18 June 2015
Homes For All
by J R Thomas
Ten years ago it looked as though the hot potato which is the UK’s housing policy had finally been nicely mashed. The introduction in the 1980’s of a free market in new residential lettings had greatly widened the availability of places to rent, and ensured a rapid improvement in quality as landlords began to compete to attract and retain tenants. A new class of investor appeared, the “buy to let” landlord, private individuals investing into one or perhaps a few residential units, as an alternative to stock market investments or as a pension substitute. This gave further variety and choice in the market.
In social housing the transfer of much housing stock from local authority control to Housing Associations (“HA’s”) was a major success. The housing associations were usually comparatively well managed and did not have the financing conflicts that inevitably fall on local authority budgets, so were able to more clearly set priorities and run their housing estates. Rent controls were relaxed to let social housing rents move in line with private rents, though at a discount. To ensure that those unable to pay were not disadvantaged, the social security system was reformed so as to support those unable to pay a full rent.
The resulting improvement of HA finances funded not only the improvement and modernisation of their existing stock, but also enabled them to start building new properties. The more entrepreneurial also moved into building private rental properties, and even mixed estates where some units would be sold off, often as shared-purchase sales, so that the younger and less well-paid could make their first purchases.
The recession of 2007 had some strange side effects on the housing market. House prices began to decline steeply, especially outside London. The effects of this were mitigated by a very soft touch approach by the mortgage providers who were surprisingly constructive (compared with the recession of the early 1990’s) in rescheduling debts, often turning defaulting owners into tenants. For the first time since the Second World War the percentage of owner-occupied homes (around 80% at its peak, the highest in Europe) fell. Such was the demand for renting homes that in London rents actually rose through the recession.
The housing associations were not unaffected by this. Although controlled rents were relatively steady, for many tenants ability to pay became a problem and arrears rose. This especially affected HA’s that were dependent on the private rented sector or private sales.
Construction of new stock came almost to a halt, just at the time of a huge drift of people into London from the rest of the UK and also from Europe and beyond, looking for work. This created a huge demand at the lower end of the housing market at the very time affordability was low and new supply very restricted. Housing was once again a hot political potato.
And so it has remained, especially in London. Indeed, it is probably the reason why the one area in which Labour significantly improved its number of votes in the recent election was in the London seats. Young people continue to move to London in the hope of finding work (and often do so) but wage levels have remained flat. Construction of housing units has improved but most of this has been at the upper reaches of the market – not just the £4,000 a square foot luxury apartments in Knightsbridge, but also £1,000 per square foot two bedroomed flats in locations as disparate as Brentford and the Royal Docks, aimed at rising young professionals.
At the lower end – those on £20,000 to £40,000 a year salaries – which includes most London teachers and policemen, not just school leavers and first jobbers – the supply remains very tight. It is almost impossible to rent any flat for less than £1,000 per month in the inner London boroughs, and any advantage from moving further out is negated by high tube and rail fares.
That has created a mood of resentment among the young who, naturally, blame the government. Housing is one of those problems which are usually with us, and to which there are rarely quick easy solutions. There are always sound bite points to be scored, and one that resonates currently is that the Knightsbridge apartments, especially the ones allegedly owned by absentees, are restricting supply to the lower end of the markets. It seems likely that the opposite is true – the wealth created by the construction and servicing of these buildings, and the expenditure by their rich owners on their (if only occasional) visits, creates economic growth which trickles down into improving wages and capital creation for activity at that lower end. But the political resentment festers.
What is restricting low level supply is twofold. Firstly, finding the land to build on. In spite of the protestations of politicians, a lot of the so-called brown land in London is not suitable for building on – often because it is actually still in use for something (all those delivery lorries have to be parked somewhere), or has structural or contamination issues. Secondly, there’s the problem of getting planning permission to build even when the land has been acquired and the funding is in place. We all want more housing – but not next door, or if it means demolishing our favourite shop, or might create noise or congestion, bring in difficult neighbours, or keep us awake though building disruption. That is what politicians have to overcome to get the supply chain swelling, and the results cost politicians their seats. The common trick at local level is for councillors to vote against development and let the planning inspector make the decision to proceed! The political blame is avoided but the development eventually (eventually) gets built.
Given the land shortage and the political dimension, the trick is “intensification” – getting more square footage onto a given piece of land. City of London office developers are the masters of that. In the 1960’s seven-story buildings were taken down to put fourteen storeys in their place; now those little towers are coming down – and forty two storeys are going up instead. The residential developers can do that too. In Ilford, the ground-level covered Ilford Market has gone – replaced by shops, a massive restaurant, an equally huge gym (a splendid example of commercial symbiosis) and thirty-odd floors of flats above – 300 flats for rent and sale. At the upper end of the scale, Heron Corporation knocked down the City of London’s western fire station and built a new 8 storey home for the Guildhall School of Music and Drama – surmounted by a further 36 floors containing 284 luxurious (tiny but perfectly-formed) flats.
The developers are increasingly ingenious in winkling out new plots to send soaring into London’s spiky skyline. Toynbee Hall, east of the City, long a centre of help and healing for distressed East Enders, is busy recasting its buildings to build residential on part of its gardens, take down some poor quality 1950’s space, and get more offices and housing onto that land. But its aspirations are nothing compared with those affecting the Holland Estate across the road, next to the famous Petticoat Lane market.
This estate is an attractive 1930’s red-brick mock-Georgian sprawl of 5 blocks of 160 or so flats, housing 600 people, set round gardens and courtyards. It needs modernisation certainly (there are no lifts, for example) but it is well and solidly built, with good sized rooms suitable for families. It belonged to Tower Hamlets Council but was transferred to EastEnd Homes, a large local housing association. EastEnd obtained a £5m grant in 2006 when they promised to spend £15m modernising the estate. This was delayed by the recession, but while EastEnd thought about it, they had a better idea.
Their better idea was intensification – knock the existing estate down and start again with a high-rise estate anchored by a 25 storey tower. This provides a substantial increase in housing on the site, by at least 60 units, but actually will reduce the amount of social housing units because much of the new build will be private, and sold to owner-occupiers to pay for the new scheme. There is a furious row going on here, with the current occupiers almost unanimously against the scheme (and one might wonder what a housing association is for if it is effectively selling off its tenant’s homes.)
But EastEnd has a point; London needs more housing especially in the inner city, the high rise is probably appropriate right next to the towers of the City of London, and the economics of it do work.
The Holland Estate battle will be hard fought, and will no doubt be repeated in many London boroughs as the struggle to make the economics of low cost housing work continue. One thing is for sure – if we want to house the young, the poor, the vital professions and services, we are going to have to accept some sacrifices to London’s skyline and existing buildings.
