Seseña and Ordos: Two speculative cities that are still standing empty

Residencial Francisco Hernando, Seseña, Spain. Image: Grupo Francisco Hernando/Wikipedia.

London is a city clamouring for space. The very idea of houses left empty, such as the ones dotted around Kensington, makes most people’s blood boil, especially if you’re part of the every growing percentage of the population for whom property ownership is a dream but little else.

More houses seem the only answer – but this medicine to South England’s ills isn’t a global cure all. Often ambitious developers put up houses that remain unintentionally empty, putting pay to the adage ‘Build it and they will come’.

Here are two examples of cities that were clearly unnecessary.

Seseña, Spain

Seseña is empty. It was originally intended as a satellite city for Madrid, a middle class commuter’s utopia away from the bustle and pollution of its large northern neighbour. Launched back in 2003 when the real estate market was booming, it was ambitiously nicknamed the “Manhattan of La Mancha”.

But if a New Yorkers saw Seseña today they would cringe to be even associated with it. Spain’s property bubble burst and, although 13,000 homes were intended for Seseña, the developers stopped at just over 5,000. By 2008 less than 3,000 had been sold; of those, only about a third were occupied.

This meant that 80 per cent of the homes in Seseña were empty. By comparison, at the same time, the town with the highest proportion of empty houses in England was Burnley, Lancashire, where just 7.4 per cent were empty.

In Seseña, the lack of people meant all the intended grocery shops, pharmacies etc. never opened, which didn’t help the appeal to prospective buyers. The whole project was dogged by rumours of corruption and the man responsible for the development, Francisco Hernando, although never charged with wrongdoing, promptly moved to Equatorial Guinea, which didn't exactly look great. Those who had already bought into the project lost huge amounts of money on their investment.

Seseña was an unneeded city. Already Spain has a high rate of property ownership, with 78.2 per cent of people already living in homes they owned. This rate is far higher than much of the rest of Europe: ownership levels are lower in the UK (63.5 per cent), France (65.0 per cent), Germany (51.9% per cent) and Italy (72.9 per cent).

So the demand for the Seseña development was low. It had little appeal to possible residents – and after the crash it had little appeal to investors either.

Ordos, China

Kangbashi New Area is part of the northern Chinese city of Ordos, and is also standing empty. Built in just five years, it was a government-led project that hoped to make homes in this coal rich region for over million people. Like Seseña, it has the infrastructure, shops and public spaces of a fully functioning city – but like Seseña barely anyone lives there.

The Ordos Museum. Image: Popolon/Wikipedia.

The homes are being bought but no one is moving in. In China, buying property is seen as a safe investment, because no one has consistently lost money in the short history of the country’s modern property market. Frenzied building is supported financially by the government as such investment boosts GDP. And so, spending is structurally incentivised regardless of whether something of use is made or not.

Citizens of China have only been legally allowed to own property since 2004, when the right to private property was written into the country’s constitution. Fifty years of demand was unleashed on an undeveloped property market, and since then it has boomed. Many Western property experts see this as a bubble and fear a market crash.

If these doom mongers prove correct, Ordos could be fated to go the way of Seseña. Patrick Chovanec, business lecturer at Tsinghua University in Beijing, sees the property boom as being driven by investor opportunities and not a genuine need for housing.

Here is the link between Seseña and Ordos: both cities were built for investment’s sake and not really with inhabitants in mind. The price has been paid in the unpopulated apartments, empty shops and quiet streets.

These are investment cities and it is in those terms their value lies. Their function as homes takes second fiddle to their market-dictated value, and it is through the disconnect between the two that financial disaster awaits.

For Ordos only a property market crash separates it from being such a failure as Seseña. So to all you developers out there, if you’re going to build a city, have a real think about who’s going to live there first.


What's actually in the UK government’s bailout package for Transport for London?

Wood Green Underground station, north London. Image: Getty.

On 14 May, hours before London’s transport authority ran out of money, the British government agreed to a financial rescue package. Many details of that bailout – its size, the fact it was roughly two-thirds cash and one-third loan, many conditions attached – have been known about for weeks. 

But the information was filtered through spokespeople, because the exact terms of the deal had not been published. This was clearly a source of frustration for London’s mayor Sadiq Khan, who stood to take the political heat for some of the ensuing cuts (to free travel for the old or young, say), but had no way of backing up his contention that the British government made him do it.

That changed Tuesday when Transport for London published this month's board papers, which include a copy of the letter in which transport secretary Grant Shapps sets out the exact terms of the bailout deal. You can read the whole thing here, if you’re so minded, but here are the three big things revealed in the new disclosure.

Firstly, there’s some flexibility in the size of the deal. The bailout was reported to be worth £1.6 billion, significantly less than the £1.9 billion that TfL wanted. In his letter, Shapps spells it out: “To the extent that the actual funding shortfall is greater or lesser than £1.6bn then the amount of Extraordinary Grant and TfL borrowing will increase pro rata, up to a maximum of £1.9bn in aggregate or reduce pro rata accordingly”. 

To put that in English, London’s transport network will not be grinding to a halt because the government didn’t believe TfL about how much money it would need. Up to a point, the money will be available without further negotiations.

The second big takeaway from these board papers is that negotiations will be going on anyway. This bail out is meant to keep TfL rolling until 17 October; but because the agency gets around three-quarters of its revenues from fares, and because the pandemic means fares are likely to be depressed for the foreseeable future, it’s not clear what is meant to happen after that. Social distancing, the board papers note, means that the network will only be able to handle 13 to 20% of normal passenger numbers, even when every service is running.

Shapps’ letter doesn’t answer this question, but it does at least give a sense of when an answer may be forthcoming. It promises “an immediate and broad ranging government-led review of TfL’s future financial position and future financial structure”, which will publish detailed recommendations by the end of August. That will take in fares, operating efficiencies, capital expenditure, “the current fiscal devolution arrangements” – basically, everything. 

The third thing we leaned from that letter is that, to the first approximation, every change to London’s transport policy that is now being rushed through was an explicit condition of this deal. Segregated cycle lanes, pavement extensions and road closures? All in there. So are the suspension of free travel for people under 18, or free peak-hours travel for those over 60. So are increases in the level of the congestion charge.

Many of these changes may be unpopular, but we now know they are not being embraced by London’s mayor entirely on their own merit: They’re being pushed by the Department of Transport as a condition of receiving the bailout. No wonder Khan was miffed that the latter hadn’t been published.

Jonn Elledge was founding editor of CityMetric. He is on Twitter as @jonnelledge and on Facebook as JonnElledgeWrites.