Not a day goes by without a politician talking about the London housing crisis, and rightly so. It is the biggest challenge our city faces, causing serious problems for almost all sections of the capital, from businesses to renters and families to first time buyers.
Politicians have a frustrating tendency to talk about housing with an air of despondency and resignation. There is a lot of hand-wringing and a real lack of political determination and ambition when it comes to actually tackling the problem. A consensus has developed that the private sector must be allowed to get on with it, with the state having little more than a fringe role when it comes to building new homes. Let’s be clear: this is completely the wrong approach.
That is why I have announced that, as mayor, I would turn to the bond markets to help finance thousands of new homes for Londoners. By issuing up to £10bn of London Housing Bonds over the course of the mayoralty, the mayor could directly fund 30,000 new social homes. This won’t solve the housing crisis overnight – nothing will. But it would give the mayor a new role leading from the front when it comes to building the homes we need.
Under my proposal, 80 per cent of the bonds issued would be marketed to institutional investors, while the remaining 20 per cent would be community bonds offered to ordinary Londoners. These would most likely be ten-year bonds offering a return of 0.5 per cent above gilts and would be issued by a new Homes for London organisation that I would set up to coordinate and oversee building in the capital. Other candidates propose such a body should just be another level of management; I have argued for a much more hands-on role.
This is a policy that would benefit all Londoners: investors get a reliable bond with a good return; Londoners get new homes, as well as the jobs and apprenticeships that accompany new construction; councils and housing associations get a stock of new properties; and businesses get more affordable housing to attract potential employees. All that is needed to make it work is a bit of political ambition.
Using bonds to finance infrastructure has been proven to work; organisations including Transport for London and Network Rail have long been doing it. Housing associations, too, have had great success in using bond issues to fund new homes. To date, however, the mayor has refused to use the bond markets to finance London’s biggest need – new houses.
In London, we have one of the biggest financial centres in the world, but we are not good enough at harnessing the potential and the success of the City to help solve the capital’s problems. Too often, previous political leaders have talked about the City of London as working against the needs of Londoners rather than as a successful part of our city that could be harnessed to help meet those needs. It is by bringing different parts of London together, not pitting them against each other, that we will most effectively tackle the challenges our city faces.
The next mayor has to be bold and innovative but also inclusive, working with the City to issue the London Housing Bonds, and with councils, developers and housing associations to build and manage the homes that will be financed. At the same time, he or she must provide new leadership in getting London building, working closely with the private sector but not relying solely on it. Intervening to maintain the stock of social housing in London will be increasingly important as the government pushes ahead with its senseless extension of Right to Buy. Issuing bonds to fund new social homes will allow the mayor to do this.
London’s housing needs require politicians to be far more ambitious and innovative than many have been recently. We have to be honest: the Labour Party went into the General Election with a timid approach to housing. We promised to build 200,000 homes but didn’t explain how we’d do it, or how we’d actually make those homes affordable for people on average incomes.
Mayoral candidates, too, should be careful to avoid the trap of announcing headline-focused housing policies that actually amount to nothing more than the same inertia and off-the-shelf solutions that caused the housing crisis in the first place. Instead, we need a mayor who will provide new leadership and is willing to roll up his or her sleeves and get on with the job at hand. London Housing Bonds would be a crucial step in the right direction.