There is no disputing the fact that there is national housing crisis. For over a decade we have been building at least 100,000 homes less than the UK household growth would indicate we need and a Joseph Roundtree report says that the UK will have a shortage of 1 million homes by 2022.
I have written many times about how the national house builders make all the right noises about wanting to build more homes (“give us a smoother planning process“ etc), but are still, in some cases, making record profits by building far less than they have historically built. This makes for very healthy ROCE (Return on Capital Employed), an easier life for them but has tremendous negative impact on those trying to make a home.
The problem in London is acute and is being inflamed by the continued and growing pull of the city in terms of attracting people from UK regions. The always thought provoking Centre for Cities have just published a report that really does pose questions.
The Centre for Cities says the gap is widening between London and other UK cities. Its report states that a third of 22- to 30-year-old graduates who move, move to London. (A net inflow of 15,000 per year).
There is a net outflow when people are in their 30s but it is to “London’s counties“ Essex, Surrey and Kent: “While these people may no longer live in London, they very much remain within commuting distance, and commuting patterns suggest that some are likely to remain part of the capital’s labor market,” the Centre says.
The report states that London continues to leave other UK cities behind in terms of job creation, creating over 215,000 private-sector jobs from 2010 and 2012, that’s 80% of the total for the whole of the UK. Two public sector jobs were lost outside London for every one of these 215,000 London jobs created.
Whether we think this “brain drain” is damaging to the UK as a whole or that the runaway success of London can benefit the UK as a whole what it is clear that this influx fuels the housing shortage.
In 2012, 7000 new homes were built in London with 5000 going to overseas buyers of which Savills estimate that 50% have been left empty as investments. As well as taking homes away from the thousands who spend their weekends attending viewings of properties and are in competition with up to 200 others considering the same property, it adds to the spiraling prices as many overseas investors are not price sensitive.
Something has to give. I like Labours plans to double the council tax on empty properties but for those overseas “investors” who are looking to place their money (not all of which will have been ethically earned) in a safe haven then this will not be a game changer. One way to start to ensure that new homes are built for people living and working here is to introduce a policy that has long been in use in Australia, whereby any new development can only have a percentage (this has varied from 10% to 50%) sold to non-Australian residents.
With new build only accounting for less than 10 per cent of total transactions in London it doesn’t solve the problem of availability of homes but it does claw back some of the stock.
Add to that a massive programme of council house building, and a 50% tax on all homes bought by non EU investors and we might just start to see a difference and is London’s appeal to the world so fragile that this policy would fatally wound its economy as some would have us believe? Not a chance.