Why ‘luxury flats’ do not ‘push out’ London’s poor (and why we still need to build for low-cost rent)

Why ‘luxury flats’ do not ‘push out’ London’s poor (and why we still need to build for low-cost rent)

Among the more religious received wisdoms of recent years is the belief that if new homes for full market sale are built in a part of London, poorer resident are “pushed out” as a result. Such developments, routinely denounced as “luxury flats” even when they are, in reality, perfectly plain, are characterised as if they were settler villages – fortresses of an invading bourgeoisie destroying once blissfully contented “working class space”.

I parody, of course, though not that much. In particular, I parody the populist politics of what I call the Protest Left, although appalled Conservatives and conservationists sometimes embrace the same formula. The seemingly rival tribes find common ground in thinking all commercial property development is bad – perhaps especially bad if financed by those modern folk devils “rich foreign investors” – and the resulting homes too expensive for “local people”.

The trouble with all this, which for years has done a roaring trade in academia, upmarket liberal media and on the conference merry-go-round, is that, like all populism, it reduces a complex situation to a set of good-versus-evil slogans. These acquire a self-perpetuating momentum which, if it gets into politicians’ heads, can heighten London’s multifarious housing problems rather than reduce them.

A new housing research note from City Hall shines a searching light on this realm of foggy outrage. Compiled by the Greater London Authority’s James Gleeson – @GeographyJim as he is known elsewhere – it is very much not a polemic, and my need to point this out stems from my slight unease about recruiting it, up to a point, to my bad-tempered mission to persuade people to stop congratulating themselves for not thinking hard enough.

The note succinctly summarises seven recent studies of what happens to housing affordability when new homes are built – in particular what happens to it in the immediate vicinity of those homes in the short term. “There is already evidence that increases in the supply of housing bear down on housing costs in the long term,” Gleeson writes in his executive summary, emphasising that this applies if all other factors are held equal. This new research explores how they affect the cost of housing in people’s own backyards soon after its completion.

Gleeson finds “a number of consistent findings” in the seven studies which, using new and more precise forms of data, variously look at situations New York City, San Francisco, Helsinki, parts of Germany and estate regeneration schemes in London.

One such finding is that “building new, market-rate homes makes other housing more affordable”, not the other way round. This happens because, as the note explains, the new homes tend to be bought by local people with high incomes, which very likely entails them selling their previous home to another local household with less money.

This can be the start of a virtuous “chain”, which reaches down through the income layers and gives people near the bottom a better chance to move into somewhere better. It also has a local “supply impact”, changing the neighbourhood supply-demand balance and reducing buying prices and rents accordingly.

That is not the whole picture. Gleeson stresses that although the studies show that building new market-rate housing “increases the availability of homes affordable to low-income households”, it does not do so “as directly as building social housing and other kinds of affordable housing”. There really is no substitute for that.

His other topline caveat is that “the geographical distribution of market-rate housing supply matters”. The studies show that if market-rate homes are “focused only in low-income areas” it can indeed lead to “localised increases” and to “potentially increasing gentrification pressures”.

Furthermore, new housing can prompt improvements in local amenities such as restaurants and even bring about reductions in crime. Changes of this kind, Gleeson writes, can “generate enough increased demand to the second-hand housing stock in the area to outweigh the supply impact of new homes and therefore push up prices and rents”.

Even so, if demand for high-cost new homes goes unmet, “it is primarily low-income households that lose out,” Gleeson concludes from the studies.

That is a far cry from the righteous certainties of anti-gentrification protesters, whose seemingly unshakable premise is that if market-rate new housing is built anywhere in London, such “luxury flats” can only ever be bad for those in the neighbourhood who can’t afford them, and will inevitably result in their “displacement” or, more emotively, their “social cleansing” from the area.

In reality, it seems, the less well-off Londoners usually have more to gain from new market-level housing appearing on their patches of the city than they have to lose.

Read the whole GLA housing research note here (including links to the individual studies). If you value On London and its writers, become a supporter or a paid subscriber to Dave Hill’s Substack for just £5 a month or £50 a year. X/Twitter: On London and Dave Hill.

Categories: Analysis


  1. Guy Lambert says:

    Flats like where I live are described (by the same people) as luxury flats far too expensive for local people and rabbit hutches or shoe boxes, unfit for people to live in.
    Well, I love my flat, which is fairly compact (800 sq Ft) but plenty for me , including 2 slightly OTT bathrooms and I’m in it because I can’t afford the smallest terraced house in my area.
    This is far from uncommon, certainly in outer W London!

  2. Tony Woolf says:

    Could the reason that new-build flats are so often described as “luxury” be because that’s how the developers describe them on their hoardings?

  3. Dr Roger Green says:

    New apartments/flats for sale do not reduce London LA’s housing waiting lists for people requiring social housing/council rent level accommodation.

    1. Dave Hill says:

      The article reports the summary’s conclusion that the quickest way to improve affordability for those on low and middle incomes is to build more “affordable” dwellings.

  4. Patricia Wheeler says:

    This article is surely a joke. London is full of empty high end properties whilst schools are empty because middle of the road earners and lower income earners cannot afford the property prices. Get real, please!

    1. Dave Hill says:

      Why is the article “a joke”? It reports a meticulous summary of seven separate studies of the effects of building new market-rate homes in urban areas, all of which conclude that this has some beneficial effect for a range of local income groups. If you can plausibly challenge the findings of those studies and produce a counterargument that building fewer market-rate properties would lower prices, please go ahead.

  5. MarkJustin says:

    There is a much held falsehood that the areas of new high market value housing are all empty.Quite why someone would purchase a £2M flat in say Battersea then sit in it without moving in or renting it out is beyond believable.
    The time honoured and totally useless method of calculating unoccupied flats is the” lights on” ruse. I am forever seeing whole blocks of Council housing with very few “lights on” while the new apartments in say Battersea Power station are all on and gleaming in this high end development. A better measure of occupancy would be making use of the publicly available electoral register for these new developments to see who is occupying them. At Battersea the electoral register is growing by leaps and bounds to real people and real occupiers who are also on the Register They are NOT as is often stated “all empty”

  6. MilesT says:

    This “trickle down” benefit is based on the assumption that the new housing is owner-occupied (or full time rented) by local people.

    Which would be great, if it can be enforced. Too often it is not, with the properties being bought as “non-occuplied” investments or made available for let on a day-basis (on platforms like AirBnB, Vrbo and several others.

    That would imply that occupancy of all major new housing developments in London and other major cities handled by housing associations on a non-profit basis, with the required percentages made available for social rent (all types), market value rent, and leasehold on balanced terms. I would propose HA would offer leasehold 99 year leases with ability to renew leases at will for modest costs within a framework that provides occupier (leaseholder/renter) governance for service charges to allow occupiers to mitigate situations where the controlling HA exhibits incompetence in delivering on service contract (sadly a too frequent issue).

    It will take some careful legal structuring to ensure developers still get a reasonable profit on the development but not requiring the HA to raise large sums to take over freeholds on completion (some sort of HA commission payment to developer and/or a multi-layered leasehold structure with annual lease premiums/ground rents at each level).

    I note that TfL has been involved in some schemes (where there is transport oriented development on TfL owned land) via a arms length commercial entity.

  7. Guy Lambert says:

    Having sat for several years on planning committee, there was frequent battles fighting for affordable property and developers fighting against. Their most effective weapon is the planning commission and the inherent assumption that making less than 20% net margin is unacceptable and a reason to allow an appeal.

    Councils are working in an environment where the rules are stacked against them. “Affordable” includes things that really aren’t, though that has been better defined by Sadiq Khan.

    In my part of outer London there is very little property unoccupied, though it’s true the like of Airbnb is a problem, but far from being sufficient in supply to be a problem in supply, though they are often poorly managed and attract ASB and poor waste management.

    There are a number of private flats via being used by councils (often by other boroughs) to deal with their shortage of supply. This is valid but as partly paid by central government via benefits it is a distortion of the market.

    The other scene I see is owners who have a second property elsewhere, so technically occupied sometimes for a lot less than all the time.

    But flats bought widely for investment and kept empty are very rare, but the problem is often emphasised by owners of houses who don’t like change and worry about incomers despoiling their comfortable neighbourhood

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