In a keynote speech at the Centre for London’s annual conference, the Mayor of London, Sadiq Khan, has made the case for more investment in housebuilding as he published a new report which reveals that just a one per cent decrease in house prices in London could yield a £7.3 billion boost to the economy over a decade.
The new research - commissioned by City Hall, London Councils, Trust for London and the G15 - outlines the significant impact improving housing affordability could have on London’s productivity and the government’s growth agenda.
The Mayor has consistently argued that more affordable housing would make it easier for London’s businesses to attract and retain workers, reduce homelessness and the reliance on temporary accommodation and make it possible for households and businesses to invest in more productive areas of the economy. This in turn would lead to more jobs and more investment for future growth.
The Mayor also used his speech to warn that the mess left by the previous government has had a catastrophic effect on housebuilding. Over the last eight years, the Mayor has got London building again, with more new homes completed than any time since the 1930s and more new council homes started than any time since the 1970s. But a combination of a lack of national funding over 14 years and the economic legacy of low-growth, high interest rates, the rise in the cost of construction materials and the lasting impact of a hard Brexit has left ‘housebuilding on its knees’. He will say that we are now ‘in the midst of the most difficult period for housebuilding for the capital since the global financial crash in 2008’.
He outlined his determination to do everything he can to support young Londoners and to fight for a response that equals the scale of the challenge. This includes building on the progress already made in London, committing to building 40,000 new council homes by 2030 and making the case for the national investment London needs – for the benefit of Londoners and the whole country.
Addressing the annual London Conference event, Sadiq also:
- Welcomed the new Government’s commitments on housing and say this is just the first step if we are to solve the housing crisis.(1)
- Outlined how government backing for the creation of a devolved City Hall Developer Fund would unlock stalled developments and enable City Hall to become a direct home builder to deliver new, low-cost housing at pace.(2)
- Called for reform to the constraints on local government to borrow to build. This includes providing certainty on Public Works Loan Board loans, which offer low-rate, long-term loans to councils.(3)
On building more affordable homes to boost growth and support Londoners, he said: “It’s a given that affordable housing is an essential feature for any economy to thrive and grow. It allows employers to recruit and retain the best talent, prevents destitution and affords households, businesses and young people the freedom to spend their money in more productive areas of our economy. In turn, that leads to more jobs, higher living standards, better growth. And the virtuous circle continues. But in London, high house prices and rents relative to income are holding our economy back. And the new research we are publishing shows that affordable housing in London is absolutely critical if we are to realise our national growth ambitions.
“Our analysis shows that even a small change for the individual can produce something far greater for the collective. In fact, just a 1 per cent decrease in house prices could boost London's economic output by 7.3 billion pounds over a decade. In short, investment in building homes people can afford, will lead to the growth we need. That’s why, as well as doing everything I can from City Hall, I’ll continue to make the case for the national investment we need – for the benefit of London and the whole country.
“If there was ever a time for more public investment in housing then it’s now. And if there was ever a place to show how government still has the capacity to improve the condition of people’s lives, then it’s housing.”
On London facing the most difficult period for housebuilding since the financial crash, he added: “When I first became Mayor eight years ago, the number of new genuinely affordable homes being funded by City Hall had fallen to the lowest levels since records began. The cupboard was left bare. Since then, we’ve got London building again, with more homes completed in our city than at any time since the 1930s. But we’ve been rowing against the tide of previous governments. I want to be honest about the extent of the challenges we now face, and about how only an answer equal in measure to the test will take us from where we are, to where we need to be.
“The mess left by the last government has had a catastrophic effect on housebuilding. Funding for new social housing was slashed. Local authority housing and planning budgets were cut to the bone. And the implementation of vital second staircase regulations were botched, slamming the brakes on tens of thousands of homes. All of this – combined with the economic legacy of low-growth, high interest rates, the rise in the cost of construction materials, a shortage of workers, and the lasting impact of a hard Brexit – has left house building on its knees.
“The housing industry rightly and repeatedly warned the previous government that it’s approach would severely hit housebuilding. But they were ignored. This has left their fears to come to pass – and is being felt most acutely in London. The truth is we’re in the midst of the most difficult period for housebuilding in the capital since the global financial crash of 2008.”
On the impact the housing crisis is having on Londoners and his determination to build more affordable homes, he said: “A lack of affordable homes is having a profound and devastating effect in every corner of our capital, impacting every part of our progress. It’s creating inter-generational inequality like we’ve never seen before. It’s shattering one of the bedrock principles Britain was built on: that if you work hard, you get ahead. And it’s having far-reaching implications for the demographics of our country and our capital.
“Ensuring everyone can have a place to call home goes to the very heart of why I got into politics in the first place: to help people from all backgrounds, races and religions to get the same shot at reaching their potential that London gave me and my family.
“The case for more housing is clearly economic and moral, vital and irrefutable. Fixing the housing crisis is not going to be easy, but it’s essential. Which is why, as Mayor, I’ll continue to fight for a response that equals the scale of the challenge. This crisis was decades in the making. But brick by brick, we can, and we must solve it - because the future of London rests on it.”
Cllr Claire Holland, Chair of London Councils, said: “The chronic shortage of affordable housing in the capital is driving up homelessness and putting the brakes on London’s economic growth.
“Astronomical housing costs absorb a huge proportion of Londoners’ income, make it harder for businesses to recruit, and are a clear drag on productivity.
“As this important new research reveals, improving housing affordability in London would bring significant economic benefits, as well as helping those Londoners most impacted by the housing crisis. This is the latest evidence of why increased investment in affordable housing is so crucial. Tackling London’s housing pressures will boost productivity and help generate the economic growth we all want to see.”
Susie Dye, Tackling the Housing Crisis programme lead, Trust for London, said: “The housing crisis is damaging Londoners’ health and living standards. Now we can see that it’s holding back our economy, too. For growth and productivity, we need a vibrant city where people can afford to live. Londoners – and especially the low-income Londoners who keep our city going – hope the Treasury and the Government will take note, and commit the significant levels of public investment needed to make London more affordable to live in, and not just a playground for the rich.”
Fiona Fletcher-Smith, Chair of G15 and Group Chief Executive of L&Q, said: “London is built on a vibrant mix of people from all walks of life. Providing genuinely affordable homes for those that need them most is an asset, not a cost, creating all kinds of social and economic benefits.
“Housing associations provide almost half of London’s existing affordable homes, and we are the engine of potential new homes. However, we are currently facing unprecedented cost pressures that mean new supply is grinding to a halt.
“We urgently need innovative funding solutions and a long-term plan from Government to restore our financial capacity and give us the certainty we need to put spades in the ground on new developments. We’ve been encouraged by the early commitments of the new Government, and will continue working with the Mayor of London and other partners to make the case for investment in social housing.”
