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Housing and the Cost of Living in London
In this essay, I am keen to address the ridiculous prices of housing in London;
the unsustainable expense of the first-time-buyers market; the limited
availability of accommodation for those not in a position to or wanting to buy;
and the leadership I would offer as Mayor of London to ease these potentially
damaging tensions. In it I highlight:
• The strain housing costs put on modest incomes
• The root cause of high house prices in London
• The measures that need to be taken to calm prices
• The need to address the management of affordable housing in London.
The strain housing costs put on modest incomes
When a nurse married to a policeman cannot afford to buy a house within 45
minutes of their respective London work places, there is a social and,
possibly, a moral imbalance in play.
When mortgage companies are offering young couples 51/2 times gross joint
salary to buy their homes, something is wrong in our collective judgement.
The sensitivity to higher interest rates or a slowdown in employment could
cause widespread discomfort: people are in serious danger of becoming
financially overstretched.
For a society to be open for all to participate in, the bottom rung of the ladder,
so to speak, has at least to be within reach of everyone. London
accommodation is fast becoming, or might have even become, beyond the
reach of certain people. This degree of exclusion can have serious social
consequences, even among the aspirant population.
There is of course a large group who have no interest in acquiring property.
But their choices and flexibility have been seriously reduced. People find
themselves unable to do the work they are practiced in because they cannot
find or afford housing close enough to their employer.
Furthermore, this strained economic situation has another consequence:
people find it more necessary to work for and pay cash, so enlarging the black
market; the result is a potential drop in the standard of work provided and an
inequality in the levels of taxes paid.
The root cause of high prices in London
High house prices, exactly like the discussion of transport issues in London,
result from an imbalance of supply and demand. Demand for residential
accommodation is strong - which is a good thing as it shows the economy and
Londoners are prosperous - but there is not enough supply. And when
demand outstrips supply prices rise. It really is not much more complicated
than that.
So, how do we affect this imbalance? - assuming, of course, that we want to!
I, for one, am keen to bring the cost of living closer to that of other world cities.
While I see the benefit of Londoners enjoying an appreciation in the value of
their assets (while the market is rising), there are vast groups of our citizens
who not participating and - with the ludicrous pricing of "first time" properties -
not even able to begin participating.
I believe that a revaluation is essential, not least because I do not see current
levels and rates of increase in house prices as either sustainable over the
long-term or healthy for the London economy.
The measures that need to be taken to calm prices
Prices could be affected by an adjustment to demand or supply, or both.
What, then, could be done to moderate demand? As a free market
economist, my response is clear: Nothing. To a socialist, and I am sure a
good many of the Nanny-knows-best interferers in Tony Blair's government,
hideous measures are being discussed like: limits on the number of homes an
individual can own for individual occupation; taxation on purchase; taxation on
disposal, etc. All such interventions are anathema to me.
The key factor in this imbalance is supply. There are not enough homes or
new homes being built. Various reasons are causing this. The first
contributing factor is the limited amount of space available for new housing
and the second is Planning.
London is clearly short of space. There are pockets of grey- and brown-field
site around the Capital, but these are no where near big enough to make a
material dent in the matter. And as for the idea of massive blocks of flats, I
think even the thickest socialist architect has realized that these are utterly
discredited as a solution.
On Planning, the government has recently given the Mayor of London
important and far reaching new powers of direction over planning applications.
Inherent in this is an erosion of the role of boroughs' planning and
development control committees in making decisions about what is built
locally. This is undemocratic and extremely dangerous. I will do everything in
my power to reverse this.
The idea of building on land around London, the Green Belt, is totally
unacceptable. Green Belt land around London is sacrosanct. There are,
however, selected areas of land which, with appropriate planning, could be
developed sympathetically to increase the number of new houses being built.
But these are decisions for local authorities representing the views of local
communities - not to be imposed by dictates from the Mayor of London.
Consequently, as Mayor of London I will advocate an intelligent, sympathetic
and environmentally aware look at how we can add to the London housing
stock and thereby control the spiralling rise in house prices. This, of course, as referred to in the Transport essay in this booklet, would also pay significant
attention to the infrastructure requirements and consequences of any such
development.
The need to address the management of affordable housing in London
Tenants and others awaiting affordable housing provide a stark contrast to
those participating in Britain's booming housing market. There is no doubt
that there is a massive shortage of affordable housing in London and families
face a desperate shortage of accommodation that they can afford.
While the market in properties for sale is open and relatively transparent, the
allocation of affordable housing is anything but. Local authorities use various
systems to ration the demand for affordable properties: this has effectively
created a 'lottery' in the rented housing market.
As Mayor of London I will call for a strategic review of the way in which this
accommodation is handled across the Capital and ensure that the system of
allocation is transparent, fair, and far more efficient. This is essential before
we can begin to address the meeting of demand for affordable houses by
building more.
In addition to the unclear allocation process, there are several agencies
already established to deal with various aspects of this problem:
• The London Housing Board
• The Housing Forum for London
• The London Tenants Federation
• The Housing Corporation and various strategic partnerships.
My questions are: Do all these bodies work smoothly together? Are they
working smoothly together with the 32 London boroughs? Are all their efforts
coordinated? Are they working to the same strategic plan and assumptions
across London? Something tells me that I might be able to guess the answer
to these questions!
On the 28th November 2006, the government published the greater London
Authority (GLA) Bill, proposing an enhanced package of powers for the Mayor
of London and London Assembly.
Among these were more strategic powers for the Mayor in key areas, one
being a new lead role on housing and the formation of a London housing
strategy.
As Mayor of London, I will empower those with the skills and expertise in the
market to lead the way. I will consult and engage with the best brains in the
industry until a solution is found, not only to break the deadlock, but to provide
a method of continuity.
My strategic review of London accommodation will assess whether all those
bodies involved in London housing can't be pulled together as a multidiscipline
task force to iron out the current shortages and come up with clear
solutions to set up London's affordable housing needs for the next 20 years.
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