What relevance does this have to modern-day London? As a consequence of the housing shortage, we could be on the cusp of the resurgence of the corporate-sponsored worker housing. Large and small employers alike are increasingly worried about London’s living costs and, from those we speak to, one of their foremost concerns this year is how to continue to attract and retain staff in this environment. On our current projections, central London house prices will grow by 15 per cent over the next five years, and rents by 22 per cent.
While these increases are lower than those recently seen, they still represent a large rise in the living costs of London’s workers. In turn, more employers are likely to be forced to respond and find a method of ensuring they keep their staff and remain competitive in the job market.
For some, the solution has been to move to greater London or to “north shore”: Deutsche Bank and HSBC have recently expanded into Birmingham, while Freshfields has headed to Manchester. Unlike previous waves of relocations in the 1990s, this time they’re moving “front office” roles. These moves and expansions are driven by numerous factors, with cheaper office and staff costs being the most common rationale among employers.
Of course, relocation is not possible for many, and even if it were, it’s unlikely that we’ll see a mass exodus from central London: many large companies accept that having a City or West End presence is vital for servicing some clients and raising profile. So what can companies who want to stay in town and keep the vast majority of their workforce here do? Some have explored raising salaries to mirror the 4-5 per cent annual increase in housing costs. But for the vast majority, the bottom line cannot accommodate the wage growth required to offset rising mortgage or rent bills.
If employers can’t raise wages to help staff pay their rent because that rent is going up faster than profits, what’s left? Some of the city’s biggest employers are already helping staff manage housing costs directly. Starbucks is offering staff loans to cover their rental deposits, while Deloitte is negotiating preferential deals with housing associations to provide subsidised flats for its graduate intake. The natural evolution of this is that the largest employers will go a step further and start developing specialist worker housing blocks or areas that they can impose rent controls on.
Hence we could see history repeat itself: while it’s unlikely that we’ll end up with whole worker “villages”, it is feasible that hubs of corporate housing will emerge in and around London. The demand is certainly present, while the investment community is lining up to invest in long-term secure income streams in the UK – of which corporate housing would be one – which would enable schemes to get off the ground.
Corporate housing is already reasonably established elsewhere in the world and, practically speaking, it is only an advanced version of purpose-built student accommodation, which has been one of the leading real estate asset classes over the past 10 years, so the conditions are ripe.
While the corporate housing of the twenty-first century may be architecturally very different to that built over a hundred years before, the paternalistic approach of the employers of today is not a million miles away from their nineteenth century predecessors.