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The Institution of Residential Investment in Seventeeth-Century London

In this Business History Review excerpt, William Baer explores how development of "pattern books" in the seventeenth century led to England's first speculative real estate market.


While the emergence of sophisticated accounting and double-entry bookkeeping techniques in the early modern era has been credited with helping to promote economic development, the real estate investment practices of seventeenth-century England, especially London, have not been as closely examined. Evidence suggests that methods of assessing real estate also underwent significant change. The seventeenth century saw the emergence of "pattern books," which revealed rules of thumb and strategic methods of calculating appropriate yields and value. Although not as technically perfected as double-entry bookkeeping at the time, these books acted as a catalyst for economic development. The origins of pattern books are obscure, but their introduction to the public in the mid-seventeenth century, and their widespread dissemination toward the end of the century, influenced the decisions of a variety of investors who shaped London's remarkable physical growth. 1

The seventeenth century was a fertile time for institutional innovation in London's real estate market. Over the course of the century, London witnessed plague, civil war, revolution, conflagration, and coup. Surging population growth—from about 130,000 in 1600 to perhaps over 550,000 in 1700—had turned the city into a metropolis. It was the seat of England's economic and political power. It is therefore not surprising that London saw the rise of England's first speculative real estate market. 2 Although only a small portion of the stock of housing (or its leases) might have been on the market at any one time, the number of houses in London and Westminster grew to more than 55,000 by the late seventeenth century. 3 Accommodating the growing population required entrepreneurial vision and skill, as those undertaking the task had to acquire building sites, mobilize money and credit, labor and materials, and frequently had to procure government license for new construction in the face of royal proclamations. 4 Such growth also required the ability to assess investment opportunities by rules common to both buyer and seller.

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The term "pattern books" was used generically for books covering a variety of specialized topics that were sold to the trades and the general public. These became quite popular in the seventeenth century and on into the eighteenth, and were part of a rapidly growing publishing industry. "Writings on trade, credit, agricultural improvements, and employment schemes" are examples of some economic and commercial topics covered by pattern books. The economic writings were fewer in number than titles on religion and politics (both of which were bitterly contested terrain in this era), but they were ultimately very important in shaping London's consciousness about, and understanding of, various markets.34 There was also a growing need for numeracy among the urban populace, during a time that saw a "proliferation of textbooks on commercial arithmetic"; an increasing replacement of Roman numerals by Arabic; and the "supersession of the counting-board or abacus by arithmetical calculations on paper." 35

The (pattern books) were uneven: explanations ranged from tedious detail to elliptic depictions.
— William Baer

Certain of the pattern books were primarily illustrative and descriptive, especially those on the architectural orders (Doric, Ionic, Corinthian, Roman, and Composite), on architectural designs and patterns, and on prices of labor and materials, because architecture was still largely the preserve of master craftsmen, not of the still nascent profession of architect. Beginning in the sixteenth century, such books had been primarily aimed at craftsmen and quantity surveyors, who were employed to measure the size of a construction after it was built. Other types of pattern books were more instructional and analytic, especially those on techniques of carpentry, measuring, surveying, building—and valuing. 36 All these topics, of course, emphasized the need for numeric skills in the world of business. 37

By the mid-1600s, a few of the pattern books also included ways to appraise the value of a property or the worth of a lease. These latter books were not just written for craftsmen. They were also directed to gentlemen who wanted to enhance their understanding of architectural styles and taste and also to improve their knowledge of financial affairs. 38 By this time, it had become evident to many of the "better sort" that there was a need to embrace new concepts in economics. With their increased presence in an ever more commercial London, the nobility and gentry had, according to one historian, "encountered a bewildering array of market forces that glorified self-interest, profit, and money." 39 Such forces required abilities acquired by learning mathematics rather than the rhetorical skills inculcated by the traditional gentleman's education in the classics. 40 The emergence of pattern books was both emblematic of this trend toward commerce and one of the ways that the upper classes might teach themselves about it, especially the time-value of money. Pattern books were just one of many types of books written at the time to explain economic principles. 41

Information on how to value leases and properties was helpful to literate individuals of any class in striking a bargain in the lease or sale of a house for personal use. The information was especially helpful to the growing class of professionals who increasingly managed the affairs of the aristocracy. 42 These professional readers engaged in steady buying and selling, letting, and leasing. They included scriveners seeking properties or their leases for investments; or members of the emerging profession of estate managers—lawyers and stewards as well as urban under-stewards, bailiffs, and others responsible for maximizing rents and estate yields. Not only was the matter of value and rent within the purview of such overseers, but so too were the details and general costs of construction, and this material was all covered in the pattern books. 43

Not that each book was a veritable encyclopedia of real estate practices and building. The works were uneven: Explanations ranged from tedious detail to elliptic depictions. Cross-checks between books were sometimes difficult. Moreover, the practices described and costs presented were not actual contracts signed nor actual costs incurred—they were only the author's amalgam of a range of practices and costs existent at the time. Yet, in some ways, the pattern books are more revealing than the few surviving examples of raw data from the actual contracts. 44

In some ways, the pattern books are more revealing than the few surviving examples of raw data from the actual contracts.
— William Baer

Two of the earliest books (Henry Phillips's The Purchaser's Pattern and Thomas Willford's The Scales of Commerce) were written during the Interregnum of the 1650s. Their observations reflected the considerable experience in buying, selling, leasing, and new building that had accumulated during the first half of the century. There are no direct data on building cycles, but we can surmise from the peaks in royal efforts to suppress new construction that there had been a building boom between 1613 and 1619, a lull during the London depression of the early 1620s, and another rise in construction lasting until the early 1640s (at which point civil war was in the offing). 45

The great majority of building prior to the second half of the century was still along traditional streets, alleys, and courts, and was undertaken by the "blue apron" classes and the "middling sort." Nevertheless, there were some notable exceptions. During the 1630s, Charles I, patron of the arts, encouraged the dissemination of the neoclassical style of the Italian architect Andrea Palladio. One extant example of this style is Covent Garden, designed for the Earl of Bedford by the King's Surveyor, Inigo Jones, who also introduced the London square. Another is Queen Street, built by William Newton, which became noteworthy for its architectural regularity. Such development was allowed under license and had to meet the building standards outlined by the proclamations. This licensed new construction was more uniform and regularized than buildings in Elizabethan times. 46 The beginnings of a more homogeneous and professional building style may have been a factor in the greater standardization of assessing lease values.

Preparations for London's defense at the outset of the Civil War in the early 1640s, the downturn in trade, and other difficulties reduced housing demand and drew off the building trades for constructing fortifications. By the Interregnum, however, housing construction had picked up again. 47 Legislation was passed by Oliver Cromwell's Protectorate parliament in 1657, but it did not seem to have had much effect on the real estate market. 48 Despite its title— A Bill for the Preventing of Multiplicity of Buildings in and about the Suburbs of London, or within Ten Miles thereof—and its recitals of the "annoyance of building," it was an outright revenue act, seeking one year's rent as a fine for any and all building contrary to law since 1621. A short section reiterated the core of the Stuart proclamations: all houses and cottages were henceforth to be built of brick or stone or both, and "straight up, without butting or jetting out" into streets or lanes. 49 Only 1 percent of the expected revenue was realized in the first year and not a great deal more subsequently. 50

The Civil War and early Interregnum largely proved to be a boon for the publishing industry, as government control over printing broke down. There was a flood of literature, including the pattern books examined here. Henry Phillips was one of the main authors of real estate pattern books. Six editions of his book, The Purchaser's Pattern, were eventually published-in 1663, 1654, 1656, and 1663, prior to the Great Fire, and then in 1667 and 1670.

We don't know Phillips's occupation, but his purpose was, as he stated, to "lift the veil of ignorance" about real estate:

Of all Bargains and Contracts among men, there are scarce any which deserve more serious consideration than the conveyance of Land or Houses.

For Bargains of this nature are usually of a long continuance, and many times of great consequence. Yet there is no affair wherein the most part of men are more subject to erre, and not only to deceive others, but many times their owne selves. 51

Excerpted with permission from "The Institution of Residential Investment in Seventeenth-Century London," Business History Review 76, Autumn 2002.

William C. Baer is an emeritus professor in the School of Policy, Planning, and Development, University of Southern California.

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Close Up: Rare Business Collection

The Kress Collection of Business and Economics held in Baker Library, Harvard Business School, includes many seventeenth-century pattern books including several which are shown in this article.

The Kress Collection is recognized as one of the premier rare book collections in the world. Included are rare books, pamphlets, broadsides, manuscripts, and prints ranging from the fifteenth through the twentieth centuries. Researchers will find not only the great classics of economic thought but also an extensive selection of ephemeral material that provides a historical context for the growth and dissemination of ideas.

Readers can learn more about the collection by visiting http://www.library.hbs.edu/hc/collections/kress

1. On accounting, see, for instance, Bruce G. Carruthers and Wendy Nelson Espeland, "Accounting for Rationality: Double-Entry Bookkeeping and the Rhetoric of Economic Rationality," American Journal of Sociology 97 (July 1991): 31-69, and references therein. "Pattern books" is a term loosely applied to a wide variety of publications largely, but not exclusively, "pertaining to architecture and the building trades: books on the five orders, pattern-books, books of designs, builders' manuals and textbooks, price books, books on building materials, architectural criticism, and polemical publications." Elizabeth Harris, British Architectural Books and Writers, 1556-1785 (Cambridge, 1990): 11-12. Even so, the books to be discussed here do not quite fit in any of the above categories.

2. For the variety of population estimates, see Vanessa Harding, "The Population of London, 1500-1700: Review of the Published Evidence," London Journal 15 (1990): 111-28, esp. 112, table 1.

3. Craig Spence, "Mapping London in the 1690s," in Storia and Multimedia, eds. Francesca Bocchi and Peter Denley (Bologna, 1994). Southwark and other parts south of the Thames were excluded from the calculations. If 2 percent of the housing stock was added each year (a general rule of thumb, but conservative for London's rate of growth), there would have been almost 1,000 new transactions annually (not counting the turnover in the existing stock and its leases, which might easily have doubled that number.

4. Paul L. Hughes and James F. Larkin, eds., Tudor Royal Proclamations (New Haven, 1969), 2: 466-8, and 3: 244-5; James F. Larkin and Paul L. Hughes, eds., Stuart Royal Proclamations (Oxford, 1973), 1: 47-8, 111-12, 171-5, 193-5, 267-71, 345-7, 398-400, 428-31, 485-8, and 597-8; James F. Larkin, ed., Stuart Royal Proclamations (Oxford 1983), 2:20-6, 280-7; R. Steele, ed., Tudor and Stuart Proclamations, 1485-1714 (Oxford, 1910), 1: 399, 429.

31. See Robert C. Allen, "The Price of Freehold Land and the Interest Rate in the Seventeenth and Eighteenth Centuries," Economic History Review, 2nd ser., 41 (Feb. 1988): 33-50; Christopher Clay, "The Price of Freehold Land in the Later Seventeenth and Eighteenth Centuries," Economic History Review, 2nd ser., 27 (May 1974): 173-89; and H. J. Habakkuk, "The Long-Term Rate of Interest and the Price of Land in the Seventeenth Century," Economic History Review, 2nd ser., 5 (1952): 26-45.

32. McKellar, Birth of London, 44-53.

33. Grassby, The Business Community of Seventeenth-Century England, and English Gentleman.

34. Joyce Oldham Appleby, Economic Thought and Ideology in Seventeenth-Century England (Princeton, 1978), 4-5.

35. Keith Thomas, "Numeracy in Early Modern England," Transactions of the Royal Historical Society, 5th ser., 37 (1987): 103.

36. Harris, British Architectural Books; David T. Yeomans, "Early Carpenters' Manuals, 1592-1820," Construction History 2 (1986): 13-28.

37. Susan E. Whyman, Sociability and Power in Late-Stuart England: The Cultural World of the Verneys,1660-1720 (Oxford, 1999): 41.

38. Sir Balthazar Gerbier, would-be successor to Inigo Jones as King's Surveyor prior to a falling-out at court, wrote Counsel and Advise to All Builders for the Choice of their Surveyors, Clarks of the Works, Bricklayers, Masons, Carpenters, and Other Workmen (London, 1663), in which he noted for gentlemen's benefit various ways that workmen tried to swindle their clients. Later, Richard Neve (City and Country Purchaser, i-xii) claimed that the second edition "were made as fit for Gentlemen's Use, as the former Edition was for Workmen" (italics in the original) and, in his preface, argued that building was more than "base mechanicks and handicrafts to be looked down upon, it was an art to be learned by gentlemen."

39. Whyman, Sociability and Power, 4. The interpretation of these values nevertheless still contained a strong streak of moralism, with social implications of the most practical bent. See Craig Muldrew, The Economy of Obligation: The Culture of Credit and Social Relations in Early Modern England (London, 1998), 273-4.

40. Keith, "Numeracy in Early Modern England," 109.

41. In the 1620s other economic books pertained to mercantilist principles of alliance between commerce and state; in the 1650s, freer trade; during the 1660s and 1670s, the role of interest rates; and in the 1690s, currency and protection; Whyman, Sociability and Power, 43.

42. As Keith points out in "Numeracy in Early Modern England" (pp. 107,112, 118), clients also had to understand these basics to evaluate the recommendations of professionals and catch damaging arithmetic errors.

43. Geoffrey Holmes, Augustan England: Professions, State and Society, 1680-1730 (London, 1982), 12-14; D. R. Hainsworth, "The Estate Steward," in The Professions in Early Modern England, ed. Wilford Prest (London, 1987), 154-80, esp.158,166. Whyman, Sociability and Power, 41; McKellar, Birth of London, 42, 52 (John Bland, working for Barbon, was variously described in lawsuits as an attorney, measurer, scrivener, and gentleman). See also Margaret Gay Davies, "Country Gentry and Payments to London," Economic History Review, 2nd ser., 24 (Feb. 1971): i6.

44. Much of the information on the authors presented here is from Harris, British Architectural Books. Phillips was not included in her survey. See also Nisbet, Proper Price, 2-5.

45. The estimate of building activity is based on the fluctuations in royal and Privy Council efforts to suppress it, as found in Acts of the Privy Council and State Papers, Domestic.

46. "William Harrison: The Manner of Building and Furniture of our Houses, 1587," in Seventeenth-Century England: A Changing Culture, vol. 1, Primary Sources, ed. Ann Hughes (Towata, N.J., 1981), 8: "[I]t is come to pass that the fronts of our streets have not been so uniform and orderly built as those of foreign cities."

47. Stephen Porter, "The Economic and Social Impact of the Civil War upon London," in London and the Civil War, ed. Stephen Porter (London, 1996), 175-204. He reports that there might have been a vacancy of as many as 12,000 houses in the mid-1640s, 191. R Malcolm Smuts, Culture and Power in England, 1585-1685 (New York, 1999), 139.

48. Commons Journal, 7: 504 (14 Mar. 1657). 515, 531 (8 May 1657) [second reading], 542 (30 May 1657) [Cromwell to have power to appoint its commissioners], 544, 554-5 [Possible amendments, including slight delay in its taking effect], 563-6 (19-20 June 1657) [Multiple amendments offered; some approved]. For the final wording, see C. S. Firth and R. S. Rait, eds., Acts and Ordinances of the Interregnum, 1642-1660 (London, 1911), 2: 1223-34.

49. Firth and Rait, Acts of Interregnum, 2: 1230-4.

50. Calendar of State Papers, Domestic, 1658-59, 80. Nicholas Barbon, the famed builder, claimed the tax yielded but "Twenty thousand Pounds clear of all charges, as appears by the records of the Exchequer," Nicholas Barbon, An Apology for the Builder (1685), 29.

51. Phillips, The Purchaser's Pattern, 4th ed. (1663), " To the reader," A3.