Soaring house prices and rocketing rents are costing London’s economy over £1bn each year, according to a new report out today. The study – published by a new campaign to increase London’s housing supply called “Fifty Thousand Homes” – says employers across multiple sectors are facing more competition and staff retention problems as a result of the capital’s housing crisis.
Citing new research conducted by the Centre for Economics and Business Research (CEBR), Fifty Thousand Homes says that businesses are facing a £5.4bn wage premium this year, equivalent to £1,720 per person, in order to compensate for employees’ housing costs.
The CEBR also projected that nearly 11,000 additional jobs could have been created in the capital in 2015 if the cost of housing was lower. The researchers also said that “unnecessarily high” housing costs are removing £2.7bn a year in consumer spending from the capital’s economy, while driving millions of workers outside of London because they cannot afford to live in the capital.
Using average salary data for various occupations, the CEBR found that workers such as shop attendants and restaurant employees would have to pay their entire pre-tax salary to rent an average private home in London. Social workers, librarians and postal workers would have to pay more than half of their salaries in order to afford to live in the capital.
Commenting on the research, Scott Corfe, an associate director at the CEBR, warned that the cost of housing “risks undermining the capital’s position as a global centre of enterprise, talent and success”.
Baroness Jo Valentine, chief executive of the business group London First, agreed, saying: “If we carry on as things stand, in 10 years’ time London will be a no-go zone for employees across sectors and at almost all levels.”