Housing crisis threatens London's future business prospects

Monday 12 May 2014

Housing crisis threatens London's future business prospects

All undeveloped brownfield sites in London should be registered by the Mayor - and owners given four years to start building before compulsory purchase is enacted, to help ease the spiralling housing crisis in the capital. 

London Chamber of Commerce and Industry (LCCI)'s report "Getting our house in order: the impact of housing undersupply on London businesses"  argues that rather than there being a shortage of brownfield sites within London suitable for housing, too little brownfield is in the hands of developers who are willing and able to build.

The Mayor of London should ensure that all suitable land whether publically or privately owned is made available for housing and encourage more, smaller, developers into the market to increase the number of homes built each year.

The chasm of availability in affordable and mid-market housing is threatening the competitiveness of London business with three in five companies reporting high housing costs led to a greater pressure to increase wages and two in five saying that it made it more difficult to recruit and retain skilled workers.

LCCI believe the Mayor of London should consider the impact of housing pressures when renewing his London Resilience Risk Register as the long commutes faced by many essential workers - including 'blue-light' emergency services staff* - could affect London's response in the event of prolonged future crisis situations such as major strikes, adverse weather or civil disorder.

And even outside of any crisis situations, long commutes are taking their toll on London's workforce with one third of businesses reporting that long, tiring commutes affected employee productivity and punctuality.  As housing costs rise, more workers are likely to have to live further from their workplace.

Colin Stanbridge, Chief Executive of LCCI said: "The capital's business rely on easy access to a skilled workforce. If greater numbers of workers are priced out of living in London and have to endure long commutes this will have an increasingly detrimental effect on London's productivity, competitiveness and resilience.

"There is no magic wand that can change this situation overnight but we urgently need to start building many more homes that ordinary Londoners can afford to buy or rent, otherwise we could find the workforce that is the capital's greatest asset under threat."

The report says that the London market is increasingly polarised between subsidised homes whose eligibility criteria exclude many ordinary workers and high-end residences that only those on top salaries can afford.

To ensure that developers are producing the homes that most Londoners need, the Mayor of London should set an annual target for the creation of homes affordable to households earning up to £50,000. Currently the Mayor's Housing Strategy states that 42,000 new homes must be built each year of which 17,000 will be "affordable" but the rest will be at "market prices".

An LCCI survey of all two-bedroom properties available to buy within 10 miles of Westminster showed only 0.5 per cent could realistically be bought by a first-time buyer household earning £50,000 and only 7 per cent were at rents deemed "affordable" for such a household.

In addition, the amount of social housing being built by councils is too low because of unnecessary Treasury restrictions on how much local authorities are allowed to borrow. If these limits were lifted then London councils could be freed up to build up to 12,000 extra homes a year.

Rent costs and house prices are all pushed upwards by a lack of supply so it is essential that more developers are attracted into the market. Many smaller developers are unable to finance the high start-up costs of developing housing such as the land costs, Section 106 payment and Community Infrastructure Levy all of which must be paid before housing is put on the market.

The report calls for councils to defer payment of the Community Infrastructure Levy on developments of up to 50 units and for the Mayor to consider allowing deferment of payment for smaller sites from the public sector until after the houses are put on the market.

LCCI believe the Mayor of London should also work with the government to build on the success of stimulating demand through the Help to Buy scheme by providing a similar system of finance guarantees to stimulate supply. Government-backed loan guarantees a part of a new Help to Build programme would enable smaller developers access more and cheaper finance, the scarcity of which is one of the biggest inhibitors to their growth.

The full report is available here

ENDS

Media contact:    
Fiona Callister
T: +44 (0)20 7203 1897          
M: +44 (0)7827 241528
E: fcallister@londonchamber.co.uk

NOTES TO EDITOR:

  1. London Chamber of Commerce and Industry (LCCI) is the capital's largest and most representative business organisation, with members ranging in size from multi-national companies to SMEs and sole traders.
  2. Colin Stanbridge is available for further comment and interview.
  3. In February and March 2014 LCCI undertook a membership survey to which 126 Chamber members responded.
  4. LCCI held interviews and discussions with a range of London businesses and relevant public policy stakeholders.