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.
