London has had a chronic shortage of housing for well over 30 years. This doesn’t just mean there are lots of people who can’t afford a decent roof over their heads – it also means lots of other people are spending far too much of their income on mortgage or rental payments with a corresponding impact on the economy and vital signs for a civilised society, like child poverty.
No other Northern European country has this type of housing shortage and this is almost entirely because in the UK we have largely left housing supply to the builders.
House builders have their place in the market but their whole financial model is based on restricting supply to avoid depressing the price. A housing model based on the vast majority of new housing being delivered by private housebuilders just doesn’t work.
This has not always been the case. Indeed, in the decades following both world wars the construction of homes for rent far out stripped that for sale – the public and private sectors both building substantial quantities of rental housing.
Our post mid-20th Century obsession with housing for sale has helped to create both economic and social divisions. Those who have the wealth to buy a house and pay for it acquire an appreciating asset making them better off year on year. Meanwhile those who can’t afford to get on the ladder face ever increasing housing costs and insecurity.
Rental housing has become a choice of last resort for the young and low paid. Add to this the UK rental market in the UK being traditionally poorly regulated and dominated by amateur and small-scale landlords – leading to poor standards of management and insecurity of tenure.
At the same time, publicly owned housing has suffered from a chronic lack of investment, poor management and (not surprisingly) unmanageable demand.
This again was not always the case. In the 1930s when the London County Council built the Becontree Estate in Dagenham renting was more common than buying and people aspired to live in publicly owned rental housing because it was the most desirable housing of all. This was not unique to East London.
Governments since 1979 broke with the post-war consensus and took the view that public housing should only be for the very poor and every incentive should be used to encourage the economically active to buy their own home regardless of the effect this has on labour market mobility and the wider economy. The fiscal and other incentives given to home buyers in turn reduced the rental sector to a poor cousin.
This in turn made publicly owned housing less attractive to the very people it was originally intended, and today form the ‘squeezed middle’ in limbo between high rents and unaffordable mortgages.
This coincided with local authorities being reduced to rationing a fast-diminishing pool of publicly owned housing rather than replenishing the stock they had lost.
In the long term, home ownership will always hold its appeal and reward those who have the good fortune to invest in it. However, it is not an option for the many for whom a supply of good quality well managed housing is the answer.
A significant supply of good quality rental housing has the healthy effect of dampening the retail housing market particularly at entry level, which is why housing for sale is generally more affordable in mainland Europe. Ironically, a home owning democracy is made more secure by having a vibrant rental market.
If we are going to tackle the current hosing crisis, local councils need to look at their role in the housing market a fresh and return to their role of delivering good quality homes for aspirational working Londoners.
We need to reclaim publicly owned housing and get out of the mind-set that it should only be for the most disadvantaged. Part of this involves stopping calling it social housing which has a pejorative tone and reinforces the ‘tenure of last resort’ message.
Let’s start building good quality homes for rent that are publicly owned and managed but are available at a variety of price points for the people we need to live in this city.
When the Becontree estate was built it housed London’s key workers, police officers, fire fighters, train drivers, industrial workers. We need to build homes for these people again. For too long we have left them to try to buy in an overheated market or to rent in a poorly regulated private sector.
We now need to start providing homes which can be rented at different price points to take account of different salary levels and where rents can be adjusted according to changing circumstances and where we can move to larger and smaller properties as we go through the cycle of life.
Of course, in doing this we have to provide ways for people to deal with the down sides of renting. Particularly what you do when you retire or no longer have an income to pay rent and how can you accumulate a capital sum to buy property with or bequeath to others. This means a new approach to shared ownership, equity share schemes and rent set aside schemes.
These aren’t easy things to get right but we need to do this as we start to build the new public housing of the 21st Century.
In doing this we need to learn the lessons of what worked and what went wrong in the last century.
Too often the design or construction of public housing was unsuited to its location and function. Many Councils failed to manage and maintain their stock properly often creating a culture of neglect which became self-perpetuating.
Allocations and rental policies also perversely encouraged dependency and focused the rental subsidy on the property not the individual. This trapped people in particular locations as well as encouraging other social problems like under-occupation and sub-letting.
For a city to work properly it needs to have a properly functioning and balanced housing market. That London has grown and thrived without one is may be called lucky but depending on luck is no way to plan for the future.
To make the market work the public sector has to intervene to deliver supply that the private sector cannot, and balance that market so it meets the city’s need.
This means local authorities starting to build again at scale and building a new product which meets modern needs not just rehashing what they did in the 1970s.
Our new municipal housing needs to look and feel like good quality private sector build and be managed in the same way. It also needs to comprise units which can be rated at different price points from current council rent levels up to full market price – all according to the circumstances of the occupant. And it needs to attract people with aspiration who are in employment at rent levels which don’t take an excessive percentage of their take home pay.
This is all possible if we put our minds to it and break out of the confines that ideologues of the past and start to think about how we deliver the housing that Londoners needs and deserve.
Local authorities have the remit, borrowing ability and planning powers to transform London’s housing market. We need to rise to the challenge. If we don’t London will ultimately lose out with the all-too-familiar ravages of economic neglect, social decline and rise in disadvantage. That is not a London I want to see.