Monday, 7 January 2013
Rent and property prices in the capital are obscene - and its turning London into a city for the rich
Take this one on private rent in London: The charity Shelter has 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 and in the majority of London boroughs median rents cost more than 50% of median local full-time earnings.
Meanwhile, in August 2012, the average price of privately renting a home reached its highest ever level, jumping 4.8% in a single year to hit £1,272 a month. In central boroughs the cost is even higher. And rents keep rising, driven by the equally unbelievable prices for London property. The average home in the capital now costs £397,000 – 70 per cent more than the UK average – with the average price of a two-bedroom property at £483,000.
And yet this doesn't need to be the case. There are a number of factors that drive these costs that can, with political bravery, be tackled. Take two of the most toxic causes of property and rental price increases, the number of second - or third - homes in the capital and the influence of buy-to let landlords.
Walk around a high-end part of a central London borough - near the King's Road in Chelsea for example, or Belgravia - on a weekend and you'll never cease to be surprised at how empty it can seem. This isn't necessarily your imagination. Camden Council found that 1 in 16 homes are left empty by their owners in their borough, as these aren't a 'home', but rather part of a larger property portfolio.
According to estate agent Savills, 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.
That the Government and the Mayor have nothing to say on this, other than commending multiple home owners for 'investing' in the capital isn't surprising: Conservatives have never, and will never, find much wrong with protecting the interests of the very wealthy. That it was a Labour government that allowed second home owners to have a tax break should be a source of shame for those in the Blair and Brown administrations.
A government could help make owning a second home in the capital less attractive and thus free up vital homes for those that need it. Denmark, like other continental European countries, has for many years taken the impact of multiple home owners on communities and the countryside very seriously indeed.
The effect of buy-to-let landlords is even more pernicious. The idea, supposedly, is that buy-to-let landlords lubricate the market, driving house building. And yet, despite last year seeing a staggering 15% rise in buy-to-let mortgage approvals, house building growth is moribund.
In other words, buy-to-let landlords are swallowing up vital housing stock that would otherwise be available for those looking to buy a home. And while first-time-buyers are saving for an average of eight years for their first home, not least to pay the huge deposits now required by mortgage lenders, those with large property portfolios can trade on record rental incomes to access these properties far faster.
A do-nothing Mayor
Despite a crisis of affordability, 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. His only contribution to the situation is to push up the costs of public transport in London.
Where new properties are being built, they are frequently "prime residential" schemes aimed at the super-rich. These numbers of these kinds of property at planning or build stage rose 70% between 2011 and 2012.
As this blog has pointed out before, whereas his defeated opponent proposed 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.
The situation is a disgrace. Whereas ordinary people who seek merely a home of their own to live in have to suffer seemingly ever-rising energy and transport costs while they save for a house, those with wealth and power can use the situation to enrich themselves, at the direct cost of everyone else.