All posts tagged: London
A report out this week from Deloitte shows that London dominates more economic sectors than any other world capital. It leads the world in insurance, retail and investment banking, fund management, digital media, non-internet publishing, legal services, accounting, tax and payroll, architecture, engineering services, and management, scientific and technical consulting. London really is the world’s capital.
Yet the number of families being exported out of London has more than doubled over the past year, numberless thousands of poor people are living in beds in sheds, London house prices have soared by 9 percent over the past 12 months, the average private sector rent is £269 a week and the average London house costs £476,000. Millions of Londoners are spending up to half of their incomes on housing costs. The largely unregulated private rented sector has grown massively in recent years and a million people are on London’s waiting lists. London may be booming but the disparity between its economic wealth and its dysfunctional housing sector is stark, and it is going to get worse.
Meanwhile 75 percent of all newbuild properties and 49 percent of all properties in the £1 million plus bracket are being bought by foreigners. There is some debate about the impact this is having on London house prices, but developers, in attempting to capture this market, are providing too many upmarket properties at the expense of affordable homes. This latest report from Savils shows that the shortfall is greatest at the bottom end of the market with a glut of properties at the luxury end.
London’s new Community Infrastructure Levy, which will sit on top of the CIL set by the London boroughs (six boroughs have fixed their own CIL so far) is likely to squeeze the future provision of affordable housing even further. And even when affordable homes are provided can they truly be described as “affordable” when the average rent is £182 per week?
So the future for Londoners on low and middle incomes looks bleak. The big issue is, of course, supply. Only 18,000 homes were built in London last year (see Table 253) and a third were built by registered housing providers and councils. The Mayor has set a target of 400,000 homes over the next ten years, although Savils say that this needs to be upped to 50,000 homes a year - the equivalent of 18 Olympic villages every year. By 2030 there will be another 1.7 million people in London - and at an average current household size of 2.5 that means a need for an additional 680,000 homes. Spread this over 16 years and add in past deficits and the Savils’ estimate of 50,000 a year looks about right.
But London has fewer than 4,000 hectares of brownfield land and even if all of it was developed at relatively high densities (which would be a mistake) it would still leave a shortfall of up to 400,000 homes.
So what’s the answer? Assuming public funding stays where it is there are three structural solutions. One is to build upwards and achieve higher values. One hundred new tower blocks are already in the pipeline for London, mostly private schemes, but this only adds to the pressure on roads, tranpsort, schools and hospitals. Stories like this show that London’s infrastructure is creaking already. Another is to expand London’s footprint and build outwards, something I have advoctaed here and here. A third solution is a new generation of new towns to cream off some of London’s surplus population. The post-War Abercrombie plan of 1944 achieved this but it also caused considerable damage to London’s economy by exporting skilled workers. A subtle combination of all three options seems to me to be the best way forward.
As London’s housing withers its leaders dither. The Mayor produced a draft housing strategy nearly three years ago but it’s still not been published in its final form. Boris Johnson has to invest a great deal more energy into housing than he has of late because there is no bigger crisis facing London. When Harold Macmillan was appointed housing minister in 1951 he said the pledge to build 300,000 homes a year had to be treated as a “war job” and tackled “in the spirit of 1940″. If Boris wants to be become a future Prime Minister he could do well to follow the example of a former Premier and treat London’s housing crisis as if it was a “war job”.
It seems that David Cameron and Ed Miliband have both adopted “One Nation” as a key slogan for their parties. It was Benjamin Disraeli, of course, who coined “Two Nations” in his 1845 novel, Sybil, describing the rich and the poor, “between whom there is no intercourse and no sympathy; who are as ignorant of each other’s habits, thoughts, and feelings, as if they were dwellers in different zones, or inhabitants of different planets.”
The divide between rich and poor is possibly as wide as ever, but there is another manifestation of Two Nations that should be of equal concern to our politicians – the growing divide between London and the rest of the country.
Consider a few facts:
- The average London house price increased by nearly 10 percent in the past year. Prices in its wealthiest districts increased by 25 percent. Across the rest of the country house prices have been static or falling.
- Last year, 59 percent of buyers in the Prime Central London market came from overseas. For 37 percent of purchasers in the PCL their London property is not their primary residence.
- The total value of the UK’s housing stock is around £5 trillion and London accounts for 22.5 percent of it, even though it has only 12 percent of the country’s homes.
- The housing stock in the ten richest London boroughs is worth as much as the entire housing markets of Wales, Scotland and Northern Ireland put together.
- London has 4,224 multi-millionaires (individuals with net assets of £19m or more excluding their primary residences). But it also has some of the worst child poverty figures in England.
This has several consequences for London and the rest of the country. The first is that the upper classes are being squeezed out of their traditional neighbourhoods by foreign buyers, and this works its way down the pecking order, leaving the poorest increasingly unable to afford to live in London unless they are prepared to share squalid rooms at high rents, or lucky enough to get a social tenancy. (Whenever I go to London and see the thousands of low paid workers in sandwich bars and hotels (often from Eastern Europe) I ask myself, where do these people live? I have never seen an answer to that question. Does anyone know?)
Secondly, London’s population is growing, but supply has failed to keep up. London has a severe imbalance between affordable homes and jobs, so its commuter zone now stretches from the Isle of Wight to Yorkshire, and the numbers of people priced out of the housing market has soared. The numbers of people waiting for social housing is at an all time high, although the figures are now unreliable as many boroughs are restricting access to their lists.
These changes are also creating ghost districts in parts of London. I wrote a blog last year about a walk through the back streets from Kings Cross to the NHF office in Holborn. Even at weekends, these neighbourhoods are busy and bustling. Take the same walk through the back streets of Belgravia and Knightsbridge on any weekend and you will see few people. The streets and the houses are empty. The key difference is that 50 percent of Hoborn is social housing. In Belgravia it is close to zero and many of the homes have been bought by absentee owners. How can the neighbourhoods of any major city survive if properties are uninhabited?
London is a global capital and brings us a huge array of cultural and other benefits, but it is sucking in people and money from around the world to the extent that its housing market is now having an adverse impact upon the lives of millions of people. The city-state is starting to usurp the nation-state.
But what is to be done? There are no laws that force people to live in the properties they own. Even if council tax penalties were applied it would have little impact. The highest council tax in Westminster is a mere £1,360 per annum (a scandalous state of affairs). Increase this by a hundred-fold and it would barely register as loose change for the super rich.
The Smith Institute (named after John not Adam) highlighted these concerns in a report last year, describing the London housing market as dysfunctional, largely as a result of overseas investment. It called for a review of London’s housing strategy. It has reached the stage where London needs policies and laws that are different from those affecting the rest of the country. If politicians are serious about creating One Nation, they need to tackle the London problem as a matter of priority.
The government is pressing ahead with its plans to allow developers to convert offices into homes, by relaxing permitted development rights that will allow Class B1 (offices) to be converted to C3 (residential) without the need for planning permission.
It is London and the south-east where this move is likely to have the biggest potential impact because of the shortage of new homes and because residential values are significantly higher than office values. In the West End the Financial Times reports that average residential values are £3,000 per sq ft compare to £2,375 for office space, so there is a clear incentive for developers to make the switch.
Implementation of the office to homes scheme is promised for the “spring”, whatever that means, but there remains a list of unanswered questions about how the changes will be implemented. We don’t know if any of the new homes will have to be affordable or how the Community Infrastructure Levy will apply, or how issues like amenity space and parking will be handled. Many office blocks are aesthetically challenged and may not convert to homes very easily. If a developer needs to change the external appearance of the building, for example by installing balconies, then planning permission will still be required. Then there are issues like space standards, circulation areas and energy efficiency. In London, the Mayor’s Supplementary Planning Guidance sets out minimum space standards and guidance on amenity space and aspect - for example to limit single aspect and north facing homes. Will this also apply to conversions?
When he announced the changes Eric Pickles said the change would “promote economic growth, provide more homes and still ensure that we safeguard environmentally protected land.” Some areas would be exempted but exemptions would be exceptional and only in situations where “unique local circumstances” would “lead to a loss of a nationally significant area of economic activity or substantial adverse economic consequences at the local authority level that are not off set by the positive benefits that the new rights would bring”. But Boris Johnson and others argued that the changes should not apply to the City of London and London’s Central Activities Zone (which includes all or part of ten boroughs. The deadline to apply for exemptions was the 22nd February but word is that a staggering 700 applications were received, which will make Mr Pickles very angry indeed! If huge tracts of the country are exempted then the impact will be very limited. No doubt officials at CLG are scrutinising the applications right now and deciding how few they will let through.
Yet in the larger scheme of things this move has to be viewed as a positive change. Most young people in London have given up any hope of buying or renting an affordable place, so converting offices to homes could help to improve their lot. Around a million people commute into London every day and the London travel to work zone now extends from Lincolnshire to the Isle of Wight. London’s property market is distorted by the impact of foreign buyers, but one of its biggest problems is the imbalance between homes and jobs. The same applies to cities like Oxford and Cambridge. In Cambridge, around 40,000 people commute into the city each day and the new local plan envisages 20,000 new jobs in the city but only 12,000 new homes. Boosting the number of new homes and reducing office space in these places has to be a good thing surely? The simple rules of supply and demand would suggest that if significant numbers of conversions take place it will lead to a fall in residential values as more homes come onto the market and a rise in office values as office space becomes scarcer. This could have the effect of pushing employers out of London in search of cheaper office accommodation. Again, is this such a bad thing? The truth is that in this digital age there are thousands of people working in London who have no reason to be there. They could just as easily be based in places like Salford (BBC land) or Middlesbrough, (where houses can be bought for £10,000).
So watch this space. Spring has sprung and the details of the scheme should be announced soon. But if any housing association or local authority development directors are reading this it would be well worth checking out redundant office space on your patch. One developer described the conversion of offices to homes as a potential goldrush. It would be a shame if housing providers missed out.
The true scale of London’s housing crisis was revealed by last week’s “social cleansing” story. Inside Housing’s Jules Birch and Steve Hilditch’s Red Brick covered the topic admirably, and I don’t intend to rehearse the issues here, but it’s important to note that the story was not just about Newham. Most London boroughs are looking to export people from the capital because of the shortage of affordable homes and the expense or non-availabilty of private lettings.
Paul Bayliss, leader of the Labour group at Derby City Council hit the nail on the head when he said: “The solution for London is simple. The city needs more affordable homes.” He’s right of course, yet the deeper problem for London is not just a shortage of affordable housing but a shortage of housing per se, across all tenures and types. But even if London experienced a housing boom over the next decade it could still not build the homes it needs for the simple reason that it has run out of space.
Let me explain. According to the Office for National Statistics the capital’s population is set to grow from eight million now to over ten million by 2032. That means London will need to build at least 800,000 homes over the next two decades to cope with population growth – even more if it is to make good past under- supply. That means up to 40,000 new homes will be required every year for twenty years. Yet London is only building around 18,000 a year at present, and the HCA’s affordable rent programme will only provide 5,000 a year between now and 2015. What’s more, London has fewer than 4,000 hectares of brownfied land - barely enough for 120,000 homes. At the same time, 350,000 households are on London’s waiting lists and the vast majority of young Londoners simply cannot afford to buy a decent place to live. This all adds up to a housing crisis that can only get worse.
So the maths simply do not stack up. The truth is that London will never build the number of homes it needs unless it can expand upwards or outwards. Given that the days of high-rise residential blocks are in the past, and the fact that London has seen a startling increase in densification over the past twenty years it seems the only solution is outward growth. Yet our capital, in many senses the capital of the world, is confined within an outdated and artificial boundary - the green belt - which was put in place over 50 years ago and has no relevance to its current global status.
Again, let’s look at the facts. The 33 London boroughs cover 158,000 hectares but they are surrounded by an inviolate green belt of 479,500 hectares. But a further 35,000 hectares of green belt lie within the boroughs – 22 percent of London’s total area. Beyond the London boroughs, but within the M25, there is a further 75,000 hectares of land, of which about two thirds is green belt. So within the M25 there are at least 85,000 hectares of developable green belt land - that’s enough for over 2 million homes! Of course I am not suggesting that all of this should be built upon, but much of it is either low-grade agricultural land, or occupied by low priority uses such as golf courses and pony paddocks, with little or no aesthetic value and no access for the general public. You only have to drive around the M25 to understand that this land has no other purpose than to hem London within its post-war boundaries and you have to ask yourself, what is the point of preserving this land when London’s needs are so acute? Even if 50 percent of it was built upon it would provide over a million new homes, easily enough to accommodate London’s needs over the next twenty years. Across the UK, most towns and cities expand to the edge of their surrounding bypasses and ring roads. Why should London be any different?
Not only would this growth help to re-balance London’s dysfunctional housing market but it could provide hundreds of thousands of affordable homes. It would also allow London to think more creatively about its present shape and the quality of its environment. No longer would development be crammed into the capital at ever increasing densities. Green lungs could be pushed right into the heart of the city (imagine being able to walk or cycle from the centre of London to Epping Forest or the North Downs), brownfield sites could be turned into open spaces, allotments or city farms. The artificial and out-of-date distinction between town and country could be subsumed into a new garden city vision, where the country could be brought into the city. It would also give London the elbow room it needs to put in place a range of measures that would help to “green” the capital. For example, to create a proper network of cycle lanes so that the number of journeys made by bike could be increased from the present abysmal figure of 5 percent of all journeys towards Copenhagen’s 50 percent. Air pollution could be eased. A policy of outward growth could literally allow Londoners a breath of fresh air.
None of the candidates for Mayor has raised the issue of London’s boundaries and outward growth in their manifestos. They all appear to accept that London is a fixed entity, forever frozen within its decades-old boundaries. Boris Johnson even makes a specific pledge to protect the green belt. Yet cities grow and any credible candidate for Mayor should have a vision of how London will look twenty or fifty years from now. In my view, the only solution to London’s growing housing crisis is for the capital to push out towards the M25. If London wants to house, rather than export, its population there needs to be a public debate about growth and a recognition that the green belt is literally strangling our capital.
There’s an old football chant that goes: “And if, you know, your history, it’s enough to make your heart go woooooaahh…..”
For people who work in housing I think it’s always rewarding to look back at the historical record and to remind ourselves of the awful living conditions that people endured in the not so distant past. At a time when the social housing sector is under attack it is also helpful to reflect upon the immense improvements that social housing providers have made to the lives of millions of people.
I wrote about Charles Dickens last week, and came across this extraordinary letter sent to the editor of The Times newspaper. It was signed by 54 people living in a slum in St Giles, London, on the site where Centre Point now stands.
Amazingly, The Times published the letter on July 5th 1849 under the headline “A Sanitary Remonstrance”. The spelling is as in the original.
THE EDITUR OF THE TIMES PAPER
Sur, — May we beg and beseech your proteckshion and power. We are Sur, as it may be, livin in a Wilderniss, so far as the rest of London knows anything of us, or as the rich and great people care about. We live in muck and filth. We aint got no priviz, no dust bins, no drains, no water-splies, and no drain or suer in the hole place. The Suer Company, in Greek St., Soho Square, all great, rich and powerfool men, take no notice watsomdever of our complaints. The Stenche of a Gully-hole is disgustin. We all of us suffer, and numbers are ill, and if the Colera comes Lord help us.
Some gentlemans comed yesterday, and we thought they was comishioners from the Suer Company, but they was complaining of the noosance and stenche our lanes and corts was to them in New Oxforde Strect. They was much surprized to see the seller in No. 12, Carrier St., in our lane, where a child was dyin from fever, and would not believe that Sixty persons sleep in it every night. This here seller you couldent swing a cat in, and the rent is five shillings a week; but theare are greate many sich deare sellars. Sur, we hope you will let us have our complaints put into your hinfluenshall paper, and make these landlords of our houses and these comishioners (the friends we spose of the landlords) make our houses decent for Christions to live in. Preaye Sir com and see us, for we are living like piggs, and it aint faire we shoulde be so ill treted.
We are your respeckfull servents in Church Lane, Carrier St., and the other corts. Teusday, Juley 3, 1849.
Signed by John Scott, Emen Scott, Joseph Crosbie, Hanna Crosbie, Edward Copeman, Richard Harmer, John Barnes, and 47 others
I don’t think I need to add anything to that. It speaks for itself. What became of these “corts” and their residents I do not know.
Today’s announcement of the “affordable rents’ programme show that 90% of the new homes will be provided by housing associations. But there are quite a few local authorities on the list and also some private developers like Keepmoat, Persimmon and Taylor Wimpey. After years in the wilderness it will be interesting to see how new council housing will look and feel.
So London gets 36% of the national cake to produce 27% of the homes. A good result for London and Boris. The North East and the North West get around 10% of the cake each, but the East and South East only receives 13% of the national total, less than the Midlands and the South/South West, even though housing needs in the south east are acute. A quick analysis of the cost per home shows that the East and South East can produce a unit for less than £16,000 whereas in London it costs nearly twice as much, at almost £29,000. My guess is that the Eastern region accounts for most of that favourable figure, because they were producing homes with the lowest level of grant under the previous system. It’s also interesting to note that it costs over £22,000 to produce a single new home in the North East, the second most expensive region after London. This highlights the fact that the affordable rent programme does not work in most of the north and requires a larger subsidy. Moreover, you can buy a decent terraced house in Middlesbrough for £10,000. I’m sure additional analysis will follow, but these are my initial thoughts.