Even a cursory look at the state of housing in London instantly shows that something is profoundly wrong. Rents outside the social sector are racing ahead, up 17% last year. House prices defy the laws of gravity, up 5% despite national economic trends.
And the really scandalous thing is that it has been this way under both Mayors of London, with no sign of any fundamental change. That’s why I’ve been arguing we must focus above all else on getting the supply increased. Without that, solving the affordability question gets harder and harder: ever-rising housing and land costs means ever bigger subsidies per property and fewer and fewer made available.
In the news last week, the G15 group of large housing associations published a study by the London School of Economics, making a powerful case for investment of public subsidy in London. I agree, but that’s fighting over a shrinking national pot of money – which even Mr spend-spend-spend Balls isn’t promising to increase.
The only way out is to turn what is London’s big problem – the overheating market – into an opportunity by making it possible for private investment into building of all types.
Two other stories in the news last week show this really is viable. The charitable Wellcome Trust is reported be offering £1 billion for the Olympic Village and adjacent land. They can clearly see the opportunity.
Meanwhile the housing association, Places for People, successfully raised £140 million in a retail bond on the stock exchange – open to individual Londoners as well as institutional investors.
And when the Homes and Community Agency launched its private rented sector initiative at the height of the financial crisis back in 2009, it still had 64 formal expressions of interest – and said £5 billion of investment and 60,000 new homes was a viable outcome.
Let’s go back to economic first principles. London is growing, with approaching a million more people expected to be living here by 2030. Demand is already high, with 360,000 families left languishing on council waiting lists. Over 220,000 households are overcrowded, the highest rate in the country.
The land is there, much of it in public ownership and coming under the direct control of the Mayor of London. The snappily-named London Strategic Housing Land Availability Assessment and Housing Capacity Study says there is capacity in London boroughs for at least 360,000 homes over next ten years.
The Mayor already has strategic planning powers and a duty to prepare the London housing strategy. The Localism Bill in Parliament is removing the section in the Greater London Authority Act 1999 that currently prevents the GLA from direct housing building. The bill also grants new powers for CPOs and setting up mayoral development corporations.
In short, aside from lack of mayoral drive, the missing link is the funding, which is why I’ve been so critical of the current London Mayor for not setting up the long-promised London Housing Company to capitalise on the proven interest in the City.
So when the Mayor’s own cross-party housing taskforce estimates that £35 billion of private investment is needed, I say: let’s have a Mayor of London with the ambition to make it happen.