Fragmented governance architectures underlying residential property production in Amsterdam

Introduction

Scholarly work on entrepreneurial urban governance discusses the increasing collaboration between public and private actors, mainly for the benefit of the private sector and particularly the property industry (Brenner, 2009; Harvey, 1989; Mazzucato, 2011). Existing literature highlights the complexities and dysfunctionalities of entrepreneurial, market-oriented, privatized and contractualised urban governance (Aalbers, 2020; Gordon and Travers, 2010), and its spatial consequences for cities. Moreover, the emerging forms, mixed qualities and effects of urban entrepreneurialism are explored through discussions on municipal entrepreneurialism, new urban managerialism, urban diplomacy and urban speculation (He, 2020; Phelps and Miao, 2020; Thompson et al., 2020; Wu, 2020). Meanwhile, political and urban scholars have framed the connected growth of involved actors in urban development and their weak integration in governance systems as organisational and political fragmentation (Le Galès, 2002; Taşan-Kok, 2010). Nonetheless, it remains difficult to understand what is fragmenting and how: the extent and format of institutional and organisational structures that accompany market-oriented ideological shifts and transitions in urban governance often remain unnoticed and empirically understudied.

How can we better grasp and systematically analyse the institutional and organisational structures that accompany transformations leading to entrepreneurial urban governance systems? To this end, we propose an original thesis and argue that entrepreneurial urban governance requires, and ultimately creates, fragmented governance architectures that accommodate complex institutional and organisational arrangements in market-oriented urban development. ¹ We utilise a definition of fragmentation that refers to the actions of actors and organisations as being influenced by the “proliferation, specialization and diversification of institutions, actor-constellations, norms and discourses active in an issue-area” (Pattberg et al., 2014: 5). In this sense, fragmented governance architectures point to the underlying infrastructures of governance, alluding not only to the active participation of a wide range of actors with different political positions, interests, and goals, but also to the various regulations and narratives that shape their interaction. These infrastructures help to create an organisational capacity that enables establishing a core set of norms, meanings, and values for governance systems (Bok, 2019).

Empirically, we reveal how the fragmented governance architecture of Amsterdam goes hand in hand with residential property production as an entrepreneurial political project. Existing studies on Amsterdam’s governance transformation are limited to sectoral analyses of regulation, market, or policy dynamics (Bartels, 2020; Hochstenbach and Ronald, 2020; Savini et al., 2016). In contrast, we operationalise our more comprehensive approach by analysing i) the way property industry activity is regulated by the public sector; ii) the way public administrative structures relate to property market activity; and iii) the way policy interventions and tools are narrated in regulations affecting residential property production. On the basis of a rich variety of qualitative methods including discourse analysis, policy analysis, and in-depth interviews with key policy and property industry actors, we forensically study changes in the underlying organisational and institutional structures of Amsterdam’s property development.

Terhorst et al. (2001) described Amsterdam’s governance system as ‘consolidated’ because of its orderly (and hierarchical) structure. The city’s governance has also been praised for being ‘egalitarian’ and ‘just’ (Fainstein, 1997, 2014), balancing market dynamics through the delivery of welfare services. However, national regulatory changes have consistently altered state-market relations in Dutch urban development (Taşan-Kok et al., 2019). Meanwhile, the strong welfarist focus on affordable housing provision gave way to an entrepreneurial model heavily intertwined with property market dynamics (Boelhouwer, 2020; Hoekstra, 2017). Today, we can characterise Amsterdam’s governance system as fragmented: Uncoordinated, and at times contradictory, institutional ties link the local administrations and property industry actors in residential property production processes, forming a complex and chaotic landscape of regulations, actors, and relations.

While the national government loosened its regulatory framework to make more room for private market activities, housing shortages across the Netherlands turned residential property production into a highly politicised issue. Correspondingly, in recent years various government layers and agencies began to produce more guidelines, visions, and ambitions to push forward their own agendas based on their constituencies. The result is a complex regulatory environment expressing divergent attitudes toward property market activity, intra-organisational discrepancies within Amsterdam’s local administration up to the level of individuals engaging with property development, and the circulation of fuzzy policy narratives on property industry actors. Combined, these factors create the underlying infrastructure that allows an increasingly entrepreneurial governance system to roll out at the local level. Without strong and consistent public-sector leadership, this fragmentation is likely to increase.

The paper first elaborates on the concept of fragmented governance architectures as a novel perspective to analyse entrepreneurial transitions. Then, after presenting the research approach and methodology, we apply the framework to our Amsterdam case study. There, we show that organisational and institutional transformations are not structured systematically but concretised in residential property development projects throughout the city. This does not mean that the governance system of the city is completely out of control. Even though urban governance systems may still contain powerful organisations, institutions, and interest groups, the governance infrastructure that links the public sector to the property industry may be still complexifying. Finally, we discuss our empirical findings and conclude that fragmented governance architectures warrant recognition as they lie at the heart of scattered investments in the urban built environment.

Understanding entrepreneurial urban governance through fragmented governance architectures

Entrepreneurial governance refers to the model of managing cities under a neoliberal political economic ideology, which brings market and public-sector actors closer to one another. Growing numbers of actors and organisations, ranging from private companies to communities and individuals, are partaking in planning processes, which has seen governance perspectives prominently enter the spatial planning field (Schmitt and Wiechmann, 2018). The politics and finance of entrepreneurial governance as well as the spatial outcomes of this form of governance in terms of piecemeal, dispersed, or fragmented urban development projects have been discussed at length (Beswick and Penny, 2018; Hall and Hubbard, 1998; Harvey, 1989; Ward and Jonas, 2004). Property development has direct implications for the morphology of urban space as projects mushroom in the city. Growth through uncoordinated and complex institutional relations diminishes the possibilities of interlinking these spatial interventions with the wider built environment surrounding them (Pessoa et al., 2016; Özogul, 2019; Salet and Majoor, 2005). Fragmentation is also the subject of recent discussions in relation to the political economy of land, land speculation, and value capture mechanisms (Catney and Henneberry, 2019; Karaman et al., 2020; Noring, 2019). It is also discussed in relation to the financialisation of the built environment (Aalbers, 2020, 2019; August and Walks, 2018; Bryson et al., 2017; Teresa, 2016; Ward, 2019). All of these issues lead to scattered property development projects in the urban space.

Structural and administrative consequences of this form of governance, however, are only covered in a limited number of discussions outside of the public or local administration literature (Lauermann, 2018; Pike et al., 2019; Taşan-Kok, 2010). Due to the involvement of various institutional bodies, policy networks, and community organisations, and the potential of missing connections between various policy domains, fragmentation can be perceived as an essential characteristic of governance. In a dynamic policy environment where the number of interactions between institutions and governance actors increases, it is difficult to control new forms of public action (Le Galès, 1998). In fact, several public administration scholars perceive fragmentation as an institutional coordination problem, especially within the framework of welfare state transformations (Bonoli and Champion, 2015; Champion and Bonoli, 2011). They see entrepreneurial political agendas as structured by powerful interest groups that are increasingly framing public policies in less hierarchical and less organized settings (Lascoumes and Le Galès, 2007). Moreover, as institutions and policy instruments shape or constrain the interactions and behaviours of actors and organisations (Powell and DiMaggio, 2012), they are also important to understand the power relations associated with them.

To explore the interplay between institutions and organisations in entrepreneurial urban governance in more detail, we bring neo-institutionalism into the picture, which enables us to focus on the relations between institutional characteristics and political agency (March and Olsen, 2006). North (1994) provides a robust viewpoint to differentiate institutions and organisations: He argues that organisations are the players and institutions are the rules of the game. In his view, institutions contain formal rules and informal constraints, which define “the opportunity set, and therefore the kind of organisations that will come into existence” (North, 1994: 190). Furthermore, as Pierre (1999) states, institutions shape or constrain the political behaviour of actors (organisations) through overarching systems of values, traditions, norms, and practice. Regulations in particular are important mechanisms of governance (Le Galès, 1998). Not only do these neo-institutional understandings define the fundamentals of institutional change in a capitalist economic model by linking actors (organisations) to the regulatory framework (institutions). They also help us disentangle the entrepreneurialisation of governance by drawing attention to the intertwined institutional and organisational dynamics that go hand in hand with increasing private-sector involvement in urban development.

While organisational and institutional fragmentation have been recognised as characteristics of entrepreneurial governance, they are not easy to systematically unpack. Given the lack of suitable frameworks in the wider planning and urban studies fields, we turned to a conceptual framework that is used in governance studies when explaining large-scale administrative bodies such as the European Union, or administrative complexities such as human rights regulation: fragmented governance architectures (Biermann and Kim, 2020; Biermann et al., 2009; Pattberg et al., 2014). Governance architectures refer to the fundamental institutional characteristics of a meta-level form of governance, focusing on governance arrangements in relation to a specific issue area. Within that issue area, institutions and organisations can differ in terms of their character, subject matter, objectives, constituencies, and spatial scope (Zelli, 2011). They can be either synergetic or conflictual, and when combined create a patchwork of policy domains (Zelli, 2011). The more rapidly the number of institutions and organisations increases, the more diverse and specialised institutions and organisations become. This means that more diverse actor networks, policy discourses, and narratives circulate in the patchwork of policy domains, creating the higher degree of fragmentation of the governance architectures (Pattberg et al., 2014).

In the scholarly literature on urban governance, the politics of entrepreneurialism or pro-growth agendas are mainly covered in reference to hybrid, neoliberal governance formulations (Pierre, 1999; Taşan-Kok et al., 2020). However, the underlying infrastructures of these formulations, which are equally important for defining the future of spatial development, are largely untouched. To fill this gap, analysing entrepreneurial urban governance through fragmented governance architectures illuminates how entrepreneurial governance agendas facilitate scattered policy interventions and investments in the city. In a growth- and market-oriented setting, governance systems become more complex; public-sector actors are not – as commonly perceived – opposed to the private sector but actively shape property markets and interact with property industry actors (Adams and Tiesdell, 2012). This can lead to what Buitelaar et al. (2014) describe as ‘institutional contradictions’ where diverse and multifaceted regulations shape, stimulate, and regulate the property industry actors’ actions, which in turn diminish direct and consistent links between policies, policy narratives, and organisational set-ups (Adams and Tiesdell, 2012).

Therefore, our understanding of governance architectures linked to the issue area of property development refers to: the regulations aiming to regulate divergent state-market relations; the organisational structures aiming to co-ordinate inter- and intra-organisational discrepancies; and the policy narratives related to the involvement of market actors in residential property production. In terms of the interplay between entrepreneurial urban governance and fragmented governance architectures, following our threefold operationalisation allows us to uncover the complex institutional and organisational processes that are ultimately responsible for shaping the actors and relations that are creating the urban built environment.

Methodology

We set out to explore the governance architecture of residential property production in the City of Amsterdam, specifically looking at the public sector. First, taking an inductive approach, we compiled a database of all public-sector regulations affecting residential developments in the city. Following Guy and Henneberry (2000: 5), we see property development as “a complex process which entails the orchestration of finance, materials, labour and expertise by many actors within a wider, social, economic and political environment.” Thus, the 69 policies, laws, decrees, and governmental visions that we assembled, and that were valid at least until May 2019, covered the planning, finance, concept, and construction stages of the development process. We categorised all regulations by year of issue and scope (municipal, regional, provincial, national, and European), and then systematically analysed their relationship to market activity following a framework of Adams and Tiesdell (2012) (see Table 1). Second, we conducted in-depth interviews with 24 public and private property market actors ² on the fragmented nature of property development in Amsterdam. Interviews lasted between 45 and 90 minutes, and interviewees were promised strict anonymity. Therefore, only limited information on their sector and area of operation is given in the analysis. Interviews with strategic advisors, municipal planners and project managers focused on the policy context of property development, internal dynamics, and collaboration within the different clusters and divisions of the City of Amsterdam, as well as perceptions of the City’s general relationship with property industry actors. Interviews with private-sector actors focused on the influence of public-sector regulations on their investment decisions, as well as the relevance of the perceived attitude of the City of Amsterdam toward the property industry.

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Table 1.

Categorisation of regulations in relation to market activity.

Market shaping regulations	Shape decision environment of development actors by setting broad context for market actions and transactions
Market regulating regulations	Constrain decision environment of development actors by regulating or controlling market actions and transactions
Market stimulating regulations	Expand decision environment of development actors by facilitating market actors and transactions
Market capacity increasing regulations	Enable development actors to operate more effectively within their decision environment and so facilitate the operation of other policy instruments

Source: Adapted from Adams and Tiesdell (2012: 134).

Third, we selected 15 policy documents from our collection ³ for an in-depth analysis based on their administrative agency level and their relevance to the perception of the property industry. Policy documents were systematically screened for references to, and descriptions of, private-sector actors and their role in spatial development. After comparing diverse framings of the property industry in the written documents, we returned to our interview transcripts to compare narrative framings. In fact, we consistently moved between the regulatory analysis, interview data, and narrative analysis in order to critically reflect on and verify our own observations. As standalone analyses, all three focus areas would be open to methodological biases; combined, our extensive empirical material allowed us to formulate solid arguments on fragmentation in Amsterdam.

Amsterdam’s fragmented governance architecture of residential property production

Like many global metropoles nowadays, Amsterdam is a city under construction. Residential property development projects mushroom all over the city. Between 2012 and 2019 alone, 1326 housing plans were either completed, under construction, or at a stage where principle or investment decisions have been taken (City of Amsterdam, 2019a; Figure 1). The inadequate supply has been perpetuated by demographic changes and Amsterdam’s attractiveness as a city to live, work, and study in, coupled with the City’s financial situation after the 2008 financial crisis that nearly halted housing production. The city’s housing market reported the highest price changes in the Eurozone in 2017, with annual rates over 15% (Nijskens et al., 2019). Furthermore, compared to average disposable annual incomes of residents in 2018, housing in Amsterdam is the most expensive in Europe, according to credit rating agency Moody’s (Het Financieele Dagblad, 2019). Amsterdam also experienced the country’s highest rent increase for several years running (Statistics Netherlands, 2019).

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Figure 1.

Amsterdam’s Housing Plans 2012–2019. Created based on data from City of Amsterdam (2019b).

The map of Amsterdam’s housing plans provides an indication of the underlying institutional and organisational complexity of residential property production, considering that in each coloured area, different sets of actors (organisations) interact based on unique sets of regulations (institutions). Madden and Marcuse (2016: 119) once commented that housing policy is “an artificially clear picture of what the state actually does in myriad uncoordinated and at times contradictory ways”. Studying Amsterdam's regulatory framework of residential property production, we discern a structure behind a seemingly uncoordinated and contradictory array of regulations. Based on our analysis, production of residential production in the city is regulated through four policy domains, to use Biermann et al.’s (2009) terminology: embedding social housing provision in market mechanisms; co-ordinating market housing production; regulating the financial mechanisms of housing production; and finally, ensuring spatial quality of the built environment (see Figure 2).

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Figure 2.

Locus of regulatory powers by function and policy domain.Source: Authors’ own analysis.

In the following systematic analysis we illuminate how the regulations in our database do not assign a coherent function to the market. Furthermore, we reveal how this regulatory complexity is accentuated by intra-organisational discrepancies within the local administration, in terms of the attitudes and relationships that public servants display in relation to property industry actors. And finally, we expose how both the analysed regulations and interviewees utilise multiple and fuzzy narratives to form an additional layer of fragmentation.

Discussion and conclusion

Entrepreneurial urban governance is often treated as a given, without querying the underlying process of neoliberal transformation As we argued above, entrepreneurial urban governance requires flexibly designed fragmented governance architectures to accommodate the multi-actor policy interventions linked to property market activity. Our analytical perspective, borrowed from Bierman et al. (2009) but operationalised in relation to property development, provides entrepreneurial urban governance scholarship with a means to detect the institutional and organisational structures that accompany transformations leading to entrepreneurial urban governance systems. Cities adapt entrepreneurial policy agendas in different ways, reflecting the regulatory, organisational, and political traditions of the wider governance context. However, the divergent public sector regulations of market activity, intra-organisational discrepancies and fuzzy policy narratives affecting Amsterdam’s property development, are emblematic of the fragmentation of urban governance systems elsewhere. Fragmentation allowed neoliberal ideologies to take hold even in Amsterdam, a city once said to be consolidated in its governance. Internationally, Amsterdam is known for its extensive public administration and large-scale control over development, thanks to public land ownership.

Our empirical analysis illustrates how Amsterdam’s ‘peculiar mixture of neoliberal and state-led institutions and regulation regimes’ (Engelen and Musterd, 2010: 702) operates on a practical level. We showed how regulations provide the basis for fragmented governance architectures in the various ways they regulate state-market relations. We discussed how administrative divisions set up their own policy directions, alderpersons have their own priorities, and individual public servants different management styles, all leading to multifaceted relationships between public officials and property industry actors. And we explained how fuzzy policy narratives reflect this fragmentation. Even though entrepreneurial governance arrangements in Amsterdam are not new, we see that the degree of fragmentation has intensified since the 2008 financial crisis with the subsequent de-regulation, particularly at the national level, and – once the repercussions were felt in Amsterdam – with various attempts to re-regulate residential property production at the local level.

Project-oriented residential development has become the norm, even in Amsterdam. Despite citywide policies and the close-knit relations between sets of actors, project-specific outcomes may deviate from overarching regulatory frameworks. Although our research did not cover the spatial consequences of institutional fragmentation, we can observe the consequences in Amsterdam, where space is limited due to its historical and water-oriented morphology. This form of property-led development is conducive to scattered spatial development which is planned through incremental, usually unco-ordinated and complex institutional relations. This form of physical development is manifest as a patchwork: different areas have been developed without being connected to each other in the spatial structure (Pessoa et al., 2016).

The fragmentation of Amsterdam’s governance architecture is a consequence of the entrepreneurialisation of urban governance, shifting away from housing provision to residential property production. But it is also a precondition for this structural transformation. It is the result of, and further enhances, unco-ordinated institutional ties linking public and private residential property market actors. Therefore, we concur with Mallach’s (2014: 771) call for more research “to explicate the complex relationship among local markets, public policies, and investor behaviour to provide the intellectual foundation for a new generation of housing and urban policies to reflect the new realities.”

Our approach is critical of the fragmentation of governance architectures. But we recognise that it may have some positive effects, as the increased flexibility to accommodate new actors may enable new groups to participate. Although the field appears messy, as nobody is really able to follow what is happening in cities at once, fragmented governance architectures may also enable new forms of city building (co-operatives, co-production, etc) which were not previously easily implemented due to the rigid governance networks. A good example of this ‘enabling’ policy environment that fragmented governance architectures support is the creation of a new Environment and Planning Act (Omgevingswet) in the Netherlands. Within this framework, new research is needed to look deeper into the dynamics of entrepreneurial governance through divergent actor structures and mismatches of policy objectives, professional principles, and political agendas within the public sector, rather than single-mindedly blaming the private-sector actors and their greedy, profit-oriented actions for the ongoing housing crises in metropolitan cities like Amsterdam.

Many new ideas have emerged about how the public sector should act in this entrepreneurial governance model. Some scholarly literature suggests that governments be reimagined as ‘creative agents’ as ‘the state has not just fixed markets, but actively created them’ (Mazzucato, 2011). Some popular liberal media outlets, such as The Economist (16 January 2020), advocate for ‘flexible planning systems’ and ‘financial regulation to turn housing into a force for social and economic stability’, raising expectations for new entrepreneurial governance approaches. Although we cannot foresee the shape of state, market, and citizen relations after the 2020 coronavirus outbreak, governance architectures might make a sharp turn to enable more welfarist public-sector interventions.

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