New research from upmarket property agent Savills shows London is facing a serious housing crisis over the next 5 years, with thousands of people set to be priced out of the rental and ownership markets.
The Guardian and the Financial Times report that Savills estimates that an extra 70,000 households a year will be unable to rent or buy property at the market rate nationwide. That equates to an extra 350,000 people who will need government assistance just to find a place to live by 2020.
Of the 70,000 annually priced out of the market, a huge 26,000 are forecast to be in London. The FT reports that this includes 5,000 households each year earning £35,000 a year or more — and even a household income of £60,000 may not be enough to live in the capital, according to the report.
The research assumes 200,000 new homes will be built each year in England, but that prices will continue to rise at their current rate.
Between 2005 and 2013, 900,000 extra people moved to London, but only around 175,000 new homes were built, according to stats from London estate agent Foxtons. That’s putting a huge amount of pressure on rents and house prices.
Savills’ sets the bar for affordability at 30% of gross household income spent on either rent or mortgage repayments.
The average wage in the UK is around £25,000, but Savills’ research looks at household income rather than individual income. Those on a total of £35,000 will likely have children to support, which is where the affordability crunch comes.
But there’s also an affordability crisis for lower paid professions, many of which are hugely important for the functioning of London as a society.
The FT cites a separate report from think-tank Centre for London that claims that within two years senior nurses and teacher will be unable to find affordable housing in London. The report points to a growing invisible housing crisis in the capital, whereby young professionals are forced to live with their parents for longer.
To make matters worse, the government is slashing price capped affordable housing and rental supplies, just as need is growing: developers to allowed to sidestep quotas on building affordable housing if they are building “starter” homes; Right to Buy is being extended to let housing association residents buy their property at a discount, thereby reducing stock; and housing benefits are being tapered to bring people to pay market rate rents.
The Guardian quotes Chris Buckle, associate director at Savills research, as saying:
There can be no question that we need to boost housebuilding volumes, but these new homes need to be built across a variety of tenures to put homes within reach of those in greatest need.
Our concern is that new policy will result in a greater shift from sub-market rental products towards more expensive shared ownership and starter homes accessible only to those on middle incomes.
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.