The connections between the capital’s high and rising housing costs and the fortunes of its people and the city as a whole are large, various and recognised by a wide range of interested parties. Boroughs, businesses, clued-up campaigners and even Boris Johnson agree - along with increasing numbers of Londoners, of course - that many more homes for low and middle income households are required if London is to function well, both as an economy and a society.
But the impacts of the crisis aren’t always understood as precisely as they might be. A new analysis published by think tank Centre for London brings into sharper focus its particular effects on poverty and inequality. Tony Travers, Sam Sims and Nicolas Bosetti identify three distinct consequences of house prices in Greater London increasing a staggering six-fold over the past 20 years and private sector rents by a wounding 20% in the past five
They begin by documenting how rising housing costs have hit Londoners’ living standards, especially those of private renters who have been less protected from recent trends than others. Their incomes after their housing costs are taken into account have been falling since the start of the century, especially in Inner London. That of owner-occupiers has fallen too, although by less. By contrast, those in social housing, whose rent levels are set by a government formula, have seen their incomes increase on average. One result of this disparity is that, as the Trust for London’s poverty profile showed, the private rented sector has seen the highest growth in households in poverty. This partly reflects other changes, such as stagnant and falling wages in Inner London and the increase in the number of housing benefit claimants in Outer London, but rent levels are at the heart of it.
Secondly, the researchers show how the housing market is increasing inequality both between London and the rest of the country and within London itself. The combination of booming prices and the increasing size of the deposit needed to buy a house are, in the words of the report, “inflating the wealth of those who own their own home while simultaneously reducing the number of people who are fortunate enough to do so.” This explains the large fall in the percentage of owner-occupiers in London: a drop of 12% between 2004 and 2014 to 27%, which is now smaller than the figure for private renting.
Finally, the suburbanisation of poverty is examined. Although poverty rates - the proportion of poor people in the population rather than the number - are still highest in the parts of the city where they’ve long been highest, primarily east and south-east London, Islington and Haringey, they have been falling in those areas and catching up in Outer London, notably in Brent, Enfield, Redbridge, Croydon and Hounslow. This won’t have been caused by only by housing costs: there has been downward pressure on wages in these areas too. But the unaffordability of Inner London housing is seen as clearly implicated in these changes.
The report makes some closing observations about government policy, and how it could address London’s housing costs. While boroughs and other London public bodies can do something to increase house building, and mayors can make a difference to living standards by lowering transport fares and even helping to reduce housing costs in the long term, central government has far more power yet seems reluctant to use it or give it away.
“What is required is a comprehensive review of property taxes and the incentives they create, to produce a less distorted, more economically efficient and socially sustainable housing market,” the report’s authors say. Good idea, but let’s not hold our breath. They soberly conclude: “If house prices are allowed to continue to rise this will make the centuries-old struggle against poverty and inequality in London even harder.”
Read the Housing and Inequality in London report for yourselves here.
