Good news seems thin on the ground right now, so the latest Greater London Authority housing statistics (Housing in London 2019), hinting that London’s housing crisis may be easing off at last, seem like a rare ray of sunshine on a drizzly day.
Firstly, the gap between the supply of homes and growth in population has stopped widening: the average number of people living in each home fell back slightly from 2.52 in 2016 to 2.50 in 2018, having risen consistently in the ten years before that.
The tenure shift from ownership to private renting that has been taking place since 2000 has also gone into reverse. Owner-occupation is back up to around 52 per cent – the level it was in 2012. The most dramatic shift has been among 25-35 year olds; their ownership rate fell to 27 per cent in 2016, but has bounced back to 34 per cent – around the same level as ten years ago.
Finally, cost pressures seem to be easing. Average house prices are 10 per cent lower in real terms than they were in early 2016, and private rents have risen little since 2017.
Is cautious optimism in order? While stalled rents and gently declining house prices are bad news for landlords and people seeking to sell homes, few outside the pages of the Daily Express can really be willing a continuation of the irrational exuberance that boosted London’s housing market in the first half of this decade. Most of us would welcome a few years moderation, a breathing space to allow salaries to begin to catch up with housing costs, or at least to stop lagging ever further behind them.
But there are stings in the tail. Space distribution remains unequal: more and more owner-occupied homes have spare space, while overcrowding in rented accommodation is growing sharply. And for people at the sharpest end, London’s housing crisis is still intense: more than 56,000 households are in temporary accommodation – the highest level for ten years – many living in atrocious conditions, while rough sleeper numbers have doubled over the same period.
The future also looks uncertain. Figures released last week show that April-July saw building starts of just 2,300 housing units in London – the lowest quarterly starts since the financial crash. In the year to July, just 13,800 new homes were started, 10 per cent less than in the previous year and 35 per cent less than in the year to July 2016. In other words, just as house prices seem to be levelling off, supply is slowing to a crawl.
It is beyond the scope of this piece to try to unpick the factors that connect these threads of good and bad news. Maybe better mortgage availability, the removal of tax incentives for buy-to-let, and three years of above-average housing delivery have combined with Brexit uncertainty to cool the ardour of London’s housing market.
But maybe that same uncertainty, and the prospect of stagnant prices, have also given developers cold feet, or punctured their development appraisals. Housing association L&Q’s decision to put new projects “on pause” has made the news, but many other developers seem to be taking the same approach albeit less visibly.
Simply relying on the market to build enough homes to meet London’s needs or to achieve any significant long-term price moderation is flawed. Accelerating delivery in this way has a built-in speed limiter. Building many more houses is a necessary step but not sufficient step towards addressing the problem.
Tackling London’s housing crisis will require a much broader approach – which looks at new models of supply from build-to-rent to new forms of council housing, which sets incentives and taxes to reflect housing’s role as an essential urban service not an asset class, and which finds ways to help all Londoners to find affordable places to live. Centre for London’s Housing Manifesto for the next Mayor will point to some ways to achieve these aims.
Richard Brown is researcher director at think tank Centre for London. Photograph: Housing on Roman Road, Tower Hamlets, by Omar Jan.
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