In April, figures showed that private rents in London are at their highest ever level, having risen a staggering eight times as fast than wages in a single year.
A recent report from the housing charity Shelter found that in five London boroughs, average monthly rent for a 2-bed property is now 75% or more of local median take-home pay.
This is part of a trend that has been accelerating over recent years, as the prices of London's properties push people that would ordinarily buy into renting. Reports in March confirmed that the cost of buying a home in London is now higher than in 2007, prior to the banking crash. Halifax, in a recent survey, classified 100% of London boroughs as being 'unaffordable' for first-time buyers.
The price of buying property has been driven by a number of factors, including the lack of new house building, the malign influence of the booming buy-to-let sector and the vast bank accounts of the global super-rich.
These last two factors are rarely talked about, but tackling them is crucial to prevent the majority of new houses built in the capital merely being swallowed up into the ever-larger property portfolios of the wealthy - and changing the political character of a city that has tended to lean left, even now.
The global super-rich
The influence of the very rich on London's property market can't be overstated. As the commentator Carole Cadwalladr put it today, "their effect on London's housing market has been nothing less than catastrophic", as she highlighted a study that found that 73% of prime central London new-build homes were bought by foreign buyers last year.
This is backed-up by other recent studies. Last year, Savills announced that almost 60% of buyers in central London areas such as Kensington, Chelsea and Marylebone were from overseas and for 37% of these their London property is not their primary residence.
Research by Camden Council in 2012 found that 1 in 16 homes are left empty by their owners in their borough, many of which would be due to the fact that they are a second (or third, forth) 'home'.
And the trend is set to continue. The number of "prime residential" schemes aimed at the super-rich at planning rose 70% between 2011 and 2012. The effect on inequality in London is startling: a study found that, in 2012, the top 10% of households by property wealth in the capital account for 45% of all household wealth. The bottom 40% have no or almost no household wealth at all.
The journalist Simon Jenkins railed against this recently; the property market, he said, "is clearing streets of their residents. It is erecting tower blocks of luxury flats along the Thames, which will stand as “fiscal launderettes” that are empty of occupants...These properties are not sublet. They pump no money into the local economy. They are Midas properties, a banquet of solid gold that is uneatable by anyone. Boris Johnson’s theory that these people are “bringing wealth to London” is laughable. They are stashing it here, that is all".
Another key factor in the crisis in housing in London is the impact of buy-to-let. Despite a dismal set of lending figures by the banks to first-time buyers, 2012 saw a 15% rise in buy-to-let mortgage approvals.
Underlying this is the fact that many first-time buyers, often with a good income, are unable to afford the huge deposits required to buy a house in London. Recent figures showed that an average first time house buyer would need to save for 24 years to accumulate the deposit required to cover a home in the capital. And, the forecast is even bleaker for those seeking to get a home of their own: the average deposit for a house in the capital is set to rise to a jaw-dropping £100,000 by the end of the decade.
On the other hand, buy-to-let landlords have the capital - and access to the best bank rates. For many sellers, the stability offered by this group of people is attractive. And so first-time-buyers are disadvantaged yet further.
London: a true blue city?
acting for anonymous overseas buyers, allowing money gained in potentially the most toxic ways to flood the capital.
To help reduce and control the cost of private rents, there is the option of a New York-style cap on rents and there is the concept of a London Living Rent - both proposed by Ken Livingstone.
To tackle both issues there is the option to levy charges on empty homes, as Camden Council suggested. And there is, of course, the option of increasing taxes on second homes, thus making buy-to-let investment less attractive and reduce the influx of money by the wealthy into properties then left empty. It would also restore life where there is now eerie silence in parts of prime central London areas like Kensington at weekends - or the 'ghost town' effect, as Simon Jenkins recently put it.
So, what does London's Tory Mayor, Boris Johnson, propose to do?
Nothing - as his Deputy confirmed recently.
And yet, why would he do anything? For it this trend continues, London will be a 'true blue' city, populated only by the wealthy, the very wealthy and - just occasionally enough to qualify for non-dom tax breaks - the mega-rich.
It will be, as Giles Fraser, the priest-in-charge at St Mary's Newington, put it, 'a playground for the super rich'. The super-rich that, as another commentator concludes, already "exist in a separate space, behind their gated drives, ring-fenced from the rest, convinced everything is fine".
It will have little or none of the social diversity that has made London such an energetic city, locating as it has done wealthy Primrose Hill next to more down-at-heel Camden and Kentish Town, or, in 1990s and 2000s, trendy, arty Shoreditch next to the towers of the City. It won't have boroughs like Southwark or Wandsworth, that see the rich, the middle-class and the poor live mere moments from each other.
But it will almost certainly vote Tory. And what could be more important to Cameron or Boris than that?
Sunday, 21 April 2013
Wednesday, 10 April 2013
ICM Thatcher poll: voters believe that privatising the utilities and cutting taxes for the rich were wrong
So, as the Tory press will suggest, people support the neo-liberal consensus: deregulation, competition, a minimal state and low taxes. At the same time, 'old' social democratic values are now rejected.
Except, as polling demonstrates, this isn't quite true. The fact is, evidence points to what Blair always thought - the British people are middle of the road. The population, taken as a whole, hold a set of beliefs, that over time may adjust, but broadly can be described as centrist - although admittedly sometimes contradictory.
So, on the one hand, voters of all hues tend to oppose immigration - Labour, Tory and Lib Dem alike. And there is no doubt that attitudes to welfare (arguably due in a large part to the 'drip drip' effect of right-leaning tabloid horror stories) aren't exactly supportive.
However, let's take the latest ICM poll on Margaret Thatcher. It polled a representative sample of voters on whether they thought, on balance, some of her key policies were good or bad in hindsight. On the one hand, taking on the unions and (despite the massive housing problems London in particular now faces) right-to-buy, are both seen in hindsight as positive.
However, key aspects of Conservatism are rejected - and by large margins. So, for example, privatisation of the utilities are seen as negative. This, of course, is unsurprising: energy companies, like their rail counterparts, haven't exactly endeared themselves to the British public.
At the same time, voters now overwhelmingly reject cutting taxes for the richest. Only 28% in the ICM poll agreed that the reductions in the top rate was a positive policy. No doubt the banking crisis has contributed to this, but equally two decades since Thatcher left office have demonstrated that 'trickle-down' economics doesn't work: average real wages haven't increased in the USA since the 1970's.
Interestingly, a YouGov survey released today found a similar pattern, with voters seeing privatisation of utilities in negative terms.
Interestingly, a YouGov survey released today found a similar pattern, with voters seeing privatisation of utilities in negative terms.
Tory voters aren't really as conservative as you think
We shouldn't be surprised about the ICM results. Previous surveys from some of the leading polling firms have segmented voters by party preference, and found that Tory voters support - in some cases by large margins - the following:
Wednesday, 6 March 2013
It is worth revisiting, in the wake of an abysmal set of figures for manufacturing and - yet again - dire data on UK construction, the views of the minority of economists that rejected the economic plans of Osborne in 2010.
The Chancellor's plans, backed by the Tory press, the Mayor of London, the Prime Minister and, shamefully, the Liberal Democrats, have brought the UK to the brink of a triple-dip recession. Even if the services sector saves him from the humiliation of another recession, by April, Osborne will still have presided over an economy that will have barely grown since he came to power.
Coupled with this, wages are now a real concern, with the average Briton's standard of living continuing to fall. It is entirely possible that, come 2015, any return to growth will mean little to millions of ordinary people.
As a result of this situation, opinion polls now demonstrate that voters are finally rejecting the Tory approach of cutting public spending in the midst of a stagnating economic climate, where private spending is lacking.
In light of all of this, let's consider this set of experts, writing in 2010. They were dismissed at the time by the majority of 'mainstream' economists and yet, well, they have every right to feel vindicated. Take David Blanchflower:
"A Harvard economist said to me recently that the coalition government's fiscal deficit reduction programme is the biggest macroeconomic experiment in an advanced country in any of our lifetimes.... He argued that no government, unless forced to, would be dumb enough to take such unnecessary risks with the well-being of the nation".
Or Nobel prize-winning economist Paul Krugman, who has written on numerous occasions about Osborne's folly. After joining a minority of economists opposing the Tories' 1930's style economics in 2010, he wrote this around a year later:
"Slashing spending in the face of high unemployment is a mistake. Austerity advocates predicted that spending cuts would bring quick dividends in the form of rising confidence, and that there would be few, if any, adverse effects on growth and jobs; but they were wrong".
Well, now, as Tory cheerleaders in the press desperately call for more of the same medicine, this small group of commentators can justifiably say: "I told you so". Sad, though, that millions of people will suffer anyway as a result the triumph of right-wing ideology over pragmatism or common sense.
Monday, 25 February 2013
The Lib Dem's mansion tax - including the suggestion of it being extended to second-homes - is now supported by Ed Miliband's Labour Party. The prospect of the two parties voting together on the issue (however symbolic that may be) is now a distinct possibility, with Clegg's suggestion that the Tory Party is 'turning a blind eye to the super-wealthy' a sign of things to come.
The right-wing media has - as would be expected - criticised such a policy, even while finally admitting, hypocritically, that housing costs are getting out of control for the majority.
A poll by YouGov, however, shows that voters have a different view. Two-thirds of British people support a mansion tax on properties worth over £2 million, with a majority in favour of the tax to be extended to properties valued at over £1 million.
On balance, Conservative voters also favour a tax on £2 million houses.
That even Tory voters support the concept of a mansion tax shouldn't be surprising. Previous polls have demonstrated that Conservative voters (unlike the MPs and other leaders they elect) tend to support higher taxes on the rich, regulation of internships, a higher minimum wage and a host of other policies that the right-wing press vilifies.
Sunday, 24 February 2013
"When a loan is granted to a landlord, it effectively means yet another property is removed from owner occupation.
It doesn't help that buy-to-let remains unregulated, with loans calculated on a cheap interest-only basis (with tax benefits thrown in), while today's first-time buyers have the full force of post-financial crisis regulation dumped on them".
As this blog has argued, it is precisely this issue of a minority swallowing up multiple homes that a Government one day soon has to confront. Collinson suggests a clever 'middle-way' solution, which would stimulate house building, control the frankly ridiculous costs of property in the south-east of England and avoid claims of a 'socialist' attack on aspiration that will inevitably come from the right-wing media.
His solution would be to restrict buy-to-let mortgages only to the construction of new property. This would avoid the current scandal of those in possession of multiple homes from hoovering up existing housing stock and stimulate new house building.
It would also restrict the explosive growth in private rental costs that make more and more of London unaffordable for tenants. There is no doubt, though, that even this reasonable suggestion will be fought tooth-and-nail by a small minority who gain a great deal from maintaining the status quo.
Sunday, 17 February 2013
A feature of the market is the degree to which the very rich are dominating the landscape - with the top 10% of households by property wealth accounting for almost half of all property wealth in London and the bottom 40% having almost no household wealth at all.
At the same time, those forced to rent in private accommodation are seeing record rental costs - jumping almost 5% in a single year.
Figures out this week, finally covered by the Standard (showing that the ridiculous situation is even bothering traditional Tory constituencies) show that an average first time house buyer without 'bank of mum and dad' will need to save for 24 years to accumulate the deposit required to cover a home in London. The average deposit is set to rise to a jaw-dropping £100,000 by the end of the decade. A recent survey from Halifax, meanwhile, classified 100% of London boroughs as being 'unaffordable' for first-time buyers.
Two major factors driving these prices are the distorting effect of rich second (or third, forth) home owners and also buy-to-let landlords hoovering up existing housing stock. These effects are illustrated by figures showing that almost 60% of buyers in central London areas such as Kensington, Chelsea and Marylebone were from overseas and for 37% of these their London property is not their primary residence. Even in the comparatively less affluent borough of Camden, 1 in 16 properties are left empty by their owners.
Meanwhile, last year saw a 15% rise in buy-to-let mortgage approvals. That house building growth has stagnated demonstrates that these landlords are buying existing stock, rather than stimulating new house building, and therefore pushing up prices for those seeking a home rather than an investment opportunity.
News today that the Liberal Democrats are set to consider a 'super-tax' on second homes, in a week that saw Ed Miliband back a mansion tax, is long, long overdue. The alternative will be a generation of people shut out from home ownership, trapped paying exorbitant rents to a minority of very rich landowners. Other countries have used similar policies to prevent the scandal of empty properties owned by the very wealthy resulting the the destruction of local services. It would have a dramatic - and positive - effect in London too.
The question will be whether the powerful vested interests that would stand to lose from such a policy, coupled with the resistance to 'taxes on aspiration' that many British people seem wedded to, will manage to bury what could be a transformative idea.
Sunday, 13 January 2013
The first collated some of the advice that lifestyle magazines in the US provide to patients on how to haggle with doctors when navigating their fragmented, grossly unfair health system.
The second summarised the range of reports and reviews that have demonstrated that the NHS - at least the NHS as it was in 2011 - is fairer and, crucially, more efficient than many other health systems in the developed world, as well as seeing record levels of public satisfaction.
The third post highlighted the huge body of opposition from experts and professionals in the British health system against the Government's NHS & Social Care Bill.
Despite this evidence that the NHS was doing broadly well, despite the weight of opposition from the UK's leading experts, despite the countless examples of where the fragmented US system fails its people and despite the continuing public support for the service, the Government, aided shamefully by the Liberal Democrats, passed the reform bill which effectively started the wholesale privatisation of the institution. In time, it is likely that people will acknowledge this was the bill that ended the National Health Service as most of us know it.
The NHS, however, is just one area in which the government is rolling back the state. In the education sector, the Government has introduced Free Schools and weakened the role of Local Authorities, without pausing to see if evidence supports their lavish costs. It has slashed state funding for universities and indicated it is ready to go further an accept for-profit providers to take over schools.
In criminal justice, the Government is privatising swathes of the police service, to add to extended privatisations of prisons and, most recently, has announced it is to outsource the bulk of the probation service - without a pilot. Companies such as G4S, which performed so abysmally during the Olympics, stand to gain handsomely.
In welfare, as well as slashing benefits to the poorest, it is ensuring that what payments remain are controlled and distributed by private companies - even those like A4E that make large profits while bending the rules in their favour. All the time these corporations are protected from the public scrutiny by exemptions from Freedom of Information requests, so the public has little idea of their costs or profit margins.
If the Government were being genuinely pragmatic - echoing Blair's mantra of "what matters is what works" - then where the private sector and privatisation fails it would seek alternatives, rather than pursuing a one-way street that identifies 'failures' in the state sector but ignores those made by profit-making companies. It would, for example, recognise the scandalous state of our railway system, with its rocketing fares, rather than nodding through whitewash reports.
If the Coalition were interested in evidence-based policy, in welfare or criminal justice it would at least pause to consider whether companies like A4E or G4S are capable of running key public services effectively. After all, these aren't the kind of service people can opt out of - they are crucial to society.
Instead, the only conclusion people can draw is that major companies can screw up completely and still get to gain from further outsourced contracts. Meanwhile, the government will shout loudly about scandal in the state sector, even where botched part-privatisations are arguably responsible, but refuse (as is the case with the probation service) to even pilot these further privatisations to assess their effectiveness.
The modern Tory Party, like their cousins across the Atlantic, increasingly tread a deeply ideological path: the state should be shrunk at all costs and the profit-motive is king. Everything else is secondary. In this version of reality, the financial crisis of 2008 wasn't caused by deregulated free market capitalism but by too many nurses, police officers and probation staff working in a 'bloated' state sector.
The truth is that this current Government has little interest in 'what works', in evidence-based analysis, in independent experts or professional views. What matters to this Government is that it knows that it is likely to lose the 2015 General Election, and that between now and then it will seek to privatise as many of the public services as possible.