1. A New Direction for London’s Housing? An Alternative View Christine M E Whitehead LSE Evolving London GVA Second Series, October 13 th 2014 Kings Fund, London

2. The Housing Problem: Is there anything new to say? At one level not really – everyone thinks they know the problem but no-one really knows the answer Housing now regularly comes top of the list of political concerns, especially in London Problems include affordability; access to owner- occupation and generation rent; lack of social housing; and most importantly low levels of new supply The two biggest problems are: plans are unrealistic and political courage is very limited (nil?)

3. What are the big issues? Shorter term problem arising from the financial crisis and the subsequent near closure of the mortgage and development funding markets Longer term problem about the slow and inadequate response of new supply to changing demand The volatility of house prices and the concentration of demand in London Structural changes in tenure and affordability Reductions in government support for both supply and demand - which are unlikely to be reversed whatever the result of the election Plans need a reality check

4. The basics 1: London’s demographics London’s population grew by 88,000 a year 2001-11 – 1.1% Young population: births exceed deaths Substantial net international inflow Large net flow out to rest of UK But net outflow has been lower during recession So both shorter term and long term pressures

5. How big is London’s housing problem? Updated projections suggests 53,000 homes a year required This still implies falling headship rates for 25-34s. ‘No age group worse off’: 63,000 homes a year. Alan Holmans: 23,000 affordable homes a year 15 boroughs housing a third more households in over 20 years? London’s housing shortfall could be around 30,000 homes a year

6. Looking at the 25- 34s Many fewer single person households More ‘others’ More couples – with and without children. What has been happening?

7. What might happen 2011 to 2021? Cohort requirements from DCLG’s 2011-based projection (based on 53,000 pa) 149,000 homes released by households aged 35-74, many from moves out of London – but will there be somewhere for them to go? Biggest impact of undersupply likely to be on groups with biggest net requirement

8. The Basics 2: Economic Fundamentals Building more will not have much immediate effect on prices – unless everyone is convinced that we can and will go on doing so for a very long time. The evidence of the past 30 plus years is against this. So no easy or immediate benefit – even if numbers can be increased rapidly; The recession has reduced household formation – so any economic improvement is likely to offset demographic changes putting further pressure on the market resulting in higher prices and lower standards of housing and occupancy; The demand for housing rises not just with demographics but with incomes – so economic success means higher demand. The easiest and worst way of reducing house price increases in current conditions is to have a recession – especially in London – this is NOT what anyone wants; So unless fundamental reductions in demand from existing households the problem will not be solved But that is not a reason not to try

9. The Basics 3: What are we going to build? Plan assumes (has to assume?): - building within the GLA boundary - building high and high/super density - building for the private rented sector - continuing to build significant proportions of social and affordable housing; Planning permissions have now risen in line with requirements and starts beginning to come forward; But very different development model from before the crisis and many reasons (including experience) to expect completions to be far behind.

10. The Basics 4: Where are we going to build? Latest suggestions: - Opportunity /housing zones - Garden cities and/or cities within cities? - Change of use from commercial Greenbelt/greenfield? All must be tried, but All have major issues (including the potential fro building the slums of the future) and likely to be slower than predicted Still massive political objections to development

11. The Basics 5: Who will build/finance? Established developers – can they expand and do they want to? Smaller and medium sized builders (inc self build) – major planning and cost issues Bringing in developers and contractors from other countries – need knowledge and support Role of institutional funders – the wall of money but management skills? Local authorities: only with partners Housing Associations: social and private renting?

12. The Basics 6: Role of Government Planning not the only issue – but still many barriers Vast number of government initiatives –all currently very small and need to be maintained and developed into a more coherent whole Most initiatives if they work will work slowly - need stability and commitment At regional level – micro monitoring and management having some success The basics are still that there is less money and more uncertainty

13. Conclusions If London is to remain a world city the housing problems will not go away; Those who are prepared to pay more and live in worse conditions will outbid those who can make other choices; Need to do all that is possible to build – but new initiatives take longer to get going; Can more be done in more traditional ways – especially in the outer suburbs; Can intermediate tenures play a larger role? Need to improve outward mobility; Need to tax established households more effectively; Need commitment and stability in both policy and the macro-economy!