Last month house prices in London rose by 10 per cent – yes you read that correctly. Yet affordable homes, not over-inflated house prices, are what we need.
For an overseas investor in London’s housing market – and there are many – the price rises are wonderful news. They will be equally welcome by someone who has cleared their mortgage and is looking to sell up and move out of the capital. However, for most people who live in the capital or plan to move to the capital, such price rises are far from welcome.
It is not sustainable for people to ‘earn’ far more from rising house prices than working. As Vince Cable has rightly said these soaring house prices in London as “dangerous and unsustainable”. Vince is also right to express his misgivings about the Help to Buy scheme, which will almost certainly contribute to the over-inflated housing market in London and the South East.
Where government action really is needed is tackling the massive shortage of affordable homes. Such a shortage comes with a huge social and economic price. In London, 41,000 households live in emergency temporary housing. One in four of the capital’s children live in overcrowded homes.
Then there are the economic costs. As property prices have risen so have rents, leading to a rapid growth in the housing benefit bill picked up by the taxpayer.
Soaring house prices and ridiculously high private rents are also bad news for employers seeking to expand and recruit. The Confederation of British Industry found that over 70% of London’s business community consider the lack of affordable housing as one of the most important constraints on business (report PDF).
So what needs to be done? In London we urgently need to start building affordable homes in significantly higher numbers.
The Mayor of London has an aim to build 55,000 affordable homes by 2015. However he is seriously underperforming even on this very modest target, with just 737 affordable homes begun in the first 5 months of this financial year.
In our report published this week, the Liberal Democrats at City Hall propose a series of measures to turn around this situation. We advocate that the Mayor doubles his investment in affordable homes by borrowing against the Greater London Authority’s £11.2bn annual revenue budget under prudential borrowing rules. The Mayor should also use most, if not all, GLA-owned land for affordable homes.
We also believe the government should scrap the Housing Revenue Account borrowing cap, enabling the London boroughs to invest in affordable housing under prudential borrowing rules. At a national level, we also want to see the Government increase its investment in affordable homes, shifting the balance of its spending from housing benefit to bricks and mortar.
If fully implemented these proposals would deliver an additional 270,000 affordable homes in London by 2018. The measures would have an immense stimulus effect on the construction industry and the wider economy.
When the construction industry has so much spare capacity and finance is cheap there is now a golden opportunity to address the 35 years of failure to build enough affordable homes.
Affordable homes, not over-inflated house prices, are what we need.
* Cllr Stephen Knight is a member of the London Assembly and a councillor in Richmond.
Follow @libdemvoice.org on Bluesky
Like us on Facebook
Subscribe to our feed
Sign-up for our daily email digest
Have resignations led to a rethink?
High Fell leaflet watch (2)
No, Leave didn't win the Brexit referendum because of Northern working class voters
Two new Makerfield by-election polls gives Burnham 5 and 12 point leads
Paul Fox
Andrew Tampion
Geoffrey Payne
Richard Whelan
David Raw
7 Comments
ah, but on the plus side some people are doing very well. This house alone is half the money the Govt recons it will save from the housing benefits cuts
http://www.dailymail.co.uk/news/article-2474927/Phones-4U-boss-John-Caudwell-turn-2-Mayfair-mansions-250m-home.html
Affordable homes, not over-inflated house prices, are what we need.
Amen to that. This is an excellent proposal and I wish Stephen and Caroline every success in promoting it.
In the face of the 10% month-on-month increase in house prices in London (also reported in The Evening Standard earlier this week) would Mr. Clegg and Mr. Alexander like to reconsider their Autumn conference statement that “we are a million miles from a housing bubble”?
‘Paul in Twickenham
“In the face of the 10% month-on-month increase in house prices in London (also reported in The Evening Standard earlier this week) …”
Just to point out that a “10% month-on-month increase in house prices” means that house prices would be more than TREBLED in a year’s time. Now that would be a housing bubble.
Is that what you believe will happen?
Simon Shaw
I don’t want to speak for Paul but it seems you are making a false extrapolation of what he said – not for the first time
He pointed out that there has been a reported 10% month on month increase in house prices – whether this is the case depends on your confidence in the media but it is clear there is rapid house price growth in the South which may be feeding into the current growth we see.
I don’t think anyone is predicting a trebling of house prices is a dear – but what we do seem to have is another growth spurt being fuelled by house price increases which is neither sustainable or desirable.
Do you not think that house prices in London and the South East are growing at a rate that is undesirable?
One of the main causes of house price inflation in London is quantitative easing and 0.5% interest rates. Increasing them might lead to some repossessions, but the alternative is inflation squeezing benefits and increasing rents. We need to get back to having a sustainable monetary policy, which is what I wrote to the manifesto working group about today.
@Simon Shaw – according to Zoopla, my property in Twickenham (of which I have the good fortune to be the outright owner) has during the last 12 months increased in value by slightly more than my net salary – and I work in The City. As reported in the Evening Standard story linked above, in the five weeks from September 8th to October 12th, the average asking price in London rose by 10.2% – equal to an increase of £50,484 in that one month.
And the market now seems to be in the same place as in 2007 – sealed bids, gazumping, over-extended buyers… the difference is that in July 2007 the base rate was 5.75%. It is now 0.5%. Being an over-extended borrower in 2013 is a great deal more dangerous than being in that situation back when interest rates were not being kept artificially low.
As Dr. Cable rightly says in the link from this article: “What is happening is not just that house prices are rising, they are accelerating and that clearly is dangerous and unsustainable”.
I just wonder if the very reason for accelerating house prices in London at this moment in time, has been missed.?
Insolvent banks (of which there are many around the world), had to be BAILED OUT in 2008.
That obviously, couldn’t continue, and the new method is a BAIL IN, i.e. bank depositors skimmed for their money instead of the taxpayer. Cyprus was the template for that new bail IN mechanism. Folks who thought they had over 100,000 Euros in the bank found the bank doors closed on Friday night, and when they re-opened two weeks later, their accounts were some 60% lighter off everything over 100,000 Euros in their account. So, “…MONEY…”, got scared, and realised it would have to find a new, (and more secure home), but there is no secure home for digital 1’ns and 0 zero’s in any bank account, now that Cyprus has led the depositor, ‘bail in’ way. The only security for ‘money’, is hard assets,…..of which London property is just one.
Once you understand the problem, you can conclude that ‘affordable housing in London’, is an oxymoron.