The Blog

The Row Over the New Era Estate Shows the Alliance of Old and New Money

Being a "good landlord" is not one that seeks to make excessive profit out of their tenants, nor play with their security. But in this overheated property market, all the power lies with the person who owns the property, and why wouldn't they want to make the biggest return they can?

When Diane Abbot asked David Cameron whether the rent hike enforced by the family estate of his richest MP, Richard Benyon, on the residents of a newly acquired housing estate in Tower Hamlets, was his idea of "Compassionate Conservatism", the answer, which Cameron sidestepped, should surely have been yes.

Returning control of the country's housing stock and public services into the hands of wealthy elites, whether domestic like the Benyon family, or foreign investors like the majority shareholder of the New Era estate, Westbrook Partners, a US-based private equity investor, is at the heart of the Conservative vision for the country. More than selling off to the highest bidder, the party is creating a tightly knitted together web of old and new money that the rest of the population is increasingly shut out from and subservient to.

Witness the guest list of the annual Tory fundraiser, published last week by The Guardian and Bureau for Investigative Reporting. It's a roll call of bankers, lobbyists and businesspeople who pay upwards of £12,000 for a table just to sit near a top Tory MP. These are not people overly concerned with the needs of ninety working class families on an East London housing estate.

The sale is the latest blow to long established communities in this area, who have for generations lived on housing estates like the now threatened New Era. One resident has lived on it for over 70 years. These are the "hard-working families" that David Cameron repeatedly says he wants to help.

But only once they've been moved to a part of a country more befitting their income level.

The MP in question is the director of his family's Englefield Estate, worth approximately £120 million. The family's portfolio includes The Benyon Estate, which this year went into business with Westbrook Partners to buy up New Era, and was appointed by the investor to manage the estate. Rents have risen by 10 percent already, and residents warned more are to come. The tenants' new contracts are just 12 months long.

The Benyon Estate justified the proposed rent increases with a statement explaining that "substantial investment" was required to bring the estate's buildings and its "numerous deficiencies" up to scratch. But those costs should surely have been factored into the cost of the estate when it was sold, particularly as residents were assured their rents would not rise when ownership changed.

The MP has sought to distance himself from the story, stating his family has just a small stake in the consortium that owns the flats and that he has no personal responsibility for their management. Benyon also stressed his family had been "active in the property market for many years and are good landlords". Indeed, in New Era's neighbouring borough Hackney, Benyon's family have been landlords of some of the area's most desirable properties since the mid-nineteenth century. Doubtless their rental income has enjoyed a recent boost since the borough became one of the most sought after places to live in the capital.

Now they've joined forces with the new wealth of private investors Westbrook Partners to spread their net imperiously further to Tower Hamlets, another borough undergoing a transformation as developers capitalise on its proximity to the financial heart of the city, at the expense of residents on lower incomes. There are 23,000 people on the housing list in Tower Hamlets. None of them will be moving into the New Era estate when the current residents leave. If rents do rise to market level, as they've been warned, who but the wealthiest could afford over £2,000 a month, more than the average rent in Richmond?

Being a "good landlord" is not one that seeks to make excessive profit out of their tenants, nor play with their security. But in this overheated property market, all the power lies with the person who owns the property, and why wouldn't they want to make the biggest return they can?

But while the Benyon Family is the public face of the changes, and does stand to make a good return from the estate, it's Westbrook Partners that residents should be most worried about. In Brooklyn, in New York, the population is similar to East London (a mixture of long-established, often lower-income communities and a recent influx of wealthier residents) and Westbrook Partners is highly active buying and developing real estate that exploits these changes to local population. Earlier this year it was forced to provide tenants across the Bronx, Brooklyn and Manhattan with more than $1 million in rebates for illegal fees and overcharging as well as being held responsible for neglecting to make much needed repairs.

Westbrook Partners fell foul of a group of rent-regulated tenants organising against them and their business partners involved in the deal. But New Era residents aren't rent-regulated. A company overview of Westbrook Partners by Business Week describes the firm as pursuing "opportunistic real estate investments resulting from undervalued assets and portfolios." What could be more of an opportunity than a housing estate sitting on the edge of the City of London where residents have no bargaining power and are offered no protection?

Meanwhile, over in West London, Westbrook has been attempting to prise the historic Dolphin Square in Pimlico from freeholder Friends Life through aggressive legal chicanery since 2007. Only a firm intent on making a great deal of money from these 1,250 flats would continue with such a protracted and expensive bid.

Westbrook Partners is a company used to dealing in commercial property in financial centres across the world. But there is a difference between buying up and selling on office space, however salubrious the location, and buying up residential blocks of flats with people who've lived there most of their lives. Once rid themselves of these tenants, either through paying them off or pricing them out, the make-up of that area is changed for good. But firms like Westbrook Partners have an overriding need to make profit for their backers, which can leave no room for sentiment.

Nor should it come as a surprise that Benyon and his family have a dismissive attitude to their new tenants. This, after all, is the same MP who earlier this year said families could save more money if they wasted less food and learned to store fresh produce more effectively. It was an unhelpful contribution to solving a cost of living crisis that has seen users of food banks triple in number over the last year.

New Era residents will need a lot more advice than basic home economics to find the extra money they need to stay in their homes.

Cameron dodged Abbot's question at Prime Minister's Question Time last week, and talked about the government's commitment to building affordable housing. Until the Benyon/Westbrook buy-in, New Era was affordable housing. And even if its tenants do move to somewhere more "affordable", what's to stop that being sold in the future too? How is it right that whole housing estates can be parcelled up and sold from owner to owner, with no protection for residents' long-term futures?

The New Era story is uncomfortable because it lays bare the deepening rift between the haves and have-nots in the UK today. Despite great strides in creating a more equal and meritocratic society during the last century, we are turning the clock back to a time when the country was owned and ruled by elites. The joining of forces between old British wealth like the Benyon family, and private, foreign investment firms like Westbrook Partners presents a powerful coalition of political and financial forces with clout enough to get whatever they want, at the expense of whoever they please.

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