London’s housing shortfall is running at more than 20,000 homes per year and too many of the properties under construction are aimed at wealthy buyers, according to research that warns of a growing affordability gap in the capital’s new housing stock.
A report by estate agency Savills warned that businesses could be forced out of London because their workforces cannot afford accommodation, while overcrowding forces young professionals to live longer with their parents.
More than 50% of housing demand in London comes from households earning less than £50,000 year, according to Savills, but developers are instead focusing on high-end prime properties. These cost more than £2m to buy or £5,000 a month to rent, with many ending up in the hands of overseas investors.
“Builders’ focus on wealthier, equity rich and credit-worthy buyers since the credit crunch means that a disproportionate amount of stock is being delivered at what we call ‘new prime’ levels,” Savills said.
Opposition politicians accused the government of allowing useless homes to be built, while ordinary Londoners struggled to afford to stay in the capital.
In the report, London Demand, Savills said 50,000 new homes were needed annually — almost double the 28,500 a year being built currently — to meet the needs of a growing population. The number of people in greater London increased by 14% between 2001 and 2011 to 8.2 million, and is set to grow by another million by 2021.
Susan Emmett, Savills’ residential research director, said that 60,000 new homes were built per year during the capital’s last population peak, in the 1930s.
“Today, the signs of overcrowding lie behind closed doors: the young professionals forced to live longer with their parents, the house sharers doubling up to meet rising rents and businesses moving out of London because they can’t afford to house their workforce,” she said.
The latest Land Registry figures show house prices in London have risen by almost 10% over the past year — to £393,462 — and figures from mortgage lenders show that first-time buyers are having to borrow more than ever before to get on the property ladder.
Meanwhile rents have hit record levels and some local authorities have resorted to moving homeless families out of the capital because of the high costs of housing them.
The new prime market for wealthy buyers and renters accounts for just 6% of demand, which is currently being met with the creation of 3,000 properties a year. In contrast, there is a big supply gap in affordable homes, costing up to £280,000 to buy or £1,200 a month to rent. Here Savills said there was a need for 28,5000 new homes a year, but only around 13,500 were being built.
The report said the biggest requirement was for homes to rent. It found that £12bn a year should be invested in private rented housing, compared to the £7bn currently invested.
Currently £2bn a year is spent on prime rental properties, almost the same as on rental homes for those earning below £50,000 — when the figures should be £0.6bn and £5.4bn respectively.
Emmett said: “Unless we are careful, the shortage of homes will start to impact on London’s ability to compete. We will start to see businesses think twice about coming to a city where they can’t afford to house their employees.”
Darren Johnson, a Green party member of the London assembly, said developers were building “too many expensive flats for super rich investors”. He added: “The mayor thinks that people renting overpriced flats on insecure tenancies will be happy to see these luxury flats go up because it means more supply, but they’re useless if they’re not affordable.”
The shadow housing minister, Emma Reynolds, said the government had “failed to get a grip” on the housing crisis, and reiterated Labour’s pledge to double housebuilding by 2020. “The country is facing the biggest housing crisis in a generation and it is at its worst in London. This chronic housing shortage means that the cost of buying or renting a home in London is fast becoming unaffordable for many Londoners,” she said.
“Unless the government acts now to ensure more affordable homes are built then soaring prices will put homeownership out of reach for young people and families in London and across the country.”
Roger Harding, director of policy and campaigns at the housing charity Shelter, called on the government and mayor to “take more decisive action to build the affordable homes London desperately needs”.
He added: “We hear from people every day who, despite working hard and earning a decent wage, are having to cut back on essentials in a bid to keep up with their rent each month. And, with demand for properties far out-stripping supply, the prospect of a home of their own continues to slip away for many young people and families.”
This article originally appeared on guardian.co.uk
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