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.
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42 Comments
With one short article you’ve taken my vote from Paddick.
Housing is THE issue, the elephant in the room.
I look forward to seeing if Lembit can stop thinking about himself for two minutes to put his thoughts on housing on paper…
Brian’s view, too, should be interesting.
Can we have an e-hustings on LDV at some point?
Sigh, more supply-side fantasy nonsense. Which comes down to, yes, Mr and Mrs Bloggs, you can have great and affordable housing, wonderful community facilities, great health clinics, tremendous playgrounds, excellent libraries and swimming pools and parks, yes, indeed, all of that. Just so long as someone can come along and figure out a way to make a buck out of it. If that doesn’t happen, well, you’ll just have to shuffle off to your hovels and get on with it, as quietly and invisibly as possible.
THAT is the message at the core of the neoliberal supply side mirage.
Okay, you Cleggite market mechanism booster, on your marks, get set – go!
Housing policy as a whole seems to have been money trees for the boomer generation, serfdom for everyone else. Until someone points out to the boomer generation that their housing wealth is three generations’ poverty we will get nowhere.
As it stands, the general response from the Coalition seems to be that people should look to rent, ‘like they do on the continent.’ I can only assume that the people advocating this route have never actually lived in a buy-to-let or had dealings with a buy-to-let landlord. Turn the clock back to before the 1989 reforms and we might get somewhere with rents, though it is not a panacea. Certainly you don’t want to be paying rent in retirement.
But you will never get it past the boomers.
“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.”
Nice to see someone addressing the housing issue. However, the huge rise in house prices over the last decade were almost entirely driven by the demand side in the form of easy credit. Also, land prices go up as a result of subsidies. You’re putting the horse before the cart.
New housing is welcome, but the real issue is on the demand side. If you want lower house prices then stick a lending limit of x3 salary on all mortgages, raise interest rates (which will make BTL less favourable than putting spare money in a bank account) and most importantly: regulate the disgraceul behaviour of slum landlords who fleece the state through housing benefit – make them provide a service that actually involves providing good quality accommodation. This is not just socially beneficial in providing decent social housing, but by pushing up landlord’s costs, house prices will fall (until yields become viable) as they cannot economically pass the costs onto tenants. Thus, first-time buyers will be able to compete against BTLers.
A land value tax would be best though.
The underlying problem is the decades-long net migration to London and the South East from the rest of the country. Everything from housing to roads to water supply is under increasing strain. Perhaps the best solution is to reverse this migration. Many institutions of the UK have an inbuilt London-centric bias. Government, Industry, the Arts, even lottery grants. If the country’s jobs and cultural assets were more evenly spread across the UK, there would be less migration to the capital. We can all point to token efforts to relieve the situation but a much bigger shift is needed to have enough effect.
Mike Tuffrey’s proposals are blatantly unsustainable and are simply a case of ‘doing more of the same’. If implemented, his plans would lead to further population growth in London and then further demand for housing. We would be (indeed, are) trapped in a vicious cycle of spiralling population growth, resource depletion and environmental degradation. In the last few decades we learnt that naively building more roads does not reduce traffic congestion, on the contrary, it simply encourages more cars and more road-use. Clearly, this lesson still needs to be learnt in other areas.
He writes, “we must focus above all else on getting the supply increased.” – NO, we must focus above all else on getting the demand decreased. This is the responsible and only genuinely sustainable approach.
Mike Tuffrey adds, “London is growing, with approaching a million more people expected to be living here by 2030.” This is precisely the problem! Yes, provide more housing for the existing population but this MUST be accompanied by policies to curb further population growth and make sure that this prediction of “a million more people … by 2030” does not become reality.
The UK as a whole is grossly overpopulated – now one of the most densely populated and overcrowded countries in the world, which is causing continued environmental degradation, resource depletion, dependence on imported food and energy, biodiversity loss and reduction in quality of life. A responsible government or political party would acknowledge this fact and make stopping further population growth the number one priority.
Colin Green – There is a perception that he vast bulk of public jobs are in London, but it is not nearly as true as you might think it is. See here for example. My feeling is that if anything more jobs have moved out of London since this.
http://www.hm-treasury.gov.uk/d/lyons_annexa.pdf
What you are talking about is the decline of mass-industry with mass employment on production lines around the country. I am open to the argument that we should not ‘fetishise’ old methods of production and that there should not necessarily be an aversion to new ways of working such as smaller operations. But absent local economies with actual jobs people will move to where employment is. It is not, to my mind, some great migration – just rational behaviour.
@Terry
Er, many countries are ahead of the UK in terms of population density. It’s very wrong to state we’re one of the most overcrowded. It’s an opinion, and the facts don’t agree with it.
When running for London Mayor, you’re dealing with London, not the whole country. To criticise Mike for working on a solution for London that London can act on, is rather inane.
I’m certainly more and more impressed with Mike.
THIS
@Colin Green
London actually sees more people leaving than entering from within the UK: http://twitpic.com/5mgctc
@ Rich
“@Terry
Er, many countries are ahead of the UK in terms of population density. It’s very wrong to state we’re one of the most overcrowded. It’s an opinion, and the facts don’t agree with it.”
You have got it totally wrong. The problem is not with the UK, it is with England, which taken alone is creaking at the seams with its population density and has more than 80% of the population in half of the UK land mass.
The problem is net migration. Having grown up in an already multiracial London I am used to living with many other races, but the problem of excessive and massive immigration is the elephant in the room behind London’s housing problem.
Before anyone starts shouting me down as being a racist, in some parts of London, four out of five children do not have English as their mother tongue and 75% of births are to mothers who were not born in the UK. London has ceased to be a British city within the past 15 years and until we solve this problem – not quite sure how given the ostrich like attitude of many people who STILL refuse to recognise the severity of the situation – we will not have a chance of resolving any of the others faced by our capital city.
@ Duncan Stott
Thank you for that link:
http://twitpic.com/5mgctc
These figures conclusively show that there has been a massive outflow of UK born people from London. Since London’s population is rising, there must be an even greater inflow from outside the UK. This is the problem we are facing.
@ Duncan Stott
Thanks for the link. Your graph shows the last 4 years. What about the last 4 decades? It’s good that the trend is reversing but it needs to continue to have a lasting effect.
@R C
Odd, I was sure it was the UK we were talking about, not England. Perhaps read the post I replied to first?
The end of your post rather fits the stereotypical “I’m not a racist, but…”
I trust all the people complaining about lack of action on the demand side will be entirely behind HS2, as that will allow London’s catchment area to expand without putting additional pressure on its infrastructure. Unless they have a regional development model that doesn’t involve vast amounts of taxpayers’ money that they’re not telling us about.
Adam Bell – HS2 is an excellent idea. If anything, I’d go a step further and start looking at which parts of green-belt land to put houses on. And if that means the BANANAs having their planning objections ignored, then so be it.
Mike – excellent article. of course we should make more use of land already in public ownership.
London has been and continues to be a booming economy generating wealth on a huge scale large amounts of which is then distributed to the rest of the UK . While this continues it will be an atteractive destination to people from other parts of the UK and the EU to work and invest. Your ideas will help ensure proper housing for people who live here.
If it was credit availability that led to London’s housing problems, then all of the UK would have the same problem. It doesn’t, because credit is not the main issue.
The issue is more people wanting to live here, because the economy offers jobs, and little house building in response. Mike can’t do much about the former, but does want to address the latter. That seems a good thing to do. What is less clear is HOW he is going to do it. Where is the land over which has control? What control does he have? How will he get houses built?
(The evidence on HS2, incidentally, is that it will pull more jobs to London, not disperse them, and HS2 will be too costly for commuters, and is city centre-city centre, not small town/suburb to city centre. You can spread people around the SE more by upgrading existing lines, but HS2 won’t achieve this)
@Tim Leunig
“If it was credit availability that led to London’s housing problems, then all of the UK would have the same problem. It doesn’t, because credit is not the main issue.”
The rest of the UK does have the same problem that London has – i.e. houses are overpriced relative to incomes and rents (yields) thanks to the credit bubble the housing bubble was directly correlated with. Some areas of London have lower house price to earnings ratios than the national average:
http://www.mouseprice.com/area-guide/price-earnings-ratio/SW16/Lambeth
I fin it incredible that anyone can think that the UK as a whole does not have a profound problem with the affordability of housing. Prices rose in many areas of the Country by 150%-200% between 2000 and 2007. These areas typically have had no net immigration, yet prices rose steeply at the same time the banks lent recklessly. Thanks to base rates slashing, prices have not (yet) fallen to economic equilibrium.
@tim leunig:
Source? I don’t dispute the costly bit, but the jobs bit is interesting. HS2 doesn’t spread people around the SE, but it might spread them round the rest of the country.
The best way to persuade employers not to locate in London is to not build any more houses there. The smart employers will realise they can move elsewhere and are more likely to attract employees with the increased standard of living offered outside the capital.
At last a Lib Dem, and a London Lib Dem, emphasising the need to build lots more houses. There is an overwhelming economic and social case for building far more homes, which so often gets drowned out by nimbyists and the economically illiterate. The more I hear from Mike Tuffrey and his campaign the more impressed I am.
@Simon McGrath
“London has been and continues to be a booming economy generating wealth on a huge scale large amounts of which is then distributed to the rest of the UK .”
This is what you meant to write:
“London continues to skim wealth from the productive economy in the rest of the UK and, as such, is a magnet for spivs, speculators and corporate monopolists”
@Paul Pettinger
“economically illiterate.””
It’s the economically illiterate that think high house prices were caused by a shortage of supply.
Surely it is possible to support measures on both the supply side and the demand side?
Mike’s proposals make a lot of snese to me – particularly if they result in more affordable housing being provided by housing associations which generally make for better landlords than a lot in the private sector.
@Tim – surely the cost of housing did rise across the whole country? It may remain higher in london but it rose everywhere.
@ Rich
“The end of your post rather fits the stereotypical “I’m not a racist, but…””
Would it be better if someone responded to the points I made with some facts or reasoned argument rather than a simplistic slur?
No one really gives a toss R C – you’ve come to the wrong place.
Great article, Mike. Well said. Like Jack Holroyde said first, you’ve taken my vote from Paddick with that article. You’re the first proper libdem to advocate a sensible housing policy for London. You should also say that there should be more public money for public housing in London, and argue the case for that, as well as institutional invesment in the private rented sector.
@ RC – as someone who have lived in london all my 35 years, you are quite right to state that it has become very, very multiracial in the last fifteen. i’ve noticed it more and more, and i have little truck with people who shout you down for merely stating a fact. It’s not very liberal to not even engage with the argument. I do think immigration is too high, and the lack of white people in swathes of the capital can sometimes be disorientating (anyone here been to south tottenham recently?). Immigration is naturally a factor in demand, but even if you removed all the immigrants from London we’d still have a housing crisis. The bottom line is that the presence of immigrants, about which the Mayor has no power anyway, is not an obviating reason for more housebuilding.
“I do think immigration is too high, and the lack of white people in swathes of the capital can sometimes be disorientating (anyone here been to south tottenham recently?). ”
Presumably it’s less disorientating for the non-white people?
Yes, London needs more houses to address the supply side but there is a demand side as well which must be addressed. It seems that some don’t want to do that.
There are many reasons for growing demand but the big one is certainly net migration. Arguments about relative population density (for England already among the highest in the world for a substantially-sized country) miss the larger point that we are already consuming far more than our per capita share of world resources.
In an era when much of the world was grindingly poor we could buy all we needed from others. Is this going to continue as China, India and others start to compete – and, on present form, increasingly out-compete us? Food and resource prices are currently at near record prices; the market is trying to tell us something but are we listening?
So, there’s an environmental dimension here that any number of new houses won’t solve.
Incidentally, Tim Leunig is right about HS2 pulling jobs into London rather than dispersing them. A better plan would be to build a ‘ring main’ HS2 around the Midlands to create a composite super city as an alternative to London.
@ LondonLiberal
Thank you for your reasoned posting. I too have lived in London for all my life apart from university – 40+ years – (I’m not sure if that is true of some of those commenting here.) and have seen drastic changes in its population recently. What is the point of discussing supply in isolation when it is rising demand that is the main driving factor? We can build all we like, yet at the current rate of population expansion, it will not be enough. Other factors also come into play, like for instance transport policy (we need to renationalise the railways ASAP and promote affordable commuting) and the Green Belt as well as regional policy.
I agree that there does seem to be scope for the mayor to be more active in promoting housing, but it needs to be according to high standards of construction and design and done with regard to the liveability of London. If we end up with too high a population density vs. green spaces, then quality of life, already a problem here, is likely to suffer further.
@Paul Pettinger
Where is your tolerance then? Not much in favour of freedom of speech, are you? You start using bad language and adopt an abusive manner simply because someone states facts that are inconvenient to your point of view.
To all those who say ‘reduce demand’ – how does one dampen demand for housing in London? Domestically, an effective regional policy might help somewhat, but that means big investment in infrastructure to tempt private industry rather than relocating public sector jobs (although that’s a start). You might also tax house sales somehow, but that would penalise people from London for wanting to live in their home city. You could argue that high prices are a form of market taxation, but that still penalises locals. the question is, how do you ensure a fair bite of the housing cherry for average income earners to get on the ladder when average house prices in london are 14 times average salary (and growing)?
@LondonLiberal
“To all those who say ‘reduce demand’ – how does one dampen demand for housing in London? ”
Enforce salary multiple limits on lenders
Tax buy-to-let
Introduce a land value tax
Enforce minimum standards for landlords that are letting to those on housing benefits
Remove the council tax allowance on vacant properties
Increase capital gains tax
Increase Base Rates
Put a capital gains tax on first homes
etc
Demand isn’t the number of people that desire something – it is a function of the willingness and financial ability of people to buy something.
Thanks everyone for thoughtful comments. I do believe we can use the coming election campaign to push the big issues out for debate and start the process of regaining trust at least among the section of the London electorate interested in a serious party with a frank assessment of the problems.
I can’t do justice to the wealth of comments here. On the demand side one issue is the 400,000 people already housed in London who are seeking working while the London economy continues to suck in more people. Part of that is a skills mismatch; part is low wages and temporary/part-time jobs. A topic for another piece soon.
A big part of supply is the private rented sector, and growing that into a secure and good quality option. Again a topic for another day, but for those really interested, do take a look at this fascinating session we had on Wednesday – a professor, two council leaders, and two mayoral advisers – getting this stuff right has the power to improve the lives of thousands of our fellow citizens. I’m on at 7 mins on how increased supply can improve standards and again at 1 hr 23 mins on rogue landlords and private investment http://www.london.gov.uk/sites/default/files/webcast_planning_060711_0.asx
@Mike Tuffrey
“A big part of supply is the private rented sector, and growing that into a secure and good quality option.”
How is that part of the supply? Those houses that are bought up by the private rented sector can’t then be used for people to buy and live in. That”s a reduction in supply (as far as homeownership is concerned).
Put up the costs for landlords and house prices will come down – then people can buy their own homes and they themselves will be in charge of making sure the accommodation is fit to live in. It’s not rocket science. There are 800,000 empty homes across the UK, with many in London. In addition, there are many houses that are used as second homes or are occupied by far less people than they were designed for. There is no shortage of housing in the UK (although I appreciate there are greater pressures in the South-East and more home-building would be welcome), but until we recognise that the cause is predominantly on the demand side then there is no hope of finding a solution to a problem that is crippling our economy.
R C – I was merely trying to manage your expectations. You will notice that there is no verifiable Lib Dem on this thread calling for less immigration. In fact I think the UK should welcome lots MORE immigrants from other countries, as it will benefit both those individuals and UK society as a whole. Mike T – you have also won my vote.
@ Paul Pettinger
Perhaps my earlier comment was too cryptic, so let me be a little clearer. Without strict limits on immigration house prices, particularly in London will continue to be unaffordable and their size will decrease however many new ones are built.
Have you ever been to Hong Kong? I was there very recently. Dynamic and exciting? Yes. A place I would wish to live? Absolutely not. The super rich can afford their gated enclaves, for the vast majority it’s tiny flats in closely spaced tower blocks. Is that the future you would wish for London?
Immmigrants have enriched our society but like most things in life there are also costs and some recognition of where these become unacceptably high is necessary.
Oh, and by the way, I am a founder member of the Lib Dems.
I still don’t know how to identify you Liberal Eye, despite you supplying us with a link to your blog.
On it you write:
“My political philosophy is that people should be trusted and given control of their own destiny wherever possible and hence that both political and economic power should be devolved as far as possible.”
If you really believe the above then surely you must also believe in the free movement of people?
@ Paul Pettinger
More immigration? Good luck selling that one…
Hate to break it to you LondonLiberal, but (if the figures are to believed) we are continuing to welcome lots more immigrants from outside the EU on an ongoing basis, despite the recession.
Paul, I meant ‘good luck’ selling that to people as a desirable thing! No doubt people are still arriving here – after all, the UK in recession is still a better economic bet than most of the rest of the world if you’re an ambitious individual. I disagree with you about the desirability of ever more people coming here, though.
“Free movement of people.
Yes, of course. But actions have consequences and free movment beyond a certain point, advantageous as it may be to the movers, starts to have adverse effects on others and the price and scarecity of housing, particularly in London, is a pretty massive adverse effect. Or are you suggesting that excess immigration has nothing to do with it?