Built Up

An Historical Perspective on the Contemporary Principles and Practices of Real Estate Development

Patrice Derrington

• Publisher: Routledge
• Year: 2021
• ISBN:
  9781000367973
• Edition: 1
• Topic: Business
• Subtopic: Real Estate
• Index: Business

Built Up uncovers the roots of the global real estate industry in the machinations of a patron of Shakespeare, the merged lineages of business savvy women and men, startlingly innovative collaborations with the first English architect, and the radical explorations of other denizens of early modern London – and what those colorful origins mean for the practice of property development today.

Uniting insights from the author's career as an internationally recognized developer with meticulous archival research, this resource for scholars and professionals synthesizes economic history and the latest planning and finance literature. The result is an unprecedented effort to codify the principles and activities of real estate development as a foundation for future academic research and practical innovation.

By tracing the evolution of property development to its earliest days, Built Up establishes the theoretical groundwork for the next phase in the transformation of the urban environment.

Part I

Historical Foundations for Urban Innovation

Chapter 1: Land Ownership, Control, and Use

In order to taste the full flavor of the circumstantial context which led to private real estate development, one should be aware of the confluence of relevant social, philosophical, political, and legal factors that provided the primordial soup from which the activity was born. It is necessary to retreat somewhat in history.

Private urban development began from the ground up, and of initial interest is the nature of the title to land upon which buildings would be erected and permanently affixed. The fundamental importance of this platform for human activity has long since been noted, and it was emphasized as modern urban communities were formed. Speaking of its significance, Marshall (1804, 1) said that “landed property is the basis on which every other species of material property rests; on it alone, mankind can be said to live, to move, and to have their being.” Private urban development represents the highest level of complexity and utility yet encountered in this feature of human organization.

Title to land is a special form of owned, or “private,” property, and in addition to its functional use, it has symbolic importance within human philosophical values, particularly with respect to legal structures, governance, and social status. Consequently, for a developer and the numerous stakeholders in a project, it must be apprehended that the economic, legal, and social dimensions of the rights of the land can be claimed and acted upon as private property. It is beneficial to this to note the distinction between land in its physical form and the concept of the property rights inherent in it.

Property developers often approach a project by pushing the boundaries of the local rules that inhibit the economic rewards of their project, rather than with any deep philosophical consideration of their site’s place in the urban dynamic, and the societal ramifications of their possession of and actions within it. In this general attitude they are not particularly different from the rest of society, as the eminent chronicler of progressive property law in the 18th century William Blackstone (2016 [1807], 1–2) (Figure 1.1) wryly noted: “There is nothing which so generally strikes the imagination, and engages the affections of mankind, as the right of property … [a]‌nd yet there are very few, that will give themselves the trouble to consider the original and foundation of this right.” That the largest real estate corporation as yet in mankind’s history has adopted the name of this oracle is probably not insignificant since it well appreciates that its whole raison d’être depends upon the stability of property laws and the societal implications of property.

1.1Sir William Blackstone in 1774.

Such “affections” for the right of property, and indeed the land itself over which they were held, have been deeply ingrained within English culture. This national bonding of society and land, although not unique, has been noticed to be exceptionally strong and long-lasting. Sugarman and Warrington (1996, 111) opine: “In the strange, half-timeless world of the traditional English landed estate, feudal concepts blissfully lingered long after feudal relations had been eradicated … Land was not just the most valuable form of property; both to its owners and non-owners it was a social-political nexus, a way of life.” And Offer (1981, 5) adds: “Both Roman law and English common law set land apart as a superior prototype of property, in acknowledgement of its primacy [of use] among the assets of agrarian societies.”

The “original and foundation of this right” to which Justice Blackstone referred has not been broadly addressed with respect to the development of land as compared with the considerable general humanistic contemplation of society and the rights of property ownership within it. Primarily from a legal perspective, there have been some relevant starting points, particularly that of Pierson (2013). On adverting to the unwieldy extensiveness of a “history of property in all lands and all ages,” he reasonably proposes to

focus on a series of perennial problems that arise for those who wish to defend (or to criticize) practices of property as these have developed broadly within the Latin West and its intellectual heirs. These questions include the following: How does private property come to exist? Does it require consent? (How) is it consistent with the living of a good life? And what are its proper limits? (Pierson 2013, 20)

This discussion of the dynamics of property use and changing rights provides a suitable perspective of the matter for developers of real estate. And the answers to these questions through history contribute an important component to a study of the theoretical framework of development activity.

Definition of Real Property and the Classical Conception of Ownership

First, it is necessary to distinguish real estate, or real property, from the legal category of personal property, or possessions other than real estate, such as movables, intellectual property or financial interests, or, for technical legal reasons, the leasehold of land. As Blackstone, in his Commentaries on the Laws of England knew the concept of land, it was not the physical soil, minerals, trees, etc., but the physical space ab infero usque ad coelum; and even that which was not owned. “Ownership of land” comprises merely a bundle of rights, an interest in it that is enforceable by law, and what are termed by the industry as improvements to it in the form of structures, buildings, infrastructure, and other alterations since all affixed property becomes part of the land. Such rights vary in extent, but there was no sovereign, or total, timeless ownership except when title in the land reverted to the Crown as the entity of the state. It is distinct from the construct by which existing things in general are owned and controlled. To define “ownership” in a way suitable for a developer’s purpose, it is now generally accepted as a right defined by “real limitations on alienation” – that is, limitations on removing it from one’s possession (Honoré 1961). These bundles may vary in the quantity and quality of the rights, but they mostly fell into general formulations with internal variations. For convenience, the object of the rights is sometimes loosely referred to as the property, but precision is sometimes necessary for technical discussion.

The accepted origins of the Western concept of real property are to be found in Greek civilization of about the 4th century BC, and although conceptually vague it was importantly directed to achieving a productive and sustained society. On the dynamics of society, the philosophers – Plato, Aristotle, and Pythagoras, among others – embraced and even emphasized a concept of real property which addressed its ownership, use, and distribution that would most effectively achieve a stable and good life for the citizens. “Plato and Aristotle did much in the fourth century BC to establish both the terms and terminology within which property has been discussed [in its societal purpose] in the West ever since” (Schlatter 1951, 19–20). Though their contributions to the notion of property have often been broadly differentiated, with the former favoring common ownership and the latter preferring private holdings, Pierson argues that such a glossed opinion is not valid. The modern developer works within a nuanced legacy which avoids the distinction and combines the use and development potential of both private and commonly claimed real estate.

Specifically regarding urban property, Plato said in chapter 5 of The Republic that his rejection of private ownership applies only to those appointed to the “golden class as overseers and guarantors of the good life of the community,” that is, those governing and responsible for the state, and it was proposed “as a way of preventing them from using their privileged position to exploit the rest of the citizenry” (Pierson 2013, 25–26). That in following millennia this recommendation has been generally ignored, or even defied, by various persons in government has often led to dire consequences and loud protest, but this abuse of power for personal gain continues to be relatively unabated (Derrington 2017).

In a less specific approach, Plato conceded that communities generally function in a world of private property and private family structures. This acceptance is even more apparent in his later work, Laws, in which he outlined an arrangement for a “second-best” city, where land and houses are not held in common. This would mitigate problems of common ownership, including disputes over the “product,” that is, what might be produced by an individual working on the land as against that resulting from the labor of others. He also adamantly required “those born and bred and educated as ours are” (Plato 1998, 740–741) to labor on the land in order to obtain its benefits, though unfortunately such activities, even metaphorically undertaken, later came to be in conflict with the proscribed lifestyle of the leisured landed classes.

Relevantly to real estate development activity, his first point anticipated later disputes regarding the use of shared land, termed “commons” by English law, in the resolutions of which private property development was to figure prominently. The second was also prescient with respect to Marx’s condemnation of that rentier class of passive property owners, around which social debate continues in present times.

To these justifications for private property ownership, Aristotle was to add that “what is common to the greatest number gets the least amount of care” (Aristotle 1991, 1261b, 32). Or, as put in the more modern parlance of the former US Treasury Secretary Lawrence Summers, “no one ever washed a rental car” (Middendorf II 2011, 189). Such concerns about neglect contributed to the economic concept described in the eponymous book, The Tragedy of the Commons (Hardin 1968, 1243–1248). Thus, a lasting and relevant construct for real estate was Aristotle’s postulation that “the better system is that under which property is privately owned but is put to common use” (1991, 1263a, 38). By common use, he meant a sharing of resources: “[I]‌n well-ordered cities … each citizen has his own property, part of which he makes available to his friends, and part of which he uses [and shares more broadly] as thought it was common property” (ibid.).

Pierson (2013) has helpfully provided extensions and qualifications which specifically addressed the benefits to society as a whole to be derived from private ownership. He expands the classical basis around two key points:

1.Pleasure and positive self-esteem are derived from private ownership because “to think of a thing as your own makes an expressible difference, as far as pleasure is concerned” (Aristotle 1991, 1263a, 41). It is necessary, however, to be wary of a time when this “slips from innocence into vice, when self-esteem and self-worth tips over into selfishness and avarice” (30).

2.“Private property is necessary for the exercise of generosity” (ibid.). This does not necessarily imply that ownership predicates generous action, but if it is read in harmony with Aristotle’s insistence that owned property be “put to common use,” the proposition apparently means that ownership of land imposes a responsibility for using it for some common good. Although this suggestion might be read as either commonsense or a devious justification for accumulation, if it is regarded as providing a direction for contribution to the public realm in which a property development occurs, it is an excellent premise by which urban settlements can satisfy their complex roles for both private individuals and the community.

In this abstraction of the propriety of use that comes with the ownership of real property, it is removed from the compulsion to overwhelming self-interest with which it is so often disastrously pursued. Rather, in the promotion of its effective and societally satisfying purpose, that is, its active utilization and contribution to the common good, the ancient philosophers enunciated a comprehensive utilitarian and socially responsible concept for its role. It should not be seen as promoting a purely altruistic culture, for most contributions were made also for pragmatic reasons also, but rather it established a cultural recognition of the desirability of public generosity as an inherent obligation and virtue of land ownership, though, as shall also be seen, it is not unlikely that personal satisfaction and the pleasure of a good reputation had some part in such motivation. Importantly, this had a beneficial influence on the urban development activity that was to commence in 17th-century England.

Thus, for property development, private ownership of site, or at least something legally approximating it, not only facilitates the objective of “working” the land for the betterment of the individual owner and the community but also enables the individual owner to be happier by performing acts of generosity to others through its use. Brewer and Staves (1996, 1) explained the potential for broad benefits: “The private ownership of land especially has seemed to hold out the hope of encouragement to honest labor, of high levels of productivity from which all can benefit, and – politically – of an independent and free republican citizenry.” The fundamental principle that the ownership and benefits of private property were pertinent to the functioning of a community was established, and this axiom permeated much of European civilization.

Political Power, Social Symbolism, and Responsibility

That principle is also credited with directing societal structures. Pierson (2013) has pointed out that “(differential) property ownership (especially in land but also in movables) was also widely used as a mechanism for defining political classes in the political system of Athens,” and under the Athenian Constitution, which is attributed to Aristotle, the citizenry was divided into four classes by an assessment of the property value, or citizen wealth (24). Plato allocated each class a quarter share in electing the 360-man governing council, and in linking voting rights to property ownership, those who were craftsmen, laborers, or women without property were denied a political voice. This alignment of political power with property, particularly landed interests, persisted for centuries to come and made equitable access to property for its functional use, such as housing, a challenge that still has a place in modern property development. Consistently with the influence of Greek political and social philosophy on English thought, universal suffrage in place of property suffrage is a relatively modern development in the English system.

These inequitable outcomes from governance based on land title are difficult to marry with the call for improved social outcomes resulting from responsible ownership and use, as posited earlier. Addressing this, Somers (1996, 83) suggests:

It was not property that caused political rights; it was the political culture of membership that produced property, and the rights of property were expressed through the cultural capital of membership rights … The rights of property in effect existed only within the context of institutional relationships and the political culture of which they were a part.

From this perspective, despite the attempts of the philosophers to constrain greed and excesses, property conflicts begin with societal structures that are based on competition for resources necessary for human survival, and the use of a resource by one person means restriction from its use by another. That land, and a habitation structure built on it, was therefore conceptually placed in this competitive dynamic for survival, rather than being treated as cooperatively useful, had the pragmatic consequence that its essential value or worth was potentially depleted by misuse.

From this European philosophical foundation, the various methods of societies for sustaining their members have repre...

Table of contents

• Cover
• Half Title
• Endorsements
• Title Page
• Copyright Page
• Dedication
• Table of Contents
• List of Figures
• Preface
• Acknowledgments
• Introduction
• Part I Historical Foundations for Urban Innovation
• Part II Birth of the Modern Property Development Business
• Part III Property Development Reframed: Theory, Principles, and Models
• References
• Reference of Figures
• Index