Further and further out of reach. Photo: Getty Images
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The root cause of London's housing crisis: we don't build enough houses

Far from fixing the underlying problem, the Conservatives' mucking around with demand-side issues will only make things worse.

Elizabeth is in her early thirties. In January, after more than a decade living in London, she decided it was time to leave. 

The staggering rise in the cost of renting – up by around £3,000 a year for the average London property since 2010 – has left many of those, like Elizabeth, without a foot on the property ladder considering whether it makes sense to stay here. Meanwhile, increasing house prices have essentially guaranteed that very few of those who do stay will get the opportunity to buy.

Rising costs are perhaps the defining issue, but they are far from the only problem facing London’s housing stock, with inexcusably high levels of overcrowding, homelessness, dire property standards and rogue landlords on the rise.

Yet, these seemingly disparate problems have a common thread; we simply haven’t built enough homes in London. For Elizabeth, this has meant unpalatably high rents. For Emma – who contacted me because her landlord consistently failed to fix a chronic damp problem that led to her son developing asthma – this means increasingly few options to escape the type of negligent landlord to whom she and her husband pay large sums of rent every month.

This raises a fundamental question: Does the proposal to extend Right to Buy to housing associations do anything to solve the extensive problems we have with London’s housing stock?

The National Housing Federation estimates the policy could cost UK taxpayers as much as £12billion if all eligible and able housing association tenants took up their new right. £2billion of this would be required in Greater London. Alternatively, this would be enough to fund the construction of more than 66,000 much needed affordable homes, many of which would be for first-time buyers.

But the implications for housing supply run much deeper than government spending. This is a policy which facilitates state-sanctioned asset stripping of housing associations (many of which are charities), undermining their ability to borrow for new house building. The result could be fewer homes, higher prices and a deepening housing crisis – it is the antithesis of what London should be aspiring to.

There is a double injustice in the proposals though, with plans to fund it by forcing councils to sell their most expensive homes when they become available for re-let. Analysis of the proposals show that this could result in the forced sale of every council home that becomes available in the City of Westminster. The parallels with Shirley Porter are stark, and the implications for London’s mixed and balanced communities dire.

Even then, it is difficult to see how the funding will stack up. The £4.5billion that the Conservative manifesto estimated would be raised through local authority housing sales has been pledged to three different items – the cost of the extra Right to Buy discounts, building replacement homes for those that are sold, and funding a new £1billion ‘Brownfield Regeneration Fund’. Compare this with the NHF estimate that discounts alone could cost up to £12billion and the figures just don’t add up.

Many Londoners will understandably have trouble believing the government will fulfil their pledge to replace all sold homes. The previous Government promised the same in April 2012 when announcing the reinvigoration of Right to Buy. But since then 4,017 council homes have been sold in Greater London and only 1,530 started, and this without the additional pressures of compensating housing associations and funding an additional £1billion programme.

The fact is that we can only fundamentally tackle London’s housing crisis by building more homes, and we need to do so urgently. We can see that the personal dilemma faced by Elizabeth is shared by thousands of other Londoners and that the city’s public services and economic competitiveness are increasingly undermined by this crisis.

Yet, it would be difficult to devise a housing policy that is as carefree with the public finances but as socially damaging as the proposal to extend Right to Buy to housing associations.

Ask yourself this question: If you suddenly found £12billion that you were willing to spend on a housing policy, would you use it in a way that delivers fewer homes, makes it harder for most to get on the property ladder and increases the difficulty of tackling homelessness? I wouldn’t. I don’t think the Government should either.

 

Tom Copley AM is the Labour London Assembly Housing Spokesperson and a Londonwide Assembly Member

 

Tom Copley is a Labour member of the London Assembly

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Brexit is an opportunity to rethink our economic model

Our industrial strategy must lift communities out of low-wage stagnation, writes the chair of the Prime Minister's policy board. 

With the long term fallout of the great crash of 2008 becoming clearer the issue of "inclusive growth" has never been more urgent.

Eight years after the Great Crash, it is becoming clear that the long term impacts of the crisis profoundly challenges the model of economy - and politics - we have become used to. Asset inflation and technological revolutions are entrenching untold wealth for a small global elite.

This sits alongside falling relative disposable incomes for the many, and increasing difference in the disposable income of different generations. Meanwhile, a cohort of "just-about-managing" citizens are working harder than ever simply to get by, despite falling rates of savings. All of this – along with a persistent structural deficit in pensions, welfare and health budgets - combines to create an urgent need for new economic thinking about a model of growth and 21st century economic citizenship that works better for all people and places in our country.

The main political parties have set out to tackle these challenges and develop policy programmes for them. Theresa May has set out a bold new Conservative agenda of reforms to help those of our fellow citizens who are working hard but struggling to get by: to build an economy that works for everyone, and for the people and places left behind.

But this challenge is also generational, and will need thinkers from all parties - and none - to talk and think together about fresh approaches. This is why this cross-party initiative on inclusive growth is a welcome contribution to the policy debate.

The Prime Minister leads a government committed not just to deliver Brexit, but also to the fresh thinking and fresh solutions to the scale of the domestic challenges we face, which clearly contributed to the scale of the Leave vote last June. As she has said, it's clear that as well as rejecting the EU, voters were rejecting a model of growth that wasn’t working for them.

The UK’s vote to leave the European Union was one of the most dramatic and significant political events in decades – for this country and potentially for Europe. It changes everything: our economic model, our long term economic prospects, the assumptions and mechanisms through which we run most of our government and the diplomatic and economic status of the UK internationally.

Delivering a successful Brexit – one which strengthens our global security, our united kingdom, our economy and popular trust in parliamentary democracy, and a model of political economy that works to these ends, will dominate this political generation.

This is a challenge. But it is also an unprecedented opportunity to reform our model of political economy to tackle the causes of deepening domestic political disillusionment and put our country on the path to long-term recovery. 

Brexit provides us with a unique chance to address two of the most important public policy challenges facing our country.

First, the need to enable and enhance the conditions for creating and developing greater enterprise and innovation across our economy, in order to increase competitiveness and productivity. Second, the need to tackle the growing alienation of so many people and places from the opportunities of globalisation, which has in turn entrenched attitudes towards welfarism. I believe these two challenges are fundamentally linked. 

Without social mobility, and the removal of the barriers holding back national and regional participation enterprise, we will never be able to tackle the structural challenges of productivity, public service modernisation, competitiveness and innovation. 

It's becoming clearer to more and more people that a 21st century "innovation economy" both requires and drives an "opportunity society". You can't have an enterprising economy with low rates of social mobility. And the entrepreneurial spirit of economic aspiration is the fuel that powers the engine of social mobility.

For too long, we have run an economic model based on generating growing tax revenues from an ever smaller global elite, in order to pay for the welfare costs of a workforce increasingly dependent on handouts.

Whitehall has tended to treat social policy quite separately from economic policy. This siloed thinking – the Treasury and the Department for Business, Energy and Industrial Strategy for "growth" and the Department for Work and Pensions, Department of Health and Department for Education for "public services" - compounds a lack of the kind of integrated policymaking needed to tackle the socio-economic causes of low productivity. The challenges holding back the people and places we need to help do not fall neatly into Whitehall silos. 

Since 1997, successive governments have pursued a model of growth based on a booming service sector, high levels of low-cost migrant labour and housing and asset inflation. At the same time, policymakers tried to put in place framework to support long term industrial renaissance and rebalancing. The EU referendum demonstrated that this model of growth was not working for enough people. 

Our industrial strategy must be as much about lifting communities out of low-skill and low-wage stagnation as it is about driving pockets of new activity. We need Cambridge to continue to grow, but we also need to ensure that communities from Cromer to Carlisle and Caithness, which do not enjoy the benefits of being a global technology cluster, can participate too. That means new measures to spread opportunities more widely. 

The Great Crash and its aftermath - including Brexit - represents a chance for a new generation to think these problems through and tackle them. We all have a part to play. Six years ago, I set up the 2020 Conservatives Group in Parliament, as a forum for a new generation of progressive Conservative MPs, regardless of increasingly old-fashioned labels of "left" or "right", or where they stood on the Europe debate. This is a forum to discuss new ways to tackle the current problems facing our country, beyond the conventional silos of Whitehall. Drawing on previous career experiences outside of Parliament, the group also looks ahead strategically at the potential longer-term social and economic challenges that may confront us in the future.

I believe that technology, and a new zeitgeist for public sector (as well as private sector) enterprise hold the key to resolving the barriers that are currently holding back the development of new opportunities. With new approaches, better infrastructure and skills connecting opportunities with the people and places left behind, better incentives for our great innovators, and new models of mutualised public/private partnerships and ventures, we can build an economy that genuinely works for everyone.

The government has already set about making this happen. Through the industrial strategy, the £23bn package of investment in new infrastructure and innovation announced by the Chancellor, Philip Hammond, we can now be much bolder in developing a 21st century knowledge economy infrastructure that will be the foundation for economic success. 

The success of inclusive growth rests on a number of core foundations - that our economy grows, that social inequality is redressed; that people are given the skills they need to pursue a career in the new economy and that we better spread the opportunities of the global economy hitherto enjoyed by a segment of our workforce to the many. 

This can only be achieved if we recognise the way in which enterprise and opportunity are interdependent. Together, politicians from all parties have a chance to set out a new path for a Global Britain: making our country the world capital of innovation and opportunity. Not trickle-down economics, but "innovation economics" where the private and public sector commit to a programme of supporting each other for mutual benefit.

An economy that works for everyone is an economy in which the country unites around the twin pillars of opportunity and security, which are open to all. A country in which "shared values" are as important as "shareholder value". And in which both are better shared by all. A country once again with that precious alignment of economic and social purpose which is the hallmark of all great civilisations. It's a great prize.

This is an edited version of George Freeman's article for All-Party Parliamentary Group on Inclusive Growth's new "State of the Debate" report, available to download here.The APPG on Inclusive Growth's "State of the Debate" event with the OECD, World Economic Forum, RSA and IPPR is on Tuesday 21st February at 6.30pm at Parliament. See www.inclusivegrowth.co.uk for full details. 

George Freeman is the MP for Mid-Norfolk and the chair of the Prime Minister's Policy Board.