Monday 10 August 2020 4:15 am

We need a London housing strategy that doesn’t ignore the squeezed middle

Olivia Harris is chief executive of Dolphin Living and chair of Westminster Property Association

The UK — and London in particular — faces a housing crisis.

This is not news, and nor has the need for more affordable housing been ignored by politicians. Last week, the government announced an overhaul of planning rules to make it easier to build, while earlier this month, a House of Commons committee published a report on building more social housing in the UK.

Social housing is of course a key part of the response. But it is not the fundamental solution for dealing with the housing crisis, especially not in London. 

Read more: DEBATE: Are the new planning reforms what’s needed to help alleviate Britain’s housing crisis?

Rents are particularly high in the capital — so much so that a significant proportion of workers, including those providing essential services like nurses and transport staff, are priced out of homes near their work. They might not be classed as “low-income”, but they nonetheless are forced to move to the fringes and beyond, or live in housing that does not meet their needs. 

These workers are “squeezed middle” — unable to afford homes near their jobs, but not eligible to access social housing either.

Ultimately, London risks losing these workers to other locations.  

Employers are keenly aware of this problem and the recruitment challenges it poses — and the government should be too. The capital is losing vital employees because workers in critical fields simply cannot afford to live here.

Unfortunately, successive governments’ policies have tended to overlook the specific housing challenges for people on modest incomes, focusing either on delivering traditional affordable housing for low-income groups to rent or on helping first-time buyers onto the housing ladder. In London, where a deposit is out of the grasp of many, that leaves behind a significant cohort of people stuck in the middle.

There is undoubtedly a desperate need for more social housing for the most vulnerable. But social housing is not accessible to those on modest incomes, because they are not deemed to have acute housing need.

The answer is a type of housing that sits between market housing and social housing: “intermediate rental housing”.

Intermediate housing is traditionally defined as affordable housing which is targeted at people who are unlikely to access homes at social rent levels, but who are not able to afford to buy or rent an adequate home on the open market. Rents are set at levels workers in the squeezed middle can afford —usually significantly below the ceiling of 80 per cent of market rent.

Developers agree the rent levels and allocation policies with the local authority as part of the planning agreement, and eligibility in London is set so households earning below £60,000 a year and working or living in the local area can access homes.

Recipients pay more than social rents, which means overall more affordable housing can be delivered. And while social rents are usually offered on a lifetime basis, intermediate rented housing is usually rented on a fixed-term tenancy (generally for around three years), offering stability for families while still allowing for changes in circumstance.

More of this kind of housing should be made available to those who make the city tick: key workers like nurses and police, and also the wider range of lower-medium waged people who neither qualify for social housing nor can afford private homes — teachers, third sector workers, utilities and transport staff, and others who make our capital the global hub that it is.

Intermediate rented housing is not a new tenure type, and is used already across the UK. But most local authorities and housing associations don’t focus on it, because their priorities lie with the groups in most need — for obvious and understandable reasons. There is also political resistance to the idea of London councils helping to subsidise or support what is regarded as “private” development for seemingly well-off people.

However, this type of tenure is essential to offer rental homes that are affordable to median earners, in particular family housing. And to maximise the quantity of such housing and ensure such workers have somewhere to live in the capital, subsidy is required. Public money is needed to make intermediate rental developments economically viable while delivering the highest public benefit. In the end, if crucial workers cannot afford to live in London and move out, the entire city will suffer.

Belatedly, policymakers are starting to realise this. Last week, mayor of London Sadiq Khan launched a consultation into intermediate housing, recognising the role key workers play to “keep London running”. He is entirely correct to say that “housing costs have driven far too many Londoners away” — and we need to reverse that trend.

Our politicians must acknowledge the potentially significant impact that more intermediate rental housing could have on alleviating pressure on very scarce social housing and making living in London affordable for the capital’s vital workforce. Otherwise, they will miss out on a major tool in tackling London’s housing crisis.

Read more: Home, sweet home: Why it’s time for a national conversation about happier houses

Main image credit: Getty

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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