Crisis in the Capital

In January, the Evening Standard reported a recent poll, carried out by Ipsos MORI for London Councils, which revealed that four in five Londoners (82 per cent) agree there is a “housing crisis in London”.

It is little wonder when you consider the state of our capital’s housing.

London is unaffordable

House prices in the capital are 18.1 per cent higher than their pre-recession peak in January 2008. The average home was valued at £441,000 in November 2013, up from £393,000 a year previously. Average London rent for a two bed flat is now a whopping £1,495 a month.

Recent analysis by Savills suggests that the bulk of demand for homes in London comes from families with an income of less than £50,000. The upper end of this income band equates to homes available at a maximum cost of £280,000 to buy, or £1,200 month in rent for a two bed flat.

A pretty stark miss match.

Many London families will also need homes at lower costs than that. There is a significant gap between the rich and poor in London. The tenth of the population with the lowest income are left with less than £94 per week after housing costs. This compares to people in the highest tenth, who are left with over £1,000 per week.

To make things worse, London is unstable

A YouGov poll commissioned by Shelter revealed that over a third (36 per cent) of workers in the capital say they could not pay their rent or mortgage for more than a month if they lost their job. One in 56 households in London are at risk of mortgage or landlord possession – this compares to one in every 105 households nationally.

A quarter of a million of London’s families now rent their homes privately. Taking into account population growth, this is a staggering 119 per cent increase in the proportion of families renting in the capital since 2001.

Worryingly, the loss of an Assured Shorthold Tenancy is now the leading cause of homelessness. One third of London households accepted as homeless between July and September 2013 lost their home simply because their private landlord decided to stop letting it to them.

What are we doing to tackle this? The answer is: unfortunately not enough.

The number of affordable homes being built is extremely low. What is accelerating in London is the building of luxury flats at prices far above a level that ordinary Londoners can afford. In 2011-12 16,173 “affordable homes” were completed in London. This collapsed to 8,114 in 2012-13 and for the first half of 2013-14 is languishing at only at 1,490.

What does London need?

More affordable homes. The Draft London Housing Strategy has gone some way towards addressing these problems. It has a more ambitious vision to get homes built for the next generation than we’ve seen for many years. But it barely scratches the affordability surface.

In January 2014 the London Strategic Housing Market Assessment (SHMA) made an assessment of London’s housing need, which shows that the greatest need is for social homes. The SHMA recommended that 15,722 social and affordable rent homes should be built each year. Yet the Draft London Housing Strategy has only pledged to build 9000 affordable rent homes. While it is encouraging that half of these will be “capped” low affordable rent homes, London’s lower income households need far more new homes to be available to them.

The rest of Boris’s a £1 billion “affordable” home building budget is being allocated to building homes for rent or shared ownership  at prices beyond the reach of many ordinary Londoners. A balance needs to be struck, which recognises the need for a bigger and better middle market but also the desperate need for low rent homes.

In the meantime, private renting needs to become more stable. A Stable Rental Contract would give renters the stability and predictability they need to plan for the future: five years in their home where they could not be evicted without good reason, and during their tenancy rents could not rise above inflation. It was encouraging to see the Government call for new family-friendly tenancies in the private rented sector– but much more needs to be done to make this a genuine option. Stability and security would help London’s renting families to put down roots, and give them more confidence to demand the decent standard of property and service they are entitled to.

One Comment
  1. None of this is enough to get people in the “rent trap” into ownership in the London market. Even on a half-decent professional wage, if you don’t have property already, or very well-off parents, the ladder is almost certainly completely and utterly out of reach. Building those extra (scare-quotes) “affordable” homes won’t bring prices down!

    At the moment government effectivley subsidises the cost of second home ownership for buy-to-let landlords. We have to start actively discouraging this. Buy to let landlords are just getting fat off the rest of us as their mortgage serfs – they’re not inventors or entrepreneurs contributing anything to society or selling something people want: they’re holding what we want ransom! It’s not a business – they’re not doing anything but sitting on property, driving up prices. Why not remove tax breaks for home ownership, apply merciless rent caps, and actively tax the home barons punitively, sufficient to make buy-to-let essentially a waste of time.

    (This needn’t mean massive homelessness for the people that really do need to rent: there is a role for social housing providers for example, to provide good rent at proper rates.)

    I know this is utterly more radical than anyone is prepared to voice, especially the government, many of whom are buy-to-let landlords! (Again proving it’s not a business, doesn’t require your time and effort, you can be a politician at the same time! It’s just forcing the rest of us to rent to pay off your mortgage.) We need radical. As it stands we are producing two consecutive generations, huge numbers of which have little hope of ever gaining a foothold.

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