, but brilliant once you realise how it works. Put simply, when a company makes more money due to the location they're in, the landlord gets all of the extra profit, not the company that does the work. Every time the company's profits rise, the rent will go up by the same amount. Free money without working if you own land, and very bad for capitalism.
In the case of Old Street, it used to be that there was little advantage to being there, so rents were cheap (not much competition). That attracted lots of startup types and now, the area confers a significant advantage due to the network of companies and people. The choice for a new startup is :
a) Old Street, where recruitment costs (for example) will be lower, or
b) Somewhere Rubbish, where you pay e.g. an extra 20k per year for recruitment.
If the rents are the same, everyone will want Old street for the 20k advantage, so the landlords play them off against each other: the offices go to the highest bidder. Whilst the extra rent you pay to be there is less than 20k, it makes sense to pay it as you're still ahead, so people keep upping their bids until the rent reaches ($rent_for_rubbish_place + 20k). The landlord gets it all for doing nothing!
It's a scam because it operates outside of free market capitalism: you can't manufacture more land at Old street roundabout (or move it there from elsewhere), so supply does not increase when the price rises. Not a free market. Also no jobs created by the price rises.
The solution to the scam is land value tax (LVT), which would reclaim the unearned money from the landlords (whilst leaving them their fairly earned money from providing the buildings). LVT done right would make corporation tax unnecessary whilst causing no price rises and no job losses. A massive boost for the economy. Seriously. No hyperbole - it works counter intuitively due to the fact that its not a free market in the first place.
Winston Churchill was strongly in favour of LVT and described land as 'the greatest of all monopolies'. He thought that taxing it was one of the most important political ideas of the century, so it warrants a bit of reading: http://www.landvaluetax.org/current-affairs-comment/winston-...
my best guess for where the roundabout people will move to is Deptford - if they can cope with moving to "sowth louwdon" - home of two separate hack-spaces spc.com and a new men-in-sheds being set up by the peabody trust http://menssheds.org.uk and Goldsmiths college
Come to Brighton instead!
Brighton is to London what California is to NY. I.e. full of hippies and "creative" types.
Or the Medway Towns: Full of weird, strange people ... but still dirt cheap & commutable to/from London.
Ooops:
This article has been removed as it was launched early. It will be reinstated at the correct launch time.
Interesting. Why would The Graun bin the article?
"This article has been removed as it was launched early. It will be reinstated at the correct launch time."
Where did you get that text from?
It appeared when I clicked on the link. Maybe it's UK-only or something.
link to the post that links to the google cache: https://news.ycombinator.com/item?id=7359526
Weird - I'm in the UK and just see a generic 404.
Ah - I'm looking at the beta of the new design, which is in every way far superior, except for this one :)
I'm getting the same text from Australia.
I suppose it pays for me to read beyond the headline!
Removed article ?