The scale of the housing crisis is put into sharp focus this week as the London assembly’s housing and regeneration committee – which I’ll be giving evidence to – continues to hold Boris Johnson to account on his pledge to deliver new affordable homes. The news follows last week’s reports suggesting house prices in the capital have rocketed eight times faster than wages, according to research by LSL Property Services.
London alone requires an additional 249,000 homes over and above those expected to be built by 2020 just to meet historic and rising demand. At the same time, the government is failing to get a grip on the construction of new homes, with only 9,200 affordable homes started in the capital last year – down half on the previous year. This affects not just the very poorest, but low and middle income families and aspiring young homeowners, too.
The government’s focus on housing as an atomised asset for individuals to buy and sell, rather than as a key component of the UK’s infrastructure, seriously risks undermining the UK’s growth.
Businesses are increasingly worried about the talent they need to succeed being deterred by the expense of housing: the CBI has been calling on the government to do more to create growth and provide the affordable housing its members’ employees need. This isn’t just the same old suspects – businesses are now warning the government its housing policy is deterring skilled workers from moving to London and holding back the creation of new jobs in construction.
In a letter to the Financial Times last month, London Councils led a coalition including the British Property Federation, business group London First, the Chartered Institute of Housing and Shelter, calling on the government to lift the housing revenue account cap, which is unfairly blocking councils undertaking sensible borrowing against their housing assets to reinvest in new homes.
Research shows that a simple change in legislation could enable councils to build 60,000 new homes and create 19,200 jobs, adding 0.6 per cent to GDP – at a stroke of the chancellor’s pen.
The government has been quick to dismiss the plans as councils wanting to borrow more. But this ignores the fact that the calls come from across the political spectrum, as well as from businesses. Removing the cap has been given the thumbs-up by Capital Economics, whose research confirms councils would be able to pay the money back with little risk. Council borrowing is already restricted through prudential borrowing limits, set by HM Treasury.
In my own borough of Lewisham, we have worked closely with our housing partners to build the homes we desperately need. Last year, Lewisham had the second highest level of affordable housing completions in London. We have a programme to build new council homes over the next five years, but we could produce three times that number if the cap was lifted.
We know that investing in housing isn’t just good for the housing market – it’s also good for the wider economy and kickstarts local growth. Construction is one of the most efficient ways of guiding public investment: for every pound the state spends, 56p returns to the exchequer. Jobs in construction can be easily linked by councils to local schemes tackling worklessness and can create apprenticeships for young people.
Local authorities want to invest in housing to address local shortages and create employment. Later this month, London Councils, which represents London boroughs of all political hues, will publish a report looking at the different investment options for meeting the acute and rising need for housing in the capital. The government should take the report’s findings seriously and act on our recommendations to boost the supply of desperately needed new housing.
Steve Bullock is the directly elected mayor of Lewisham and London Councils’ executive member for housing
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