There's more to solving London's housing crisis than just building houses

Darren Johnson, Green Party Assembly Member for London has produced a thought provoking report on London's housing crisis LINK

This is an extract:

There is no doubt that housing in London is far too expensive, whether you want to buy or rent. The Mayor says this is because we haven’t built enough homes, and that building more is the single-most important thing we can do. But my evidence shows that we are unlikely to make housing affordable through supply in the next decade, meaning continued pressure on house prices and rents. Other solutions therefore have to be looked at. 

Government figures suggest we should have built more than half a million homes in London since the GLA was set-up in 2000 in order to keep up with a growing population and rising demand. In fact we built half as many.

Combined with irresponsible lending, this sent prices rising two to three times as fast as incomes. Prices are now so high that:

·   Half the population is unable to buy three quarters of the homes in London, with housing increasingly bought by investors rather than owner-occupiers.

·   Minimum wage workers can’t afford to rent the average room in a shared flat in any borough in London, and they struggle to get social housing as the stock has shrunk.

If supply were the main answer, the Mayor could push for two options:

·   Flood the market with enough homes to make house prices fall by at least 40% overnight to affordable levels.

·   Build enough to keep prices flat and wait up to 30 years for incomes to catch up with prices so that homes are affordable again.

Given our track record in the last decade, the current scarcity of mortgage finance, constraints on land supply and the shortage of people able to affordable any newly built homes, it is unlikely that private developers will build enough homes in London to achieve either of those options. Even if we kept prices flat, we can’t leave people stuck in overpriced and insecure private rented housing for 30 years while their incomes catch up.

For these reasons, I believe the Mayor needs to consider other solutions in addition to supply. Here are just a few other ideas that think tanks, academics and campaigners have put forward:

·   Constrain demand by putting controls or extra taxes on overseas investors and second home owners, or even by putting a tax on all land values to dampen speculation and stop developers sitting on large, unused land banks;

·   Give councils an incentive to release land for housing with community land auctions;

·   Build more social housing that can stay affordable regardless of supply and demand in the market, which would require either a dramatic increase direct subsidy, redirecting the Bank of England’s quantitative easing programme into housing, or freeing up councils to borrow at prudential levels.

·   Give private tenants continental-style rent controls and protections to slow the rise in rents and give people more stability than the current minimum of 6 month contracts.

Some ideas, such as taxing and auctioning land, are long-term policies to restructure our housing market and improve the level of supply. Others, such as rent controls, could also help tenants struggling with high housing costs today while we wait for supply to catch up.

Darren has published an article on Left Foot Forward elaborating his argument: