London’s Insane Housing Bubble – and the Sickening Greed that is Strangling the Capital

30.6.14

Everywhere I look in London, monstrous new housing developments are rearing up — unaffordable to most working people, and largely bought up by foreign investors. While some take up residence, others leave their investments empty or join the frenzy of home-grown landlords in the buy-to-let market, fleecing an ever-increasing percentage of London’s workforce, who simply cannot afford to buy a property and have no choice but to cough up whatever outrageous amount they are asked to pay by landlords who have been unregulated since the days of Margaret Thatcher, the great liberator of unfettered greed.

This is the new London, in which those involved in new housing developments act as pimps for rich foreigners and for Britain’s own wealthiest property owners, and struggling British workers are preyed on by their fellow citizens, in a market driven by the greedy sense of entitlement that motivates far too many landlords, and a housing bubble kept inflated by the government and the Bank of England, whose refusal to raise interest rates is the primary driver of an economy in which profiteering on housing is seen, by far too many people, as their only viable investment.

However, the situation is now so dire that last week a YouGov poll commissioned by the Evening Standard — normally nothing more than a front for the mortgage industry — revealed that “[h]alf of Londoners want house prices to fall.”

A third of respondents said they wanted property prices to go down “a lot,” while another 18% wanted them to decrease “a little.” Just one in six people expressed a hope that prices would continue to rise. As the Standard noted, with house prices rising at almost 20% a year, there have, since May, been “signs of a slowdown,” with Londoners “refusing,” or, more aptly, “unable to pay ever more astronomical sums.”

Breaking down the figures, it transpired that those aged 25 to 39 were most concerned, with 56% of this age group “wanting property prices to fall.” Of the over-60s, 38% backed lower house prices, while 21 percent wanted prices to rise further.

The differences in the responses of the various age groups was unsurprising, of course, as the over-60s are “far more likely to be owner-occupiers,” as the Standard put it, while the 25-39 year olds are those lumbered with the tag “Generation Rent” by complacent media outlets. I was appalled when that phrase was first coined, as it was indicative of an indifference towards inequality that had even contaminated established journalists, who once upon a time would have been up in arms that the government and the Bank of England, with the collusion of a servile media, was making younger people into the victims of a rigged housing market that favours those who are older and richer.

Responding to the poll for the Evening Standard, Paula Higgins, the chief executive of the HomeOwners Alliance, a lobby group that “champions the interests of Britain’s homeowners and aspiring homeowners,” said, “There has been a fundamental, historic shift in attitudes that I don’t think the Government is aware of yet.”

She added, in a comment that is all too rare in the media, “People who own properties may have made money out of them but they now realise their children and grandchildren won’t have the same opportunities unless the Government stops this boom and bust property cycle.”

In the Guardian, Dave Hill, in his housing blog on June 24, also looked at London’s housing problems, responding to a survey, by Ipsos MORI for the Chartered Institute of Housing, which “found that 36% of the Londoners asked endure ‘a great deal’ or ‘a fair amount’ of stress over their housing costs.”

The questions were asked to both mortgage holders and those renting, and as Hill pointed out, those who were concerned also “fear that high housing costs will force them to move from the area where they live.”

This, he added, is not surprising, because the 2011 census “revealed that over a quarter of London households were renting privately, a rise of nearly ten per cent compared with ten years earlier,” and that this increasing number of people “are likely to give at least half their monthly earnings to their landlords, according to the latest figures on this from Shelter.” In fact, Shelter’s research revealed that “up to 59% of a typical London family’s income is spent on rents,” and “[p]rivate rents ‘eat up’ more than 50% of a family’s monthly earnings in 23 out of the capital’s 33 boroughs.”

“Meanwhile,”Hill added, “anyone on a half-normal sort of income who’s managed to become a first-time buyer in the capital in the past couple of years will probably be in hock up to the hilt.”

Hill also noted that, although “[r]ents are much lower in the social rented sector, which in 2011 still accounted for 24% of Greater London’s 3.39 million dwellings — down just a small amount from 25.7% ten years earlier” — that sector too has its own problems; primarily, overcrowding.

As he pointed out, an analysis of English Housing Survey statistics conducted by Shelter in 2011 “found that 43% of London children living in social rented dwellings” were living in “overcrowded” housing conditions. In London as a whole the predicament was little better, with 24% of children — 391,000 individuals — enduring overcrowding, “adversely affecting their privacy, health and education.”  This, shockingly, was an 18 per cent rise since 2008, and it is clear that, in the three years since the census and this report, the situation has only continued to deteriorate.

The day after Hill’s column was published, Shelter issued another report, this one exposing how the current housing boom means that, as the Guardian described it, “[f]ewer than two in every 10 homes for sale in England are affordable for working families on average wages,” and in some areas “would-be buyers are priced out completely, even if they can raise a sizeable deposit.”

In London, Shelter noted that there were 14 local authority areas “where not a single two-bedroom or larger property was affordable to a typical family, and in 13 there were no one-bedroom homes within reach of the average first-time buyer.” The charity also found that “in all 32 of the capital’s boroughs fewer than 10% of homes were affordable to couples with children,” and that, for single buyers, “this figure extended to the entire south-east and south-west” of England.

The Independent extracted an even more shocking figure from the report, establishing that “there are only 86 affordable properties for local families with children in the whole of London,” and, based on the report, the BBC published a table of affordable properties here.

According to Campbell Robb, the chief executive of Shelter, the solution needed is to help “small local builders to find the finance they need to get building, and investing in a new generation of part-rent, part-buy homes,” but I don’t agree. What I believe we need is a full-blown programme of new, genuinely affordable social housing — not the “affordable” figure chosen by Boris Johnson, which is set at 80% of market rents — as happened with council housing in the 1930s, and from the 1950s to the 1980s until Margaret Thatcher took an axe to it.

Under Thatcher, “right-to-buy” was a supposedly democratising programme of selling off council properties, which, as the Daily Mirror reported in March 2013, has led to a situation in which “a third of ex-council homes sold in the 1980s under Margaret Thatcher [are] now owned by private landlords,” and in one London borough “almost half of ex-council properties are now sub-let to tenants.” For good measure, the Mirror also reported that Charles Gow, the multi-millionaire son of Ian Gow, Thatcher’s Housing Minister “during the peak years of right-to-buy,” is a buy-to-let landlord who, with his wife, owns “at least 40 ex-council flats on one South London estate.”

Personally, I’d like to vote for a government that sets a massive social housebuilding programme as a priority, and that works with the banking sector to secure low-interest loans to finance it, and to provide rents set at around £50 per week per person — and if you think that’s a pipe dream, consider this wonderful self-built house, which cost just £21,000 to build (and see here for the plans).

Dave Hill has a few more practical suggestions — such as “penalising … empty dwellings, land banks and seven-figure mansions with higher taxes” and “cutting the benefit bill by switching local housing allowance outlay into investing in properly affordable homes instead,” as well as “stopping giving property developers the run of the place.”

These are all good suggestions, but, as he also notes, it will take political vision to implement any major step forward, and that seems sorely lacking. The Ipsos MORI survey found that, when “asked which political party has the best housing policies for London, half the respondents said ‘none’ or ‘don’t know’ and 44% said they didn’t think politicians were that bothered about housing anyway.”

And why would politicians act anyway? As Hill also noted, “London owner-occupiers might now be (just about) a minority — a fraction fewer than 50% compared with just under 60% in 2001 — but those many who, like me, are being regularly wooed by estate agents bearing clients prepared to buy their house from them for five or ten times what they paid for it, have grounds for feeling very content indeed.” As he added, “While one third of Londoners may have big housing expense worries, it seems that two thirds don’t,” and “[a]n awful lot of poor people don’t vote.”

Last week’s Evening Standard survey suggests a slightly different picture, as the 36 percent who are worried is replaced by 51 percent who want the cost of housing to fall, a number that almost exactly matches the majority of us — albeit small, but a majority nonetheless — who are not owner-occupiers.

Perhaps what we really need is for Londoners in rented accommodation, whether in social housing or privately rented accommodation, to capitalise on the fact that we are now a majority, and to develop a serious lobbying presence. Many people who rent may indeed be poor and may not vote, but enough of us do vote to be a threat to the existing order that favours only existing owner-occupiers. As affordability becomes ever harder for more and more people to cope with, I think we have a powerful case to make for a social housing revolution that will create a more equal and just society.

Andy Worthington is a freelance investigative journalist, activist, author, photographer and film-maker. He is the co-founder of the “Close Guantánamo” campaign, and the author of The Guantánamo Files: The Stories of the 774 Detainees in America’s Illegal Prison (published by Pluto Press, distributed by Macmillan in the US, and available from Amazon — click on the following for the US and the UK) and of two other books: Stonehenge: Celebration and Subversion and The Battle of the Beanfield. He is also the co-director (with Polly Nash) of the documentary film, “Outside the Law: Stories from Guantánamo” (available on DVD here – or here for the US).

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12 Responses

  1. Andy Worthington says...

    Thanks to everyone liking and sharing this. Housing in London is a topic of permanent concern to me, as it is so central to the ever-increasing inequality of life under this wretched government. On the one hand, there are the unaffordable “luxury” new builds going up everywhere, and the house prices going up astronomically (as in the New Labour boom, houses are now “earning” more than their owners do), and on the other hand the immense poverty that we aren’t supposed to see, but which I see an awful lot of cycling around the whole of the city like I do, and the everyday stories of people being fleeced by landlords and harassed by them that I hear about regularly – including frequent rent hikes.

  2. Andy Worthington says...

    And to get London’s housing bubble in context, Land Registry figures released on Friday showed that the price of a home in London rise by 18.5% year-on-year, so that the average cost of a home in Greater London is now an eye-watering £439,719. More at: http://www.theguardian.com/money/2014/jun/27/london-house-price-inflation-highest-level-decade-property

  3. Andy Worthington says...

    Also, here’s some information about what “affordable rent” means – the new Boris Johnson-approved scam that involves new social tenants having to pay 80% of market rates. As the Guardian explained in February:

    Last year, even the Conservative Westminster council warned London mayor Boris Johnson that plans to set new rent levels at up to 80% of market rent would require council tenants in a three-bedroom home in the borough to have an annual income of £109,000 in order to be considered affordable. The council estimated that half its social rented households receive an annual income of less than £12,000 a year.

    It should be noted that many councils fought against the mayor’s plans, and not all councils are introducing the 80% rate, but I hope that quote above illustrates quite what a disaster it is for anyone but the rich.
    More here: http://www.theguardian.com/housing-network/2014/feb/03/affordable-housing-meaning-rent-social-housing

  4. Andy Worthington says...

    For further reference, the average income in the UK is around £26,500, while the median income (the one that 50% of people earn more than, and 50% of people earn less than) is £14,000. See more here, written two years ago when the average house price in London was £388,000: http://www.andyworthington.co.uk/2012/06/25/the-housing-crisis-and-the-gulf-between-the-rich-and-the-poor-half-of-uk-workers-earn-less-than-14000-a-year/

  5. Cosmic Surfer (Jan) says...

    Hello, dear friend!

    It saddens me to see London going through the same thing we are, here in the states.
    Home ownership is for the wealthy, these days; Leasing, renting, letting only for the working man and woman as rates skyrocket here, as it appears to be doing in London. Rates going up in Denver at 15-30% annually and vacancy rates (those units for lease) sit at between 1% and 4% (a very unhealthy market, allowing for predation and outrageous demands).

    Sadly, those who lost their homes to foreclosure – even short sale (negotiation of short pay off for loans through the sale of the home. The seller cannot pay off the original debt due to the decreased value of the property and they cannot pay the balance due to job loss, medical bills or other factors) – have a hard time renting. Their credit is destroyed and they are deemed “high risk”

    Though the delusion of “home ownership” is promoted as much as ever, here, Homeowners are still under water (debt to value is reversed), foreclosures still at a peak, loans are difficult to obtain for middle class and impoverished families and those homes foreclosed are sitting vacant while banks sit on them awaiting for the next “boom” before they put them back on the market.

    After nearly 40 years in that psychotic industry, I refuse to even play. I spend my time trying to get others to understand that, in the US, there is no such thing as “home ownership” in a market of the wealthy, by the wealthy and for the wealthy – give me a title abstract and 5 minutes, I can prove it every time. Unfortunately, I don’t have the media echo chamber to push truth – It is the banking and investment industry that holds the media echo chamber pushing the lies of “home ownership”

  6. Andy Worthington says...

    Thanks, Jan, for your explanation of how the thievery is organized in the US. The circumstances are different in different countries, but the underlying premise is clearly the same – to screw as many people as possible for as much of what they earn as possible. Those who bought in previous decades and have paid off or mostly paid off their mortgages are laughing, but those with mortgages now will be paying huge amounts for most of their working lives, and those renting face a conspiracy to charge people a minimum of £15,000 ($25,000) a year, which, for a couple on the median income, is over half their salary. Once you add in how the rest of people’s earnings are going on bills for overpriced utilities and the ever-increasing cost of living, it’s a wonder any ordinary people can manage to make ends meet.
    We really do need an anti-capitalist revolution …

  7. Andy Worthington says...

    Sandy Oscar Grant Allen wrote:

    Thanks, Andy. I have friends moving back to London soon. I will be printing this for them.

  8. Andy Worthington says...

    Thanks, Sandy. I guess it depends where your friends are from and how much money they have as to how shocking they’ll find it, but rents currently seem to be starting at around £15,000 ($25,000) a year for two-bed properties. I think those with experience of some other capital cities (or second cities like New York) won’t be surprised, but unless you’re prepared I think it’s a shock.

  9. Damo says...

    The evening standard is a repulsive paper that fetishises the rich and greedy.the london houseing market is out of control,rents are out of control and it’s not going to change any time soon I recently walked alonge the grand union canal from angel to hackney …..the change was unbelievable the place has become..infested.. By the rich there everywhere consuming everything nothing is safe from them,lol grabbing grabbing grabbing mine,mine ,mine there was a news night article about Generation Y,zzzzzz 25 35 something’s young professionals and there busy lives…god help us Andy if these people are the future than drop the bombs now because were fucked,they ere greedy ,selfish and cruel..they didn’t give a shit about there fellow man..not one iota…god help us

  10. Andy Worthington says...

    Good to hear from you, Damo, but yes, what are we to do? Since New Labour got in in 1997, the only measure of life has been money, and look where it’s got us. And if anything, of course, it’s only got worse under the Tory-led coalition government. For those paying attention, only a handful of figures in the public eye discuss inequality, and no one, it seems, wants to insist that it must be stopped, even though it is clearly disastrous for society as a whole. Very sad.
    Incidentally, my friends who are in their 20s don’t match the monsters you discuss, but they’re not wealthy. It’s the ones with money we need to worry about, because the heartlessness you discuss is very real, and as a society we really shouldn’t be complacent about it – but what was it Peter Mandelson said back in 1998? We (New Labour) are “intensely relaxed about people getting filthy rich.”

  11. Damo says...

    Your right Andy some of the poorer young 20somethings that I’ve met have been ..wonderfully full of passion and ideas who want us all to move forward together and how can you not fall in love with them it’s the greedy ones who are the monsters there’s good and bad in all of us I think .

  12. Andy Worthington says...

    I agree that there’s good and bad in all of us, Damo, but as you know from experience these days, there are too few voices of weight and authority reminding people that there is more to life than making money, and that it is important how we treat our fellow human beings.

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