London house prices: Solving the capital’s housing crisis needs more than just cynical promises from mayoral hopefuls
Tottenham’s resurgence near the top of the Premier League seems to have dovetailed with its housing market, which has shot up 10 per cent in a year.
Massive investment across north east London from long term investors such as Grainger, Argent and Legal & General is transforming the area, with a high focus on build to rent.
Crucially, many of these homes will be priced sensibly. Seeing this happen across London will be the single biggest challenge for the next mayor.
It’s a shame therefore, that housing remains a political football with awards for cynical promises designed for lazy headline writers. Take some of Sadiq Khan’s pledges; his London Living Rent cannot be delivered because he lacks powers to enforce it. Attacking landlords constantly does nothing to solve the problem – it only vilifies people without solving any problems.
Khan’s pledge to demand that half of all developments are “affordable housing” is laudable but totally unworkable without house building being taken back under public control.
Let’s get things in perspective: housing as we know it is almost universally delivered by the private sector. Even housing associations develop a lot of their dwellings for profit to subsidise the affordable stock.
Building homes requires financial risk and demands a whole host of cards to stack up: from banks and pension funds where you and I invest. These guys cannot build at a loss. And in London, where land and construction prices have soared, there’s more chance of Maria Sharapova winning Wimbledon this summer than new housing developments springing up with 50 per cent affordable housing.
The solutions to providing affordable housing are complex, but crucially, what we need is a mix of homes for rent, for sale and for shared ownership. If we want things to be subsidised then cost needs to be taken out of the chain – either through tax breaks or cheap land, which TfL, the NHS and MoD has a lot of.
One key spot of sense in Khan’s proposals relates to attracting institutional cash – pension fund and insurance money – into housing. We’re already seeing this being used to great effect across the capital.
Essential Living, which delivers homes specifically for rent, is delivering a pipeline of 5,000 homes for rent everywhere from Archway to Greenwich. Hub, a mid-market developer, has just topped out a tower above North Acton tube funded by M&G Real Estate. Another of its projects is revamping EMI’s Old Vinyl Factory in Hayes. Outside of London, companies like Moda Living are using institutional cash form the Middle East to regenerate Manchester, Liverpool and Leeds.
Getting more of this long term money into London is vital. And it’s notable that Zac Goldsmith – from that party well known for favouring home ownership – seems to be big on build to rent.
In his housing manifesto, Goldsmith today steered away from making blanket unrealistic promises and instead majored on the importance of build to rent. He set out three key routes to doing this which began with using public land for rental homes.
A “guarantee that a significant proportion of homes on public sector land are built for rent” could generate a windfall of income for cash-strapped councils, for instance. An old council office block in Seven Sisters is being developed by Grainger to create vital housing for rent a stone’s throw from Tottenham, for instance.
Goldsmith also promised to “amend the London Plan so it is clear that build-to-rent proposals should be considered favourably in planning decisions.”
This is crucial to ensure that homes are kept for rent and not flipped, but also enables pension funds to make things work financially.
Alongside that, he promised “a new viability assessment specifically for the build-to-rent sector” – a further move that recognises the fact that investors have to tie their cash up for decades whereas with regular housing, they sell it and make a quick profit.
The benefit for Londoners of long term property investment can be seen first hand at Kings Cross where Argent has created a new district. Mini-villages created through institutional investment will pop up across the capital. One of the first new schemes will be Vantage Point in Archway this summer.
Whether the reds or blues win in May, let’s just hope that housing as a political football also goes on a summer hiatus.
While I’ll be singing for the boys in blue to win the Premiership, the jury’s still out for me on the mayor.