Brian Paddick writes: Housing is the most important issue facing London

When I told the BBC’s John Sopel, minutes after the result of the last London Mayoral election was announced, that my second preference vote had gone to the ‘Left List’ candidate Lindsey German, he would not believe me. There were many of her policies I did not agree with but her party was passionate about building more social housing in London. In every debate during the campaign I found myself in agreement with her and disagreeing with the other candidates on that issue.

I believe housing is the single most important issue facing London and this is why.

Quite rightly a priority of the Lib Dems in government has been the pupil premium, to give extra help towards the education of disadvantaged children. Yet if those children do not have a decent place to live, the ability to sit quietly and read or do their homework away from their siblings, they will continue to lag behind their more affluent schoolmates.

If teenagers do not have a decent place to live, they are more likely to be on the streets when they should be at home, potentially being drawn into gangs and anti-social behaviour.

If parents and children do not have a decent place to live, they are more likely to suffer health inequalities. If adults do not have a decent place to live, they are more likely to say, “What has society done for us?” “Why should we obey the law, pay taxes, vote in elections?”

I’m lucky. I have a decent home. My flat in Vauxhall has been on the market for three months as I move into a slightly bigger London base. With one exception, everyone who viewed the flat has been an investor, mainly from overseas, looking for a bargain in a difficult market. A neighbour really wants to buy my flat. He can get a mortgage but he cannot afford the ridiculously large deposit now demanded by banks – it’s a common problem.

The media are talking about a generation that will not be able to afford to buy their own homes. First time buyers are frozen out of the housing market while investors ensure London property prices continue to rise.

That’s why I believe the absolute priority for the Mayor is to do everything in his power to get more decent homes built that can be rented at low cost. Making ‘building for sale’ a priority is not the answer in the current economic climate.

There is a lot of land under the Mayor’s control, mainly Transport for London land that can be used to build such homes. With the most expensive element of building in London, the land, available to developers at little or no cost, even commercial investors, those who would otherwise invest in yet another Westfield-like Shopping Centre, could still make their profits and give Londoners decent homes at genuinely affordable rents.

I was talking to a friend who is involved in a housing association. He told me of a scheme where some local authorities have entered into a contract with social landlords. The council guarantee to pay the housing benefit for, say, six tenants to the housing association for a minimum of 10 years. The social landlord goes to the bank with this guaranteed income and gets a mortgage to buy and renovate a derelict home. A disused home is brought back into occupation, six families are taken off the waiting list and after 10 years, the housing association has paid off the mortgage and can continue to rent the property at genuinely affordable rents. I am sure there are many other ways to resolve this problem.

The dream of a property-owning democracy is a good one but investors will always distort the London market and most Londoners simply cannot afford to buy. That means the priority must be to build decent, genuinely affordable homes for rent. Not creating sink estates exclusively for those on the lowest incomes, but building developments where young professionals live alongside those unable to work – in vibrant, mixed communities. And if people are happy to live in these homes, maybe that could take some of the heat out of both the rental and homes for sale markets in London.

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22 Comments

  • Andrew Duffield 14th Jul '11 - 12:08pm

    “With the most expensive element of building in London, the land, available to developers at little or no cost, even commercial investors, those who would otherwise invest in yet another Westfield-like Shopping Centre, could still make their profits and give Londoners decent homes at genuinely affordable rents.”

    …provided that the land stays in public ownership. In the continuing absence of a tax to recycle land values, any other arrangement would simply transfer community created wealth to private pockets on an ongoing basis. Of course, with LVT there almost certainly wouldn’t be any idle development land or any empty properties – or any housing crisis for that matter.

    What about pushing that as the sustainable Liberal solution Brian?

  • “When I told the BBC’s John Sopel, minutes after the result of the last London Mayoral election was announced, that my second preference vote had gone to the ‘Left List’ candidate Lindsey German, he would not believe me.”

    That was naive at the time and ridiculous to repeat now.

    Socialism won’t solve London’s housing problems. And 6 families off the housing register is just a drop in the ocean.

    Sigh

  • The only way to solve London’s (and the UK’s) housing problems is to increase the costs incurred by landlords, so that house prices will have to fall to make yields viable (given that rents are determined by the tenants’ ability to pay, so the landlords’ increased costs cannot be passed on to them). Anything else is just pie in the sky thinking.

  • Brian Paddick 14th Jul '11 - 2:12pm

    Good points Andrew. I understand the advantages of Land Value Tax but I do not think it is within the power of the Mayor to implement such a radical change. What the Mayor (and the Mayoral candidates through the arguments they put forward during the inter-party campaign) can influence is obviously much wider. I would welcome the chance to discuss with the existing and prospective Assembly members whether LDV should be part of the Team London manifesto for 2012.

    Jim. As is blatantly obvious from what I have said, I am not a socialist and I did not say that socialism is the answer to London’s housing problems. I will let others decide which one of us is ‘naive’ and ‘ridiculous’.

  • Ridiculous. Police corruption is the most important issue facing London. It’s vital that some action be taken to stamp out the taking of bribes. Immediately.

  • Brian Paddick 14th Jul '11 - 2:43pm

    Chris action is being taken and, by the way, it is not the Mayor that has to take it.

  • “Brian’s suggestion is a very good one.”

    The suggestion to give land to developers at a discount is a dreadful idea and will perpetuate the housing misery of Londoners by artificially sustaining inflated land values. Why should publically owned assets be given away at a knocked down price to developers? All it is is a transfer of public wealth to the developers – the very same developers that were responsible for inflating land and house prices by taking out ever bigger loans. As if bailing the rotten debtors out with ultra low interest rates wasn’t bad enough, Mr Paddick appears to want to give them free money as well.

  • Mr Paddick,
    I’m prepared to wager that the reason the first-time buyer can’t buy afford to buy your flat is because the ‘price’ you’ve put on it is higher in real terms than the price you paid for it? If so, the reason they can’t buy it is because you were gifted ultra low interest rates on your mortgage (which is enabling the inefficient hoarding of property for speculation based on artificial scarcity). When you say the speculartors (or investors as you strangely refer to them) are looking for a bargain, I presume that your opinion is informed by your own idea that property prices are likely to continue rising? Such an opinion is, pure (and in my opinion very badly informed) speculation.

    As a rule of thumb, multiply the gross rental value of your flat by 10 and that will give you the long term sustainable value of your flat. If you are trying to sell it for more than that then you are guilty of economic rent-seeking – trying to gain profit from someone else’s labour.

  • Brian – LVT not LDV?

  • LondonLiberal 14th Jul '11 - 6:39pm

    you are right about the importance of housing in london brian, for all the social ‘externality’ reasons you list. good luck in the contest – it will be interesting to see who of you and Mike can command the upper hand in the housing debate – a plea though. In the absence of NAHP grant, housing isn’t about promising numbers as no one will believe you. you need to come to the table with a bag full of interesting ideas, like the RSL one you mention in your article.

  • Brian Paddick 14th Jul '11 - 9:49pm

    Jones – thanks for pointing out the typo. I did mean LVT!

  • Brian Paddick 15th Jul '11 - 9:34am

    Thanks Dan

  • @Chris, ridiculous, clearly spoken from a place of great privilege. Most people on low incomes in London are far more worried about how to keep a decent roof over their heads.

  • Alec, Brian appears to be suggesting that the scheme is used for housing associations, who if renting at social rents would not need to lower rents to obtain value for money for the state. It’s not a scheme that helps buy to let investors expand their portfolios, it’s intended to increase social housing stock. Over-time it is probably cheaper to bring a derelict house into the social sector rather than paying via HB for those families to be housed in the private rented sector, where market forces mean that rents are high and will remain so.

  • I question whether housing is the single most important issue facing London. I suspect that the clamour about housing is actually being caused by more fundamental issues, which aren’t so easily articulated or resolved and certainly don’t make sound bites suitable for political grandstanding.

    Fundamentally, ‘London’ needs to maintain its status as a wealth producer for the UK, this by its very nature will attract people to the ‘bright lights’. Whilst this is happening it doesn’t really matter what the propery ownership model is, and the amount of housing built, demand will outstrip supply (remember we have been building houses in London for hundreds of years and there still isn’t enough!). Hence a rationing system of some form is necessary, this can be left to market forces or be imposed by ‘the powers that be’.

    The only real housing issue that London has, is as you point out, almost as an aside, is that the current London housing market does not cater at all well to that large group of people who are too well off to qualify for council/social housing but are too poor to be able to afford to rent or buy. I was in that group once; I moved out and commuted in, needless to say I haven’t looked back, particularly as my children can safely play outside and walk to a school which doesn’t have any of the usual inner-city problems …

    I think a more important issue than building more houses is to get the existing housing stock up to standard, this can very easily be achieved by removing the government subsidy on new build, namely charge VAT on new build and give social enterprises (specficially CIC’s) the ability to reclaim VAT on the property renovations.

  • Brian Paddick 17th Jul '11 - 1:19am

    Alec, the difficulty I have with your arguments is that they are not based on the facts that I set out. You have no idea what my property is on the market for or what the financing arrangements were for buying it, so you make them up. Not that it is any business of yours but if it were to sell it at the asking price, I would just about break-even and I have never had mortgage on the property, at reduced interest rates or otherwise. I clearly stated that the scheme of guaranteed housing benefit payments was for housing associations i.e. social landlords, not for ‘buy to let’ investors and yet you argue that I am guaranteeing housing benefit payments to those who are in it for profit. And by the way, Lindsey German was not a solely SWP candidate and has subsequently disslocaited herself from the SWP.

    What we need in a Mayoral candidate is someone who will not take any nonsense from those who falsely accuse and fabricate evidence. And if you believe that I should allow anyone to call me ‘naive’ and ‘ridiculous’ without a robust response, you are asking for a Mayoral candidate who will also be walked-over by Livingstone and Johnson. Alec, I am not weird or nasty but I am no walkover.

    Roland, I agree in part. I did outline a scheme where derelict homes can be brought back into use as well as one for new build. However, if we can significantly increase the amount of social housing and control the rents of those homes for the benefit of, for example, essential but lower paid workers such a nurses and teachers, then the inexorable rise in private sector rents that result from London’s increasing expansion, will not affect at least part of London’s population. I understand people moving out of London and commuting in, but I want to try to create a city where people who cannot afford the transport costs or who do not want to move out of London can bring up their children safely, and for them to be well educated, within London. Apart from anything else, the environmental impact of increasing numbers of people commuting ever increasing distances is undesirable and the effect on family life (more time commuting, less time with the children) is also not cost-neutral, despite the potentially safer neighbourhood. Unfortunately, those working shifts, like nurses, those in the police and fire services, cannot rely on public transport to commute beyond the reach of the night bus network, requiring them either to travel by car or live in the city. We have to provide housing for such people as close to their work as possible.

  • I agree that the lack of affordable housing is London’s number one problem. The best way to remedy this would be to significantly relax planning restrictions, e.g., by allowing the building of houses in parts of the green belt around London. The fact that houses have not been built there since the early 1930s does not mean they can never be. Building a large number of houses (say one million) in the green belt would solve a number of problems at one go:
    – reduce house prices generally in the London area, enabling many first time buyers and young people to buy houses (prices would be reduced everywhere in London, not just in the newly built areas)
    – provide work for everyone involved in construction
    – add to economic growth at a time when this is very badly needed.
    This is not quite as extreme a suggestion as you may think – even the OECD recommended recently that the UK government should give serious consideration to it.
    Unfortunately it is very unlikely to happen, because existing home owners in London would do absolutely anything to prevent a policy being adopted which would reduce the value of their house or flat. Tampering with the green belt is almost enough to get one committed!

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