Building Societies and the Inner City

The issue of whether mortgage institutions designate areas of cities where they will not lend has become increasingly important in the light of recent debates about the future of the inner city. This paper examines the evidence of 'redlining' by building societies and comments on the reasons for such practices and their wider implications. FOR several decades concern has been expressed about the housing situation in the inner areas of British cities. Considerable attention has been devoted to the identification and examination of the poor housing conditions which exist there and to the problems of government interventions in the forms of clearance and redevelopment and rehabilitation.' Until recently, however, relatively little work has been concerned with private as opposed to public investment and the position of owner occupation in inner-city areas. The purpose of this article is to examine in some detail one aspect of this issue: the reluctance of building societies to grant mortgages on properties located in specific inner-city areas. It is argued that this particular situation is an example of conflict that exists between private capital investment and the conditions under which it will take place and the housing needs which certainly exist in these areas.2 Owner occupation has expanded considerably since the early 1950s. In 1953, 28 per cent of dwellings were owner occupied, in 1976, approximately 54 per cent. The rapid expansion of owner occupation reflects factors related to demand, the tenure's favoured financial position3 and the difficulties of renting housing from either local authorities or private landlords. As Boddy notes,4 both Labour and Conservative governments have given it substantial backing as this statement by the current government reveals: The Government welcome this trend towards home ownership. . . . The Government will therefore promote measures to widen still further the opportunities for home ownership.5 It is within the context of attempts to expand home ownership amongst all sections of the population and the position of the building societies in relation to the growth of owner occupation and their dominance over the home loans market7 (in 1975 ?i8 882 million out of the ?24 431 million outstanding on housing loans were from building societies, i.e. 77 per cent) that the issue of owner occupation and mortgage finance in inner-city areas is considered.