We’ve long known that London is at the centre of the housing crisis – and that this has devastating impacts on its residents. Now we know that it’s harming its economy, too.
Homes are the foundations of all our lives. But for so many Londoners, a decent, suitable home simply isn’t affordable.
There isn’t enough social housing – 300,000 Londoners are on the social housing waiting list. At the same time, London’s private rented homes are extortionate, and increasingly out of reach for those on low incomes. And for many, buying a home is a pipe dream.
The impacts of London’s housing crisis are horrendous. It pushes people into homelessness in record numbers: an estimated one child in every classroom is homeless. It locks people in poverty. It damages their health, their wellbeing, their ability to take part in society. And we think it’s increasingly pushing people out of London, risking our capital becoming just a playground for the rich.
The human impact of the housing crisis is clear. Now we know that it’s holding London’s economy back, too.
Housing affordability and growth
Economic growth and the cost of housing are closely linked. More affordable housing creates a more dynamic and efficient labour market; it attracts talent and boosts productivity.
It sounds obvious. But thanks to this new research by NERA - the first to model and quantify the relationship between London's productivity and housing affordability - now we have the data to back this up.
Commissioned by City Hall, London Councils, Trust for London and the G15, NERA looked at over 140 local authorities across London and the South East, using data from the last 20 years. Its core finding was clear: when housing costs go up, productivity goes down.
The human impact of the housing crisis is clear. Now, we know that it’s holding London’s economy back, too.
Specifically, it found that an increase in housing costs by 1% reduces productivity by 0.14%. This might sound insignificant. But across the whole of London, it has a huge impact.
If you were to reduce housing costs by just 1% across London, it would bring £7.3bn in benefits over 10 years.
The new government has made economic growth its number one priority. This report shows that if it’s going to achieve its ambitions for national economic growth, the government needs to tackle London’s housing crisis once and for all.
What needs to change?
So how do we make housing more affordable? Ultimately, the only answer is a once-in-a-generation investment in social housing.
This will cost a lot of money. But this solution makes economic sense, too. Research from Shelter shows that building 90,000 social rented homes would add £51.2bn to the economy.
When the Treasury invested in building affordable homes in the past, the money came back, with profits. We need long-term thinking to override short term constraints.
Ultimately, the only answer is a once-in-a-generation investment in social housing. This will cost a lot of money. But this solution makes economic sense, too.
But building the amount of social homes that London needs will take time. We also need faster solutions - such as permanently linking LHA rates to the cost of living, so that more homes are affordable to Londoners on the lowest incomes.
The scale of London’s housing emergency is awful. This new research only adds weight to the urgency of taking real, ambitious action. Not just for the good of London and Londoners, but for the economic growth the government is relying on so that everyone is better off.
You can hear more about the research in an upcoming online webinar, on 30 January. Sign up here.
