As the election for the Mayor of London next year looms on the horizon, candidates are pledging to build more homes in the capital. But targets are no use to anybody unless they are backed up with a credible plan, and in London the biggest challenge is that the housing market is broken, dysfunctional, pining for the fjords.
Shelter wants candidates to produce a credible plan to build 50,000 homes a year within the first 100 days of office.
One major plank of this plan has to be non-market housing. In dark times, we should nurture and grow the pockets of light that the market’s dysfunctions don’t reach. Councils, housing associations and co-operatives can all renovate and build homes and let or sell them at permanently affordable prices. The Mayor of London can give them every ounce of support available. If Sian Berry were elected the Green mayor, she would also work with landlords and tenants to discourage the needless demolition of homes.
But to build 50,000 homes a year we really need private builders to make a bigger contribution. How can we do this?
Let’s start with who the new private homes are being built for at the moment. Hint – it’s not the average Londoner, who earns around £28,000.
The average first-time buyer in London is in the richest fifth of Londoners and pays over £400,000 for their home. Even with a big handout from mum and dad, they’d need to earn something like £80,000 on average to ‘get on the property ladder’.
Such rich individuals are in short supply, and so wealthy investors keep the show on the road. Around one in ten new homes are bought by overseas investors, and another five are bought by British investors. They’re able to buy homes before they’re built, ‘off-plan’, helping developers get finance from banks, so Boris Johnson has lent them his full support. Most investors then let these homes out to Londoners on private tenancies at rents little more affordable than a mortgage (but without the need for quite such a massive deposit).
But wealthy investors fuel our housing market, driving up prices or at least maintaining them at very high levels that the average Londoner could never afford. They also lead developers to behave like this:
(Quick aside – I’ve exposed this and many other nasty adverts targeted at investors over the years. Investors don’t just drive up prices, they also distort the kind of homes built and the way they’re marketed and sold.)
The edge may come off buy-to-let thanks the Chancellor’s policies to reduce landlords’ tax breaks and charge them a higher rate of stamp duty, but the Office for Budget Responsibility still expects prices to rise faster than earnings for the next five years.
I predict that every mayoral candidate other than Sian Berry will rail against tower blocks of luxury flats in the same breath as promising to build 50,000 homes a year. But they won’t explain how they will square this circle.
What’s going wrong with our house building market? Why are new homes so bloody expensive?
Well, to begin with, so long as we treat homes as assets to speculate on – whether home owners and amateur landlords treating homes as pensions, or Russian oligarchs treating Chelsea mansions as safety deposit boxes in case they lose Putin’s favour – so long as this is the prevailing attitude, house builders will target this wealthy market and prices will be driven up.
The Green Party wants to reform property and land taxes to discourage this attitude. For example, we’d phase in a Land Value Tax to replace council tax and business rates, with the aim of reducing the profits you can make off rising house prices.
But the Mayor of London doesn’t have the power to this – yet.
- in recent years, between a third and half of sites with planning permission have been owned by companies with no intention of building on them – speculators looking for a quick profit by hoarding land;
- the building industry has, over decades, become ever more concentrated and is now dominated by around 25 big developers;
- big developers don’t like to build and sell homes too quickly, because it will depress prices.
The last point is particularly telling. Take the Kidbrooke Village scheme in Greenwich, where 1,900 council homes were demolished to make way for 4,000 new homes. You might think the whole point would be to keep prices down in the area by building these as quickly as possible. But no, they plan to build these over twenty years, and one bed flats currently for sale start from £330,000.
The GLA found that few developers want to build more than 100 homes a year in any given development, to keep the market prices rising.
I could go off into a long explanation of the housing and land markets in London, particularly the magic of land values, but I won’t bore you. The key point is that big developers building in the current broken market won’t solve the affordability problem.
So what would a Green housing strategy look like? I’m not going to tell you what the Green Party’s manifesto will pledge, not least because that’s for the members to decide, not me. But these are three building blocks for a credible plan to build 50,000 homes a year.
- Diversify the market with public land. TfL wants to build 10,000 homes on its land. Rather than signing dodgy deals with the 25 big developers, public land like this could be used to break their stranglehold by involving a much wider range of development partners. Use compulsory purchase powers on land hoarders and avoid closed-shop procurement processes to give smaller builders and new entrants a shot at using them.
- Innovate in big projects like housing zones and estate regeneration. Parcel big sites out into smaller plots to get homes built more quickly and try different approaches with each one – co-operatives and community land trusts with homes for rent or sale, purpose built private rented housing, council and housing association homes, custom build, self-build, community-led planning and design. I could go on.
- Find more sites with the help of Londoners. Set-up a People’s Land Commission, as suggested by Stephen Hill and Darren Johnson, and use technology pioneered by Greater Manchester to get the public involved in finding more opportunities to build homes on derelict sites, on top of existing buildings, in place of empty car garages, and so on. Make sure this approach puts people and nature front and centre, rather than trampling over them with amoral talk of assets.
These proposals will also help to reduce opposition to new homes. What, other than outright opposition, can we expect when house building means very tall blocks of luxury flats built for investors, planned with no meaningful involvement from the local community? As Demos argue in a new report, most opposition is born out of a genuine concern for the community, and lack of transparency and trust in the planning process.
We need this kind of fresh thinking if we’re going to build homes, and not just false hope. Darren Johnson has done fantastic work on the London Assembly to develop and promote this analysis, and to build cross-party consensus for innovations such as selling land to smaller builders, backing community-led estate regeneration and building mutual housing for older people. Next year, together we can get a new Green team into City Hall to do much more.