Monday, 1 October 2012

Under Boris and Cameron, London is becoming divided

What marks London out as a capital is the proximity in which the rich, the middle classes and the poor live. Unlike many of global capitals, London's rich and poor are distributed in a way that makes the city resemble a patchwork quilt.

So, for example, barely minutes' walk from the white-stucco terraces of Little Venice in Maida Vale is the more down-at-heel Harrow Road. Equally, although the Royal Borough of Kensington and Chelsea has the highest proportion of people on more than £60,000 per year, it also has above average levels of deprivation.

Any supporter of progressive policies understands that without this proximity - without those who control the bulk of wealth being able to see and interact with the poorest - the likelihood is that support by them for progressive public spending will decline.

However, it is within Kensington and Chelsea where polarisation of the rich and poor has started to take accelerate, with half of its benefit recipients living in one quarter of its neighbourhoods. The policies of the Government and the Mayor (or lack of them) mean this is likely to take place on a larger scale, with polarisation not just within London boroughs, but across the capital.

A divided city

The fact that London is not yet as divided geographically as many US cities, for example, certainly doesn't mean it isn't divided economically. In fact, as the excellent London Poverty Profile, points out, it is far more divided than other regions of the UK. So for example:
  • the top 10% of households by property wealth account for 45% of that wealth. The bottom 40% have no or almost no household wealth at all;
  • the richest 10% by financial wealth (savings and non-property assets) account for two-thirds of the financial wealth in London. The financial wealth of the bottom half is effectively 0%.

A key driver of inequality has been the impact of the recession - namely that a crisis created by reckless financial speculation by some of the richest individuals in the country has impacted them the least. So, as most people suffer from more wage freezes, increasing shortages of full-time employment and rising household costs, the rich just get richer. And the rich choose to live in London.

The number of "prime residential" schemes at planning or build stage is up 70% year-on-year, at a time at which there is an acute shortage of affordable housing. Prime London property prices - those of desirable houses or flats in richer areas - saw rises of 10% between September 2011 and September 2012 alone and are now 15% above their pre-financial crisis peak of March 2008. So-called super-prime properties, valued at over £10 million each, saw growth in prices of 8% in 2010 alone.

Meanwhile, a report from Future of London warns that 'overseas buyers seeking out homes for investment purposes risk pushing prices up and reducing the availability of homes to buy for local people'. It goes on to say that, rather like the financial markets, 'the London private housing market serves the interests of few people and fails to serve the needs of the majority'.

In 2011 this was epitomised by the opening of One Hyde Park, a development one columnist described as "a 21st-century monument to the ever-growing gap between rich and poor... that reached its triumphant moment of fulfilment on the very day that the government announced a youth unemployment rate of more than 20%".

Worsening trends

The trend for wealthy UK and overseas buyers to hoover-up and then horde large swathes of 'desirable' properties can only continue, as the number of people worldwide with assets of over $100 million (which has risen by almost 30% since 2006) is forecast to rise even further. This is coupled with an acute shortage in affordable property in London. An excellent report by Shelter illustrated the impact of this shortage of housing stock. In some of the most startling findings, they found that:
  • In 5 London boroughs, average monthly rent for a 2-bed property is now 75% or more of local median take-home pay;
  • The majority of London boroughs have median rents that cost more than 50% of median local full-time earnings.
Meanwhile, in August 2012, the average price of renting a home reached its highest ever level, jumping 4.8% in a single year to hit £1,272 a month. And for those hoping to get on the property ladder, the mountain gets ever larger: the average home in the capital now costing £397,000 – 70 per cent more than the UK average –  with the average price of a two-bedroom property at £483,000.

Leading Conservatives sit back and watch

The problems that these costs will cause for large numbers of Londoners has been compounded by the Mayor of London's utter indifference to the issue of affordability... although perhaps expecting a Tory Mayor in a modern right-wing Conservative Party to address these issues is probably too much to ask. Thus, Boris Johnson currently presides over a city that has almost 200,000 homes with planning permission already granted that are currently in stalled developments. He also leads an administration elected on a ticket to water down requirements for property development schemes to have a minimum proportion of affordable housing.

Unlike his defeated opponent, Ken Livingstone, who was going to introduce a New York-style cap on private rents and a 'London Living Rent', on housing Boris offers - as one expert put it - nothing but the status quo. Similarly, while his opponent had planned the creation of an energy co-operative to drive down gas and electricity bills, Boris offered not to do anything of note.

With ever rising rents, transport and energy costs, the victory of the current Mayor in this year's election at the same time as a Tory Party is at Number 10 means that - in the words of blogger Dave Hill - 'Conservatism now has the run of the city'. And, with the exception of a few woeful token schemes, that means sitting back and doing nothing.

Unfortunately, where Conservatism does offer a solution, it is to target the poorest rather than address systematic problems. This is best illustrated by the Government's policy of tacking the housing benefit bill by capping benefits (rather than tackling high rent), leading to some London boroughs proposing to exile families from the capital.

These trends might be self-perpetuating 

What all of this will do to the economic map of London is obvious: the city will become geographically divided, with the poorest driven to the outer edges of the capital - or perhaps outside it altogether. London will become more unequal and, eventually, mostly unaffordable for those from middle and lower-income groups.

In narrow political terms all of this could be beneficial to Tory Party in the capital, as these demographic changes may mean that one day the city that has consistently been the most left-leaning region in the south-east might become a Tory stronghold.  However, it could equally be disastrous for them, as rising poverty leads to rising crime and other social problems and a disaffected population, increasingly priced out by the asset-rich, turns on its government.

However, an issue for any progressive government that wants to implement policies to address these issues will be that the longer these trends continue, the harder it will be to convince its beneficiaries to vote for schemes to mitigate them. Convincing people to care about those less fortunate than them is easier if they are located in close proximity - it's easier to persuade a rich man to care for his neighbour than for someone many miles away.

Sadly, as one commentator asked, the rich are increasingly living in a manner that means this may prove very difficult anyway:

"Do they ever look out of their limousine windows and step on to pavements? Do they experience what we experience? Do they share the same concerns about a divided society, rising unemployment and beleaguered public services? Or do they exist in a separate space, behind their gated drives, ring-fenced from the rest of us and convince themselves that everything is fine?"


  1. There has always been a north and south divide, now that is extending to parts of London. For an overview of the UK property Market take a look here.

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