Housing – Page 2 – Richard Brown

You Gove to see it?

In the sense that the only thing worse than being talked about is not being talked about, Michael Gove’s big housing speech had some grains of good news for London and Sadiq Khan.

Sure, there was a slightly formulaic spot of Khan-bashing – the allegation that “the Mayor’s failure on housing, like his failure on crime and his failure on transport, undermines the vitality and attractiveness of our capital.” We are coming up to an election and presenting Khan’s mayoralty as a cautionary example of Labour’s inability to deliver was clearly just too tempting, especially in the wake of the Uxbridge & South Ruislip by-election.

But alternately attacking and ignoring London and its Mayor have been a consistent government theme in recent years. Gove’s predecessor Robert Jenrick took more than a year to agree Khan’s 2020 London Plan, describing his housing delivery as “deeply disappointing”, demanding he water down protections for the Green Belt, open spaces and industrial sites, and allow lower densities and more car parking in suburban locations. And two years ago, in articulating his “levelling up” agenda, London’s previous Mayor, the then Prime Minister Boris Johnson, spoke of the capital only as the engine for an overheated housing market and as a drain on talent in the rest of the country.

So, while Gove may have been stating the obvious when he said making the most of the capital’s potential is “critical to the nation’s success”, the statement was nonetheless welcome. What’s more, the Secretary of State committed to working with the Mayor to “unlock all the potential of London’s urban centre, while preserving the precious low-rise and richly green character of its suburbs such as Barnet and Bromley”.

There’s quite a lot going on there, both lofty principles and low politics. At one level, Gove’s was a classic urban renaissance prescription: focusing new development in highly accessible central locations, where infrastructure such as school places is already present. But there was also electoral calculation. Ever since Johnson ran for Mayor in 2008, pledging to save the suburbs from the encroachment of high-rise apartment buildings, protecting the suburbs – and London’s safest Conservative seats – from new development has been at the heart of Conservative policy.

To unlock potential, Gove proclaimed the launch of “Docklands 2.0”, invoking Michael Heseltine, the patron saint of urban renaissance (who lost the Conservative whip in 2017 as a result of his opposition to Brexit). This “mission of national importance” would see 65,000 homes built in east London’s riverside, from Beckton and Silvertown to Charlton and Thamesmead.

Such plans have a rich heritage as part of the original Heseltine vision for the East Thames Corridor, as the heart of London Thames Gateway, and as the focus for the City East scheme developed by my former colleagues in Mayor Ken Livingstone’s architecture and urbanism unit.

Current London Plan targets already suggest that 65,000 homes are achievable in these “opportunity areas”, but realising that potential has been slow. Many sites lack the infrastructure needed to develop at scale, or need investment in remediation to make them suitable for housing. In that respect, Gove’s commitment to look at the transport investments needed, and to invest government money where it can make a difference, will be welcomed.

There is a catch, though. Gove offered the carrot of working with Khan, but also issued an explicit threat in bellicose terms: “I reserve the right to step in to reshape the London Plan if necessary and consider every tool in our armoury – including development corporations.” It doesn’t sound as if these would be mayoral development corporations, such as those set up by Johnson to oversee the Olympic Park and Old Oak projects, but 1980s-style impositions from Whitehall.

Gove’s political jabs at the Mayor have been reciprocated. Tom Copley, Deputy Mayor for Housing, has defended Khan’s record and described the government’s commitments as “thin gruel”, with funding decisions for vital infrastructure lost in the long grass of Treasury tactics. London Councils housing lead Darren Rodwell, also leader of east London borough Barking & Dagenham, has called for more funding for affordable housing and a permanent relaxation of rules on using Right-to-Buy receipts.

But behind the point-scoring and alongside genuine arguments about resource allocation, the Secretary of State’s speech does seem to mark a dawning awareness that ignoring the UK’s capital when seeking to grow the nation’s economy is a dead end. If Gove can back his vision for Docklands 2.0 with funds and facilitation, and can resist the temptation to take over and micro-manage, he may find himself in an awkward alliance with Khan, even as general and mayoral elections approach.

First published by OnLondon

I love you, you fix my rent

The Renters (Reform) Bill, which had its second reading in the House of Commons last week, should be particularly good news for Londoners. Twenty-nine per cent of households – just over one million – in the capital are private renters, compared to 17 per cent in the rest of England, so the measures in the Bill, including its centrepiece abolition of “no fault” evictions, will be welcomed by many.

The legislation has been a long time coming. The reforms were first announced by Theresa May in April 2019, towards the end of her government’s lifespan. Toby Lloyd, former Head of Policy at Shelter, had been recruited as the Prime Minister’s special advisor on housing the previous year, and he helped make the case for the reform.

“There was definitely interest in the problems in the private rental sector, both moral and electoral,” Lloyd says. “Morally, there were people at Number 10 who really cared about the ‘burning injustice’ of how the housing market operated, and electorally there was growing awareness of the difficulty the Conservatives had in attracting young people. And occasionally, when the clouds cleared on Brexit, the government was keen to advance social reforms, especially if they could also wrong-foot the Labour Party, who hadn’t declared their policies at that time.”

Four years and three prime ministers later, we have the Bill. One of its central measures will be ending “Section 21 evictions”, which allow landlords to terminate a tenancy for any reason after six months. These are currently one of the driving forces behind homelessness in London: just under half of the 5,850 households at risk of homelessness at the end of last year were in that position because of the end of an assured shorthold tenancy was approaching, and in more than half of these cases the tenancy was ending simply because the landlord wished to sell up or rent the property to someone else (presumably for a higher rent).

Under the reforms, landlords will still be able to end tenancies if they wish to live in their property or sell it, and will have enhanced rights to evict tenants who fall behind with their rent or display “anti-social behaviour”. Otherwise, tenancies will be open-ended, with landlords allowed to raise rents annually. To avoid “eviction by rent increase”, tenants will be able to challenge any proposed rent rises above “market value” at a tribunal. This provision always existed in theory, but the risk of arbitrary eviction made it toothless: landlords could simply use the Section 21 process to boot out any truculent tenants.

Taken together, these reforms begin to sound like a version of rent control, though Lloyd’s experience of selling the measures to sometimes sceptical Conservative ministers leads him to prefers the term “rent stabilisation”. They certainly falls short of what Sadiq Khan is calling for – a two-year rent freeze and a rent control commission to set rents thereafter (not least because market rents have begun to rise sharply in recent months after a period of slower growth). However, the Bill’s measures should act as a curb on the most egregious rent rises.

Not everyone is happy, however. Landlord representatives warn that the complexity of evicting tenants under the new rules may combine with a loss of tax breaks to push landlords to sell their properties. However, Toby Lloyd is sanguine: “Landlords have been saying this since I started to work in housing, but the truth is that the sector is still growing.”

And, if landlords did quit, would it matter? They would presumably sell their property, either to another landlord or to an owner-occupier. When I asked about this on Twitter recently, several respondents made the sensible point (Twitter isn’t what it used to be) that moving property from rental to owner-occupation might support a different market. One recalled, “when we sold our rental flat in Hackney, it went from being occupied by a young Bangladeshi family to a single white guy with a taste for modernist architecture.” And, she added, landlords might be more demanding in terms of references if they felt tenants would be harder to evict, which could “effectively bar a cohort of people on the financial margins.”

One solution, of course, would be to build more social housing, so that people at the margins had other options. But there are already different private rental models. Some professionalised “build-to-rent” landlords have endorsed the abolition of Section 21 evictions: Grainger, the UK’s largest listed landlord, welcomed the reforms, saying that “many of the proposals in the Bill align with Grainger’s business model.”

And maybe there is also room for what Lloyd, Rose Grayston and Neal Hudson called in a report published earlier this year an “ethical private rented sector” in which not-for-profit providers could buy property from smaller landlords who wanted to sell up, as community-based housing associations did in the 1960s.

The transition to the new system will inevitably be bumpy, leading to particular problems in specific cases (for example, for student rentals), and Londoners still need more homes and a better choice of affordable rental flats and houses. The Renters (Reform) Bill does not solve all of London’s housing problems, but remodelling the rental market to support responsible private landlords and squeeze out those whose behaviour is little short of criminal is a good start.

First published by OnLondon

Two directions home

The roots of the UK’s housing crisis run deep. Two reports published last week agree on this much, though the conclusions they draw from looking back over the past 70 years of supply, demand, policy and price changes are quite different.

Last week Samuel Watling and Ant Breach of Centre for Cities published their report on “the UK’s four million missing homes”. It analyses historic housebuilding stats and finds that the alleged golden age of post-war mass housebuilding was not so golden after all. Housebuilding rates actually fell from 1947 onwards compared with the pre-war period, and the UK underperformed many other European countries in terms of building enough homes to keep up with population growth.

From this, Watling and Breach argue that the fundamental blight on UK housebuilding has been the 1947 Town and Country Planning Act, which established the role of local authorities in setting local plans, identifying land for development and granting planning permissions, rather than the decline in council housebuilding after 1980. They argue that under the auspices of the Act and its successors land supply has been constrained by measures such as Green Belt protection. Furthermore councils’ discretion in granting planning permissions means that even what is proposed in plans may not be permitted in practice.

Consequently, the report proposes planning reform as the key to unlocking faster and more affordable housebuilding, particularly in London and south east England where supply has fallen furthest behind demand and prices and rents have risen most. The authors’ favoured solution is a zoning system, which would establish frameworks for development in local plans (including in Green Belt locations with good public transport). They would then allow developers to build in line with those frameworks without needing additional permissions. The government had plans to move towards a zoning system, but those were dropped in 2021. Centre for Cities urges it not to water down the more modest reforms now included in the Levelling Up and Regeneration Bill.

The other report, entitled Reboot, was published by the Joseph Rowntree Foundation (JRF) the day after the Centre for Cities report came out. Written by a veritable housing supergroup comprising Rose Grayston and Toby Lloyd, formerly of Shelter and the No Place Left Behind Commission, and analyst Neal Hudson, whose insights plot an assured path through the marshes of UK housing market data, it too looks back to the 20th Century to understand the housing crisis of the 21st.

However, rather than foregrounding planning, Reboot focuses primarily on how policy has shaped markets and what this means as we enter our fifth downturn in 50 years. The authors observe that every downturn prompts a response that may deal with the immediate crisis but entrenches chronic problems more deeply. For example, Help-to-Buy equity loans helped revive housebuilding after 2013, but also added inflationary pressure.

The net effect, though the report does not use the term, is moral hazard writ large. Homeowners get all the advantages of house price growth in the boom years, and when the going gets tough governments take action to bail them out and prop prices up, so they soar out of reach of first-time buyers without rich families or lucky lottery numbers.

We are now nearing the end of what Reboot’s authors call the “decadent era” of growth since the mid 2000s, with London at the forefront both of house price deceleration and of slowing construction. The report considers what might happen next – from a rapid return to growth to a fully-fledged crash – and identifies four potential problems: housebuilding drying up as builders wait for the market to revive; an investors’ market where interest rates make life difficult for first-time-buyers but offer rich pickings for buy-to-rent; serious impacts on vulnerable groups, particularly heavily-leveraged recent London buyers; and the market freezing up as sellers, accustomed to rising prices, delay selling or downsizing.

Unlike the Centre for Cities report, which focuses on one big recommendation, Reboot offers more than a dozen, looking at short-term action to protect the vulnerable, medium-term measures to sustain supply, and longer-term action to remodel the housing market. The planning system is only incidentally discussed. Instead the authors look at incentives to implement permissions, flexible funding for affordable housing, better support for low-income homeowners and renters, heavier taxes on landlord investment, and even restrictions on who can buy homes in some “housing pressure zones”.

Reboot sees the value of home ownership, but also prompts deeper questions about what sort of housing market we want – or need. The gains from runaway house price growth are curiously intangible, only realised when downsizing or passing wealth between generations, while the damages done are all too visible. As the authors write, “We must recognise that a housing system beset by regular booms and busts does not meet the needs of the national economy or those seeking safe, secure, affordable housing. A more sustainable, equitable and economically efficient housing system must obviously be one in which house prices do not continue to rise much faster than earnings.”

There are things to argue with in both the Centre for Cities and the JRF reports. Deregulating planning on its own, without substantial investment, is unlikely to build the affordable housing London needs. Conversely, a nationalised property tax, as recommended in Reboot, would impose an unfairly heavy tax burden on Londoners (even if partially offset by the abolition of stamp duty).

However, both reports seriously address the housing crisis as a product of more than half a century of well-intentioned but sometimes self-defeating interventions and policies, rather than as some sudden phenomenon. They are contrasting in analysis, but complementary in conclusion. London needs both planning that will enable growth (including in the Green Belt), and markets that are less stacked against new entrants and poor people in general. Our politicians should not let this crisis go to waste. These two reports offer them a credible programme for action.

Originally published by OnLondon.

Housing risks are multiplying

Fiscal, political and financial events are coming at us pretty fast right now, so it is easy to feel disorientated. But as the screech of U-turns fades and the smoke of burning policies clears, we already seem to be in a world that has fundamentally shifted from the stability of more than a decade of low interest rates.

Bank of England base rates, which have been below 1% for nearly 15 years, are already above 2% and some forecast they will rise as high as 6% next year (though expectations may be starting to fall, following the Chancellor’s latest statement). Mortgage rates have shot up too, with fixed-rate offers already jumping from 2% to more than 6%.

It is true that interest rate rises were already expected, but the chaos following the previous Chancellor’s “fiscal event” in late September means rises have been faster and sharper than most anticipated. What does this mean for the capital?

There’s not much good news, I’m afraid. Firstly, according to the Resolution Foundation, costs will rise sharply for those households whose fixed rate deals come to an end soon. A total of 5.1 million households nationwide – around 60% of all households with mortgages – have deals that run out before the end of 2024.

Londoners in this group will face the steepest rises, with average annual costs rising by £8,000. The capital has the lowest proportion of households with mortgages in England, but even so, there were around 1,000,000 mortgaged households in London in 2020, so around 600,000 of those could be facing a huge hike in the costs of their mortgages, assuming exit from fixed rate deals mirrors the national pattern. The impact will be selective but brutal.

At the same time, house prices are widely expected to fall – and to fall faster in London than elsewhere – as rising mortgage costs delay purchases or even force some sales. The top of the market is still booming, but there are dark clouds on the horizon. Some analysts have predicted London prices falling by as much as 12% by the end of 2024.

At first sight, this looks like it could be good news – at least for first-time-buyers, who paid an average of £440,000 for London properties last year. If those predictions of a 12% price drop were borne out across the market, this figure would fall to £387,000 by the end of 2024 and imply a (10%) deposit of £39,000 rather than £44,000. Together with the impact of Stamp Duty reductions announced in the ill-fated “mini-budget” – still standing at the time of writing, but anything could happen – this would reduce cash move-in costs by around £10,000.

But the impact of this possible saving would be rapidly wiped out by higher mortgage costs. The monthly cost of a 90% mortgage on a £440,000 property is around £1,777 on the basis of a 2.5% interest rate. If and when rates rise to 5%, even a £387,000 property would cost £2,036 per month – £250 more than now, and around two thirds of take-home pay for someone earning £50,000 a year.

For those buyers lacking the family wealth or savings to afford a deposit, falling prices and stamp duty cuts may help a first tentative foot onto the ladder. But the burden of those higher mortgage costs will soon wipe out those savings. Behind every silver lining, another cloud.

With a sharp fall in property values comes the threat of “negative equity”, a thoroughly unwelcome revival from the tail end of the last century. Negative equity – a term to describe when the value of a home is lower than the mortgage secured against it – was estimated to have hit around 40% of properties in London in the early 1990s.

A recent report by property analyst Neal Hudson suggests that a 20% fall in property prices would put 10% of London mortgages in the red. Again, the figure is higher than for other regions because prices in the capital have grown relatively slowly over the past five years, meaning recent buyers have had less chance to build up a buffer of equity.

Although negative equity is unpleasant and unsettling, it only becomes an acute issue if you are seeking to sell or remortgage a property. However, rising mortgage costs could force some sellers’ hands, particularly London’s newest buyers, who are those most stretched in terms of affordability and least cushioned by historically rising prices.

Private sector renters have it tough as well: rents are surging as landlords seek to pass on rising borrowing costs and as competition for properties intensifies, partly driven by a post-pandemic bounce. Some central London letting agencies already report more than 80 enquiries for each rental property, up from 16 in September 2019. As people delay purchases or – in a worst case scenario – see mortgaged properties repossessed, demand for rentals is likely to increase.

Something, you feel, will have to give. There will come a point when landlords will be unable to pass rising costs on to tenants or tenants will simply be unable to pay. Landlords may be forced to sell, as will some first-time buyers, which could feed a spiral of declining property values. Again, this has its attractions but raises the question of who will be able to buy when interest rates remain high?

London property prices may be overdue a correction (that is, a fall), but while interest rates continue to rise, it will be London’s private renters and first time buyers who will be most at risk of losing their home. Sadiq Khan has already renewed calls for rent controls and more funding for affordable housing as market supply stalls.

After the 2008/09 financial crisis a “mortgage rescue scheme”, administered in London by the previous Mayor, allowed housing associations to take a stake in properties to avoid repossessions. It had limited take-up in London and was closed early. But in a city that already has four times the national rate of homelessness, government action may again be needed to soften the blow.

Originally published by OnLondon.

There may be trouble ahead…

One of the grimmer expectations as sizzling summer gives way to apprehensive autumn is that we seem to be heading into a recession. But what sort of recession will it be? To paraphrase Tolstoy, even if all economic booms are alike, every recession is unhappy in its own way. How did London fare in recent recessions, and what could that tell us about the city’s prospects over the next couple of years?

1990-92 – from negative equity to currency speculation

The early 1990s recession technically ran from autumn 1990 to autumn 1991, though it cast a long shadow. It was triggered by rising inflation in the late 1980s, leading the government to put the Bank of England base rate up from around 8% in summer 1988 to nearly 15% in summer 1989 – nearly ten times its level today. Though the base rate came down steeply in the following years, it was still 10% in late 1991.

By this stage, the UK housing market was in freefall. Prices dropped by about 20% nationwide, and the fall was particularly sharp in London and the wider south east – around 30% between late 1988 and early 1993. A similarly sharp crash hit commercial real estate. The 1992 bankruptcy of Olympia & York, developers of Canary Wharf, was one of the most prominent collapses, throwing the planned Jubilee Line extension into doubt in the process.

The late eighties had seen a residential property boom, fuelled by right-to-buy, tax relief on mortgages and pretty lax lending criteria from banks. As prices plunged and mortgage costs rose, many new homeowners ended up with “negative equity” – property worth less than the debt secured on it. A study by economic geographer Danny Dorling estimated that around 40% of Londoners who bought homes in the late 1980s found themselves in this position – the highest rate in the UK. In some parts of east London, the proportion was more than 60%.

London’s workforce also suffered badly. In 1990 the unemployment rate in London was around 6.5%, the same as in Britain as a whole, but by 1994 it had doubled to 13% compared to 10% nationwide. Rates converged slightly in the following years, but London’s unemployment rate has stayed above the national level ever since. One analysis has suggested that factors driving higher unemployment in the capital included employers moving out of the city, high rates of closure in the manufacturing sector, and an increasing tendency for specialised sectors to recruit workers from outside the M25.

A curious turning point in London’s economic fortunes was reached in September 1992, when the UK was forced to leave the exchange rate mechanism (ERM), a precursor to the European single currency, which had required the government to use interest rates to maintain sterling’s value against other European currencies.

As speculation against the pound intensified, the government tried to compete with the speculators by buying sterling and by temporarily putting interest rates back up to 15%, before throwing up their collective hands and leaving the ERM. The value of sterling and interest rates then fell quickly, with the latter reaching 6% by the end of the year, and staying between 3% and 8% until 2008. With relatively low interest and exchange rates, the UK in general and London in particular suddenly looked like a great destination for overseas investment. The stage was set for the 15-year boom that followed.

2008-09 – from credit crunch to quantitative easing

The 2008-09 recession was very different in character and impact. The main trigger for the recession was the “credit crunch” – a sharp reduction in banks’ willingness to lend as they realised that many of them had bought high-risk subprime mortgages, which were starting to default. Because of the way these mortgages had been bundled up the banks didn’t even know how exposed they were. This screeching halt to a lending boom hit the housing market, with knock-on effects on consumer spending and confidence.

As concerns about unidentified “nasties” sent bank shares plunging (dragging the rest of the stock market with them), the government stepped in with a £500 billion programme of loans and guarantees to keep the money moving in the UK banking system. Interest rates – by this time set by the Bank of England – were also reduced sharply to try to return liquidity to lending, falling from 5% in April 2008 to 0.5% a year later. And, like other central banks around the world, the Bank of England also began to buy up government bonds, thereby injecting more cash into the economy for lending and investment (“quantitative easing”).

The immediate impact of the financial crisis was highly visible in London, and commentators expected this “white collar recession”, which had its roots in irresponsible lending by the financial sector, to hit London hardest. In September 2008, the collapse of US bank Lehman Brothers provided schadenfreude-fodder TV footage of stunned-looking bankers leaving their Canary Wharf offices with cardboard boxes of belongings. Immediate job losses in banking were substantial: GLA analysis identifies a net reduction of 30,000 in financial services in 2008-09.

But London proved resilient: overall job numbers in the capital fell faster than in the rest of the country, but also recovered more quickly. Unemployment peaked at 10%, but that was much lower than in 1993. House prices also dipped sharply, falling 15 per cent in London in the year to May 2009, but had recovered to their 2007 level by 2011, three years sooner than that happened in the UK as a whole. Asking “How did London get away with it?”, Professor Ian Gordon of the London School of Economics has observed that the recession affected different classes in different ways: lower-paid administrative and manufacturing workers took a heavy hit, while professionals and people working in service sector jobs supporting them saw much lower job losses over time.

One reason for this, Gordon suggests, is that the package of support provided by the government helped to revive professional services, particularly through diverting investment from bonds into property and shares. In addition, while London’s construction sector took a hit, both the London 2012 Olympic and Paralympic Games and Crossrail were major programmes of public works that sustained demand. It is, of course, arguable whether London’s rapid recovery from 2010, closely tied as it was to soaring property costs, was good for the city as a whole or has acted as a brake on productivity and equity – but that is probably for another day.

2022-?? – prospects for the capital

So, does the coming recession look more like 1991-92 or 2008-09? Worryingly for London, it may resemble the former more that the latter: interest rates and inflation are rising rather than falling (and GLA research suggests that Londoners face particularly high inflation). Private renters are already facing steep rises according to some reports, and London’s owner-occupiers may struggle when fixed-rate deals come to an end: average mortgage debt in London was about 60% higher than across the UK according to a 2017 survey, and the capital has many more borrowers with high loan-to-income ratios. Meanwhile, after a boom in demand for higher quality office space, rising interest rates and energy costs, alongside persistently high levels of home-working, are chilling the commercial real estate sector.

Furthermore, it is hard to see where new money will come from to reignite London’s economy. Quantitative easing has ended (indeed, the Bank of England is contemplating reversing the process), new transparency rules may make London a less favourable destination for (shady) foreign investors, and Transport for London is haggling with government to sustain services rather than gearing up to deliver new infrastructure.

However, for the moment, the economy still seems relatively buoyant. The number of jobs in the capital grew by around 100,000 between March and June this year, and unemployment is falling (even if, intriguingly, more people are dropping out the labour market than entering work). And London continues to top league tables of popular cities for business, from finance to tech (ironically, the sector that powered remote work seems particularly focused on office location).

London’s resilience can emerge from surprising places, as it did in the 1990s when recovery took root in places such as Hoxton and Shoreditch that had been been laid low by recession. There may even be shafts of sunlight behind the clouds. Nobody wants to see a return to negative equity, but a medium-term correction to commercial and residential property values might actually make London more accessible as a place to live and work.

There may be trouble ahead, but London still has the diversity of people and place, the heritage and culture, the transport connections and restaurants, that make it one of the world’s greatest cities. It may be politically and economically difficult to commit major investment in the capital, but the government should at least avoid damaging the social, housing and transport infrastructure that will enable London to lead national recovery after the recession.

First published by OnLondon.

More house, in the middle of our street

Michael Gove was on fizzy form yesterday morning as he sought to sell his package of housing and planning reforms over the airwaves. “Beauty! Infrastructure! Democracy! Environment! Neighbourhoods!” he proclaimed, arguing that local empowerment would lead to better homes being built and fewer new developments being opposed. Coming from a minister once described by David Cameron as “Maoist” this sounded positively Leninist – All Power To The Neighbourhoods!

“Street votes” are at the heart of Gove’s announcements, though there is almost no detail about them in the draft Levelling Up and Regeneration Bill. They respond to a question often aimed at those arguing for the regeneration of social housing estates – why are you picking on social tenants? Why don’t people living in privately-owned neighbourhoods have to densify? To which the obvious retort is, why would they when they would see the pain of new development, but none of the gain?

The idea of street votes, developed by Samuel Hughes and Ben Southwood at Policy Exchange but with broad-based political support, is to put in place a framework that will encourage such densification. Local residents would be able to prepare plans and design codes for making their streets more dense – through infill, through upwards extension, through demolition and rebuilding – resulting in more homes to meet need, profits for local property owners, and tax revenues for local authorities. Even if you excluded older and listed buildings, the Policy Exchange report estimated 800,000 homes in London would be eligible.

The proposal is not a cure-all for the housing crisis in the capital or anywhere else, but it could be a part of the solution (I was one of the many endorsers of the original report). Street votes align incentives locally and could stop London’s new development being so “lumpy” – miles of untouched terraced housing interrupted by occasional eruptions of towers.

Ominously, some media reported (or were spun?) the policy as an opportunity to veto new development, and the biggest risk is that neighbours are unable to agree how or even if they want their street to change. In that case, resident and council time has been wasted, but people would still have the option to seek to extend or subdivide their own homes. Street votes won’t work everywhere, but that’s no reason to reject an idea that could work somewhere.

The other major measure that has been reported is a standardised infrastructure levy to fund affordable housing, and the roads, schools and surgeries which new homes need but are often a bone of contention for their opponents. A clear tariff for new development would create more transparency for developers, councils and communities.

Background papers to the Queen’s Speech indicate that this will be set locally, responding to concern that a national tariff would stifle development in some places while not meeting the costs of new infrastructure in others. Nonetheless, in the age of “levelling up”, there is an understandable worry that a levy would be used to siphon money away from London, hobbling its ability to build the 100,000 homes a year that government still insists are needed, even though the draft Bill underlines that the levy is designed to meet local costs.

But the bigger problem with the new draft Bill is what it doesn’t do. Stripped out since the Planning White Paper is any idea of a national system of zoning, by which councils and communities would identify the sites for new development and agree the design codes that would manage this. Like standardised tariffs, these were intended put in place up-front public consultation rather than scheme-by-scheme negotiation, which favours larger housebuilders with deep pockets and serried ranks of consultants to support them.

Gone too (or maybe not) are the targets that would hold government’s and councils’ feet to the fire. “I don’t want us to be tied to a Procrustean bed,” Gove mused cryptically on Radio 4, referring to the Greek myth about an innkeeper who would stretch his guests to fit his bed, or lop bits off until they did, although a government spokesman later confirmed that the national target of 300,000 homes in England per year still stood.

Enabling local residents to shape new developments, pushing for better design and ensuring that new building can be backed by the infrastructure that makes places work, should help reduce opposition to new development, particularly in gently pushing up densities in cities such London. But it cannot be the entire response to an ever-worsening housing crisis. Even if Londoners become uncharacteristically excited about new development, gentle densification of 800,000 homes in London would not easily deliver 100,000 homes a year. Cities need big plans, as well as thousands of small ones.

First published by OnLondon.

Living in The City

It is an unlikely proposition on the face of it – a new block to house 644 students nestled among the polished steel and plate glass of corporate lawyers’ and consultants’ offices on High Holborn, just opposite City Thameslink Station. But this is the planning application the City of London Corporation’s Planning Committee will consider on Tuesday, with officers recommending approval.

Student housing in the heart of the City? Is this a harbinger of changing times – even of decline – as London comes to terms with “life after Covid”?

City of London planning policies, backed by the London Plan, have always been stalwart in defending the Square Mile’s unique mix of “world city” commercial functions. Loss of office floor space, the corporation’s policy says, should be considered only in exceptional circumstances. And the recent boom in privately-developed student housing has been controversial. As this project indicates, it has generated good returns for investors but is often seen as disruptive to neighbourhood life and implicated in gentrification – but, then again, what isn’t? – and has spawned some of London’s ugliest new buildings.

The High Holborn block, designed by Stiff + Trevillion on a site previously occupied by solicitors Hogan Lovells, looks far from ugly in the artist’s impressions (see image). Developers Dominvs Group originally proposed a hotel on the site, but switched to student accommodation as the pandemic laid waste to international tourism. Dominvs are negotiating a deal with the London School of Economics to house their students, and their proposal includes community and cultural spaces on the ground floor and a public roof terrace alongside the student rooms (35 per cent of which will be “affordable”).

Still, the idea of student living in London’s financial district is a far cry from how the Square Mile felt when I first came to the capital almost 30 years ago. Back then the City was a closed-off place – literally so, as the police erected roadblocks (“the ring of steel”) as totemic protection against IRA bombers – showing a rather sombre face to the outside world, however dramatic and lucrative the global trading carried out behind closed doors. By 8.00 pm the pubs had closed and at weekends the narrow empty streets felt post-apocalyptic: beautiful, calm, but also rather eerie.

But the City has been changing. Their Covid recovery plan, which triggered quickly-quashed rumours of widespread conversions of offices to homes, talked of boosting the Square Mile’s visitor economy, of opening up more on evenings and weekends, of being a “City of culture and commerce”.

But this diversification predates the pandemic. Its roots go all the way back to the 1990s, when the construction of Canary Wharf offered an alternative business district (“Manhattan on Thames”) and gave financial institutions a choice. Having survived for more than a millennium the City can tend towards the conservative, but this new challenge forced the ancient institution’s aldermen and common councillors to think again about allowing the skyscrapers that global businesses wanted, but also about what goes on at ground level – what the area offers outside office hours.

The transformation has been gradual but profound, even if it has been accelerated by Covid and the changing dynamics of London’s property markets. You can see it in the expansion of restaurants and bars – hospitality jobs have almost doubled in the past 20 years – in the new shopping centre at One New Change, in plans for the Culture Mile that will stretch from the new Museum of London at Smithfield to the Barbican and in the rapid growth of new sectors such as fintech.

Seen from this perspective, building student housing on High Holborn is a logical progression not a departure. It is the next chapter in a story of reinvention as the City seeks to bring in different types of people, who will bring life to its streets and use its amenities when they might otherwise be quiet.

The planning officers’ report points to the benefits of an “influx of a new demographic of young people” and the proximity to Smithfield, where they will find clubs and bars as well as the new Museum of London. Officers also argue that the loss of office space is marginal (around 8,000 square metres, while 800,000 square metres is in the pipeline) and observes that the engineering complexity of working above and around Thameslink tunnels makes building and pre-letting high quality offices on the site difficult.

London’s Central Activities Zone (CAZ), its retail and hospitality sectors in particular, has had a tough couple of years, as commuters and international tourists stayed away. Cities with more people living in or around the centre have fared better, and GLA-commissioned reports have suggested that a bigger residential population could be part of central London’s future too.

My former colleagues at Centre for London are working on a project to explore where and how this might be realised. This will be a complex process, which will play out differently in different parts of the CAZ. But bringing a few hundred students in to add life, and maybe a bit of mess, to the capital’s ancient heart seems like a good place to start.

First published by OnLondon.

Retro first, last and always?

For a decade or more the redevelopment of London’s social housing estates has been a flashpoint. Councillors have lost their seats and council leaders have been deposed. Plans have been challenged in court, in council chambers and on the streets.

Boroughs have pushed forward redevelopment schemes, often in partnership with private developers, as a way of meeting housing targets and avoiding the huge repair bills that have accrued for older post-war estates. Campaigners have countered that demolition and rebuilding disrupts communities, can displace residents and replaces social rented homes with unaffordable intermediate and market housing.

Underpinning these debates are deep-seated issues about community and mobility, trust in public authorities, the roles of public and private capital, and what sort of housing London needs to offer its growing population.

Now, another ingredient can be added to this volatile mix: an increasing focus on embodied carbon generated by the energy-intensive production of materials such as steel and concrete suggests that retaining older buildings may be more environmentally as well as socially sustainable.

The issue is not binary. In some cases, particularly over the longer term, demolition and replacement with a building that uses less energy may make more sense than spending substantial sums on retrofit , even when embodied carbon is taken into account.

But thinking about embodied carbon tends to tilt the balance towards retrofit. At COP26 in November architects, property and construction firms signed a pledge to reduce embodied as well as operational emissions. A campaign led by the Architects’ Journal is championing retrofit and reuse.

So, if retrofit makes sense for people and planet, why are demolitions still taking place? Discounting the possibility that London boroughs actively want to inconvenience and displace their citizens (an accusation that has been levelled at some in the past), I believe that housing targets, financial incentives and complexity work together to push councils towards demolition and redevelopment.

Firstly, demolition makes it more straightforward to increase housing numbers in response to London’s persistent housing crisis and tough housing targets: even if Covid slows or reverses population growth, the capital has a backlog of need and a yawning affordability gap. As big “brownfield” sites become scarcer, boroughs and housebuilders are searching for ways to build more within the capital’s already built-up areas – hence sporadic eruptions of tower blocks across the city. Building denser in privately owned streets is part of the answer, but large post-war housing estates offer the advantage of single ownership, even when this has been eroded by right-to-buy.

Many post-war estates currently under threat are also relatively low rise (though not that low density) by today’s standards. Last week, the redevelopment of Central Hill, a widely-celebrated low-rise 1960s estate designed by Lambeth borough architects Rosemary Stjernstedt and Ted Hollamby, took a step forward when Homes for Lambeth (a council-owned development company) announced a shortlist of firms to prepare a masterplan.

Assessing options for Central Hill in 2017, Lambeth estimated that redevelopment could add more than 500 homes to the 456 already on site. Alternative plans prepared by Architects for Social Housing (ASH), who campaign for alternatives to demolition, proposed refurbishing the existing stock and adding 242 new homes through infill and roof extensions – half the number proposed by the borough.

Refurbishing council housing can also be an expensive process, with limited scope for recovering costs. Refurbishment is funded through the ring-fenced Housing Revenue Account, which relies on rents for income. In 2017, Lambeth estimated that refurbishment costs at Central Hill would be £44,000 per socially rented home, compared to a benchmark of £18,000.

Redevelopment has a different business model. It can be undertaken in partnership with a private developer or through an arms-length housing company with more freedom to borrow and the potential to cross-subsidise, enabling social housing to be replaced by building more for market sale or rent. Lambeth aims for its redevelopment of Central Hill to be cost neutral overall, while its assessment of the ASH plan found no potential for cross-subsidy of refurbishment works. The imbalance is worsened by unequal tax treatment: new builds are VAT free while refurbishment is usually charged at the full rate.

And long-term carbon implications of new build compared to refurbishment are rarely quantified or considered. Even where “carbon costs” can be calculated, local authorities do not benefit from any carbon savings achieved. The government’s Social Housing Decarbonisation Fund has been designed to help improve the energy performance of socially rented homes, but even its maximum grant of £16,000 would not close the funding gap that Lambeth estimated for Central Hill.

Lastly, I think there is a complexity challenge. There is a mature market of developers who can enter into joint ventures with local authorities and deliver a programme of “regeneration” (demolition and redevelopment). By taking control of the site, they can manage risks and adjust the pipeline of development to respond to changing market circumstances and viability reviews. A local authority-owned housing company is in broadly the same position.

But a programme of refurbishment and infill is trickier, particularly where substantial structural work is required. As anyone who has had builders at home knows, refurbishment is disruptive, and budgets need flexibility to cope with unexpected costs, which can rise sharply. Managing disruption to tenants, different teams of contractors and the risks of spiralling costs will sit squarely with local authorities, which have seen their planning and development budgets slashed over the past decade.

Decisions on refurbishment and redevelopment are genuinely complex, balancing the needs of existing and possible future residents, and juggling financial priorities and environmental imperatives. However, despite their declarations of “climate emergency” boroughs lack the incentives and many have been stripped of the skills to invest in and add to their existing housing stock, rather than bringing in the bulldozers again and again.

Originally published by OnLondon.

Buy with a little help

Should wider home ownership be a public policy objective? It is one of the big fault lines in housing policy debates. Advocates argue that ownership represents better value than renting, offers people a way to build up capital and creates more stable neighbourhoods. Sceptics say that our obsession with property ownership is diverting investment from more socially useful channels and fuelling a monstrous bubble of unaffordable house prices.

Both arguments are true to an extent. Home ownership has built up capital for generations and supported social mobility, but as prices have shot up more and more people have been locked out. Home ownership rose through the 20th Century, from fewer than 25 per cent of households in 1918 to nearly 70 per cent in 2001, though it has fallen back since then and particularly since the financial crisis of 2008/09.

In London, ownership fell sharply for 25-34 year olds in the first years of this century. Fifty per cent of that age group were owner-occupiers in 2001, but only 27 per cent were in 2016. The proportion has risen slightly since then (as a result of stalled prices and extended availability of Help to Buy loans), but remains low by historic standards.

It’s not hard to see why: mortgages may be relatively affordable, but the 2019/20 English Housing Survey, published this week, found that the median deposit for London’s first time buyers was £70,000 – more than twice the median salary. Given that less than half of those renting privately have any savings at all, it is mainly those with family wealth (“the Bank of Mum and Dad”) who can buy a property.

Some buyers have been assisted by the Help-to-Buy Equity Loan scheme (H2B), which was launched in 2013. It allows buyers to borrow a proportion of their deposit from the state and repay it when they sell-up or remortgage. Take up was initially low in London, but has increased since the maximum loan available was raised in 2016.

The scheme has been controversial. By stoking demand while doing to nothing to boost housing supply, it has been accused of pushing up prices. Restricting the scheme to new-builds has fuelled overpriced, poor quality schemes aimed primarily at the H2B market. These is also a risk that both government and house-buyers are left with losses in a period of stagnating prices. And now, the government has started winding the scheme down, restricting it to first-time buyers, and planning to shut it down completely by 2023. They have not said what, if anything, will replace it.

What is to be done? Many would advocate a huge increase in social housing provision and an end to the obsession with the “property ladder”. We certainly need more social housing. But as someone who bought a home when they were relatively cheap, I am uneasy with “Generation X-plaining” to younger people that they should be happy renting and miss out on the security and opportunities that can come with home ownership. And London’s recovery from coronavirus will not be helped if people who want to buy have to move out of the city (or choose wealthier parents).

Of course, we don’t know what will happen to UK house prices as we recover from the Covid crisis. As the Stamp Duty holiday ends and the recession bites, the market may slow or even go into reverse. London already has the lowest rate of house price growth in England. Market moderation is welcome, but London would need a precipitous and damaging crash in prices (which would freeze the supply of new homes for sale) to bring them in line with wages and savings. Even the government’s favoured solution – discounted “first homes” – would require deposits beyond the means of many Londoners.

There is a powerful moral case for supporting first-time buyers, particularly those without family wealth, and the core of the H2B approach – a state-sponsored loan that is repaid as and when property prices rise – seems sound. But the scheme needs fixing. Firstly, it should not be restricted to new build, thereby tying young people into an expensive and mixed-quality market. Its primary purpose should be levelling the playing field, not “stimulating the market”. And the scheme should be able to run for longer than five years, particularly given the choppy conditions of the property market right now.

Would this simply fuel the speculative fires of the UK housing market? Maybe. But punishing young people from poorer backgrounds for the exuberance of property speculation seems absurd and unfair. So we should accompany support for first time buyers, with reform of the tax breaks that make home ownership so attractive as an investment – for example, the UK’s outdated and regressive property taxes, and even the exemption of family homes from capital gains and inheritance taxes. There is no reason, beyond electoral calculation, that homes and homes alone should allow untaxed capital accumulation.

Restricting house-buying to wealthy families is a problem. Runaway house price inflation has also been a problem. Both problems have been most acute in London in recent years, and they need to be tackled together if the city is to offer opportunity to present and future citizens alike as it recovers from the pandemic.

First published by OnLondon.

Housing in a time of coronavirus

[First published by Centre for London, 6 April 2020]

In 2006, the City of Sao Paulo adopted the Cidade Limpia(“clean city”) statute, banning the billboard advertising that lined the city’s highways. Citizens and visitors alike saw a new city, a city of stark concrete structures and even starker social divisions. The favelas, slums and squatted buildings that had been shrouded by advertising were made unavoidably visible.

Coronavirus may be having a similar impact for London. The city has been in the front line of infection. On 20 March, the capital had just under half of all reported cases in England, though that proportion had fallen to around a third two weeks later. Even to enthusiastic advocates of dense urban living, what once looked like creative proximity and intermingling now looks risky verging on toxic.

But density has different aspects and different impacts. If the density of connections, and of social and economic life – in crowded offices, pubs and tube trains – helped the virus to race round London in the middle of March, it is the density of living space that has made the government’s lockdown rules tough for many Londoners since then. The disease has shone a spotlight on the increasingly unequal distribution of space in the city.

One way to look at this is the ratio of people to homes. According to the Greater London Authority’s Housing in London 2019 data compendium, this has been falling for the last 30 years across England, reflecting later marriage and more people living alone at the end of their lives. London bucks the trend: the number of people per dwelling has increased from around 2.3 to 2.5 since the early 1990s. London does have some larger families, but a larger element of this growth can be seen as ‘supressed household formation’ – people continuing to live with their parents, or in shared houses and flats, when they would rather be on their own or with a partner.

Measures of overcrowding using the ‘bedroom standard’ (essentially a room for each couple or adult, with some sharing for children) tell a similar story: overcrowding has increased over the past twenty years, but this increase has been most concentrated in private rented accommodation (where 12 per cent of households were overcrowded in 2017/18 against five per cent in 1995/96), and in social rented housing where levels rose from 11 to 15 per cent. The opposite trend is visible for home-owners: over the same period, the proportion of owner-occupied households with two or more spare bedrooms has risen from 33 to 42 per cent.

Many commentators – including me, I suspect – have talked of how younger Londoners are happy to trade space for proximity to the city centre, of how pubs and parks, cafes and restaurants are the living rooms for a new generation. Why yearn for a private garden, when you have Hampstead Heath or London Fields on your doorstep? This ‘trade-off’ theory of urban living is probably true, or it probably was until self-isolation locked young Londoners in homes where every possible nook is being used as a bedroom – let alone the 58,000 households (two thirds of the English total) in cramped temporary accommodation.

London has great public spaces, the convivial tableaux of park, pub and street food market, but if the crisis has shone a light on London’s crowding problems, it may also make people rethink their trade-offs, and perhaps value private space more. The legacy growth in home working may fuel demand for homes with more spare rooms. Building taller and denser around outer London town centres may look like a more civilised way to accommodate growth than squeezing more and more renters into terraced houses designed for families. We should maybe start to worry less about the air space that buildings occupy, and more about the internal spaces they offer.

Coming out of the pandemic, the once triumphant paradigm of dense city living may find itself on the back foot. We may even see a drift from the city to smaller towns and villages. City living will have to remind the world of its benefits – as powerful now as ever – of the cultural and social life it can foster, of the environmental advantages and economic opportunities that it offers. But it will also need to show that it can be resilient to the next shock, that it can offer decent accommodation with space for seclusion as well as sociability to all its citizens.