Friday 14 November 2014

Housing conundrum in London

I went to a lecture this week at the University of Greenwich, given by Nick Raynsford MP on the subject of housing.  He has 40 years local and central government experience in this field and an encyclopaedic knowledge.  These are my thoughts that he stimulated.

I never knew that after World War II there was a policy to reduce the size of London, which was part of the rationale for the New Towns outside but near London.  Apparently this policy failed because there was a negative economic effect, and by the 70s the policy was reversed.

The problem in London is the lack of affordable housing.  We all know this.  The conundrum is what to do about it.

Just leaving it to the private sector does not work because they are always looking for maximum profit, and there will always be a large disparity in the incomes of different people, meaning that the low-income people get priced out.  One obvious solution to this is to have more supply than demand, but the private sector are not daft enough to do that.

So what about regulation of the private sector, at least in the rental market – what about going back to rent control?  The danger is that the properties will not be maintained by the landlords, and at some point landlords will step away from the market creating a huge rental shortage.  What could be helpful is regulation to limit rent increases over, say, a 3 year period, allowing for some certainty for the tenant without locking them in.

Do we need public sector controlled housing then, back to council houses?  Was it a huge mistake to allow them to be bought at all, let alone at far below the market price?  It seems there is no appetite in government to go back to this model, although I don’t see anything wrong with it – why not a PFI on a block of flats so that the government is in control, the developer gets paid over time, and the tenants are protected?  The favoured model for this seems to be Housing Associations, and that’s fine – my mother and brother live in such a flat and it works well for them.  Can we get more joint developments between housing associations, government and the developer companies?

I asked the devil’s advocate question “why not seek to make London smaller again, or at least stay the same size, and focus on housing expansion elsewhere in the UK?”.  The answer came that it would, as post-war, be an economic mistake to limit London’s growth … however there’s nothing wrong with initiatives elsewhere in the UK as well.

Mr Raynsford’s summary was that we need sensible, not extreme, action on many fronts.  I agree, because as with all significant challenges where there is no single magic bullet, we need the cumulative effect of many coherent and aligned actions to achieve a sustained response.  I pointed out that the challenge for our society is that housing policy needs to be strategic over a long timescale, and yet politicians who are masters of the policy operate on a comparatively short-term basis.  Mr Raynsford smiled and agreed.

CODA

It occurs to me that everyone still uses the phrase “getting on the property ladder” and I have been saying for a few years now that it’s not a ladder, it’s a roller-coaster, and if property prices are falling (or you need flexibility on your location) then renting is far better.  We still seem to have in our DNA this need to own our property, and it really doesn’t always make sense.  Worse still, the whole expectation that it is a ladder, allowing you to climb up the wealth tree because the next owners will pay far more than an inflationary increase, is surely part of the reason that we now have this problem – young people with normal jobs cannot afford to buy a property.  I benefited from the boom in the 80s, got started with just our own money, got up the ladder to a big house with mortgage paid off – without that I would be poorer now … but I am going to be poorer anyway because I need to fund the deposits for my two daughters so they can buy their first property.  It’s a mad circle.

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