Do you want to wait thirty years until house prices are at affordable levels again? I doubt many priced out renters in the capital would be happy to put up with the status quo for that long, but that could be the prospect if we just rely on building more homes to solve the housing crisis.
By Darren Johnson AM, Green Party member of the London Assembly
Do you want to wait thirty years until house prices are at affordable levels again?
I doubt many priced out renters in the capital would be happy to put up with the status quo for that long, but that could be the prospect if we just rely on building more homes to solve the housing crisis.
We all know that housing is much too expensive, especially in London. Listening to many housing campaigners and politicians, you’d be forgiven for thinking that housing supply is the silver bullet.
The Mayor of London has told me it is “the single-most important thing that we can do”. His plan is to build enough homes to stabilise prices, allowing incomes to catch up.
James Bloodworth argued in his recent article on rent controls that supply would help in the short term.
But my research shows that even if we’re unduly optimistic about rising incomes, it would take 14 years for the London house price to incomes ratio to return to the level we saw in 2000, and 30 years to return to a genuinely affordable level of three to one.
Unless you want to see house prices drop up to 65 per cent overnight, you have to consider what we do for people renting privately in the meantime.
Do we leave people renting homes from landlords that can turf them out every six months, and that can raise their rent every six months in an overheated market with steep inflation? Or should we look at introducing controls to stabilise rents and giving tenants more security, as I and other members of the London Assembly’s Housing Committee have argued in a major piece of work on the sector?
We also have to be honest about the reasons behind high house prices and rents. The classical economist would say it’s all about supply and demand, so we must boost supply. But why not also constrain demand?
Do we turn a blind eye to second homes (which James highlighted), to investor landlords and speculators driving up property and land values (who buy around two thirds of newly built homes in Greater London), and developers aiming to maximise profits rather than homes?
The Mayor has commissioned very useful research on barriers in the housing market which confirms this picture. But because he is so committed to boosting supply, he thinks the answer is to get more demand from investors! So he opposes smart rent controls because they might spook investors.
Even if rent controls did make properties less attractive for private landlords to buy, that may also have a positive impact in slowing down property prices and making home ownership a more affordable option for more people.
Finally, can we afford to just say “build more homes” without thinking about the sort of homes we build?
Private rented housing and market housing to buy may take years to become affordable. But social housing can be affordable from day one, and stay affordable forever. It’s also the tenure that we most need in London.
With 700,000 people earning poverty wages and many more a long way off affording market rents, there’s no way that new housing on the open market is going to be suitable for a very large proportion of London’s population.
Co-operative housing can also be affordable today and in perpetuity. There are even clever models that allow people to gradually buy up a stake in the co-op, giving many of the benefits of home ownership.
Simple messages are always good. But saying “we just need to build more homes” is wrong, and would leave too many people living with the consequences of our housing crisis for years to come.
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8 Responses to “We can’t just build our way out of this housing crisis”
LB
So not a peep about the root causes.
1. Migration. 5 million migrants, plus offspring = housing shortage.
2. Low interest rates – mean people look to invest in property
3. Brown screwed private pensions for cash. So people won’t use them.
Not that you would notice on the pension front, You get to tap taxpayers for yours. Mind you, you’re at risk. The debts are too large to pay, so eventually your pension will be axed.
janlog
100’s of thousands more council homes is what we need – jobs, rents, reduction in HB bill – and surely worth capital borrowing in exchange for housing people. It might give tenants the chance to save for a deposit and free up their property for the next tenant.
Apart from the borrowing I can’t see a downside, and even that wouldn’t be so awful if we could quickly half the £17bn pa HB bill.
JC
I would like to see house prices drop by 65% overnight. I live in my house, so it has no special value. Surely that would be the best solution.
How would you manage it? Built more houses so the price goes down? This would reduce the rents landlords charge (about 10% or value) and solve many other problems. Just building more social housing wouldn’t do it.
jonc
Stop buy to let – immoral, wrong, and redistributes wealth from those that have least to those with most. No progressive politics should countenance it.
Build more council houses.
Tax unearned income at higher level than earned income.
Bring in rent controls and tenure rights.
Bring in a right to buy for private renters.
No discount for social housing ‘right to buy’.
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