London’s persistent housing crisis frames almost every policy discussion in the capital. The latest housing data published by the Greater London Authority included some figures that almost looked like good news. But the light at the end of the tunnel may be fleeting; the latest figures also show why London needs a broader approach to provide the housing its citizens need.
Firstly, after a couple of years of slower population growth and high housebuilding, the gap between population growth and housing supply has stopped growing: the ratio of homes to people fell back slightly from 2.52 in 2016 to 2.50 in 2018, having risen consistently in the ten years before that.
But the easing of the housing gap masks growing inequalities in the allocation of space. More and more owner-occupiers have surplus rooms, while overcrowding in private rented accommodation, which now accounts for more than a quarter of London households, has almost doubled since 2000.
The long-term shift from owner-occupation to renting also seems to have been checked. Market renting levels have been falling since 2016, as owner-occupation rates have risen to around 52 per cent – the level they were in 2012. This rise in owner-occupation has been sharpest among 25-34 year olds, whose rate of owner-occupation fell from almost 50 per cent to below 30 per cent in 2013. Today than a third of this age group – core millennials – own homes, the highest level since the financial crash. Perhaps the decline of buy-to-let investing, alongside more generous Help-to-Buy loans available in London since 2016, and more stable prices, are starting to have an impact.
This price stability is expressed through slow rental growth and a fall in house prices of around 10 per cent since 2016. What you think of this situation may depend on where you are in the housing market – whether you are a landlord, a tenant or an owner-occupier. But most would welcome a few years’ moderation, a breathing space to allow salaries to begin to catch up with house prices, or at least to stop lagging ever further behind them.
But then there is a big sting in the tail…
Housing starts have fallen sharply, and are lower than they have been since the depths of the credit crunch. Figures released last week show that April-June saw building start on just 2,300 housing units in London. In the year to June, just 13,800 new homes were started, 10 per cent less than in the previous year and 35 per cent less than in the year to July 2016. In other words, just as house prices seem to be leveling off, supply is slowing to a crawl.
These figures suggest that simply relying on the market to build enough homes to meet London’s needs or to achieve any significant long-term price moderation is flawed. Relying on this model of delivery has a built-in speed limiter; as prices calm, delivery slows. Building many more houses is necessary step in addressing the problem, but not sufficient to solving it.
London needs a broader approach…
The challenges of affordability, of quality, of supply and of community involvement remain intense, and are likely to intensify further unless we find new ways of building more affordable housing. So London needs a much broader approach – which looks at new models of supply from build-to-rent to new forms of council housing, which sets incentives and taxes to reflect housing’s role as an essential urban service not an asset class, and which finds ways to help all Londoners to find affordable places to live.