London's housing crisis is a human tragedy. The London Poverty Profile, released today, shows that housing costs are the major driver of a big increase in the number of Londoners who are in work but still living in poverty. But the housing crisis is also an economic tragedy. It is damaging the competitiveness of businesses, constraining growth, and leading to a drain of talent out of the capital.
Businesses in London are increasingly concerned that they are bearing the cost of the government’s failures on housing. Earlier this month, I attended the launch of the Fifty Thousand Homes campaign. I’ve played a role in many housing campaigns over recent years, but this one is different – it isn’t being driven by renters tired of sky-high rents, or young professionals who can’t get a foot on the ladder, but by London’s businesses.
London First, which represents industry in the capital, estimates that the housing crisis is costing our city’s economy £1bn a year. And the knock-on effects on consumer spending mean that as much as £2.7bn could have been spent elsewhere in the economy last year if housing costs had kept in line with inflation over the past decade. The shortage of affordable homes is preventing the creation of thousands of jobs – as people find themselves having to plough money into mortgages and rents instead of spending on goods and services.
As the crisis grows, employers such as KPMG and Deloitte are launching housing support schemes for their staff in order to make working in London more attractive. These are for well-paid professionals who are being put off working in London, primarily because of the high cost of housing.
The net result is a brain drain of talent. Last year, more Londoners in their 30s left the capital than ever before – nearly 60,000 in total. They are leaving because they can’t afford to bring up a family in London and know they can get a higher standard of living elsewhere. They have trained here, and just when they’re at their most productive, they are leaving.
The benefit of the companies they set up and the innovation they create is being lost to London. And it’s not just Birmingham, Manchester and Leeds that are gaining from this exodus, but our international competitors like Berlin, New York, Dubai and Shanghai, only too keen to steal London’s crown as the world’s leading global city.
Unbelievably, the upcoming Housing Bill has been written without any consideration of the challenges facing the capital. In fact, it’s almost as if it’s been written to make things worse.
Extending the right-to-buy scheme to housing associations could suck £870m of funding, which is earmarked for building new homes, out of London annually. That’s enough to build 35,000 new properties a year. There is nothing in the bill to stop housing associations using funds generated from right-to-buy sales in London to build in other parts of the UK – in fact, there are incentives for them to do so.
The forced sale of family-sized council homes is a double whammy for London. The only way the government can afford to fund the discounts for those buying their housing association properties is by requiring councils to sell off family-sized homes in the capital. Millions of pounds of housing funding will be sucked out of London every year as a result, and used to build homes in other parts of the UK instead.
The so-called “starter home” scheme, announced with much fanfare by David Cameron, will also make the crisis worse. It won’t help many Londoners get on the property market who couldn’t already – and the properties are in the £450,000 price range, which requires a salary way out of reach for many Londoners. And the flip side of the policy is that fewer genuinely affordable homes will be built for rent or part-buy. This will only drive up the cost of renting across the city.
I’ve said I want to be the most pro-business mayor London has ever had, which is why housing is my biggest priority. And this is why I’m opposing the Housing Bill, which will shortly return to the Commons. I hope London’s businesses will see through the government’s plans, and call out ministers on them.
MPs, councils, businesses, community groups and trade unions in the capital need to work together to stop this bill from making the housing crisis even worse. That’s why I’ll team up with politicians from across the main parties – including my Tory mayoral opponent – to defeat it.
What London needs is a long-term strategy to start building the affordable homes we need, in the numbers we need. As mayor, I’ll establish a new expert team in City Hall called “Homes for Londoners”. It will work with private developers and councils to speed up the pipeline of new affordable homes across the capital – identifying suitable land, helping find new sources of finance, and speeding up delivery – including as a developer where appropriate.
Our city’s success is built on its dynamism. That relies on our ability to keep the greatest home-grown talent and attract the best from around the world. As things stand, we are failing to do that, and the single biggest reason is the housing crisis. So, like London’s most talented young people, London’s businesses can’t afford another four years of paying the cost of the Conservatives’ failures on housing. We need a new focus on affordability and I call on the mayor, and all of my fellow mayoral candidates, to help deliver it.