Sunday, 7 July 2013

Our capital is becoming a playground for the super-rich - it's time to ban non-EU citizens from buying property in London

We know a number of facts about the London property market:

We also know what is driving this situation:
  • We know it is caused by a shortage of new housing, with a tiny and shrinking number of 'affordable' homes being built in London.
  • We know that it is driven in part by the buy-to-let market, which saw a 15% rise in activity in 2012 alone.
  • We also know it is being driven by overseas buyers - including the global super-rich; The facts here are stark:
    • 73% of prime central London new-build homes were bought by foreign buyers last year, according to Savills.
    • 60% of buyers in central London areas such as Kensington, Chelsea and Marylebone are from overseas and for 37% of these their London property is not their primary residence.
    • Many of these - as well as UK-based 'property investors' - leave their properties empty. Research by Camden Council in 2012 found that 1 in 16 homes were left empty by their owners in their borough.
    • The result, as the commentator Simon Jenkins has put it, is that parts of central and west London are becoming 'a ghost town — bought by overseas money, then left to rot'.
Finally, we  know that we have a Tory Mayor in Boris Johnson and a Tory-dominated Government that are not just reluctant to address these issues, but have a vested interest in accelerating the status quo. This can be seen in practice through the Mayor's early decision on winning in 2008 to scrap the target for a minimum proportion of affordable homes in new London developments and in his recent decision to rubber-stamp the new Earls Court development. 

The latter will see the demolition of large numbers of social homes in favour of houses for the super-rich - something recently described as "the Tories' biggest social engineering project.... demonstrating ideology and gerrymandering and corrupting local government as never before".

The fact that a right-wing think tank report, when previewed on Conservative Home, described the electoral disadvantages for Tories of social housing in marginal parliamentary seats, shouldn't surprise. Coupled with the bedroom tax, both Boris and Cameron know that London is moving from a politically-balanced city with a left-leaning core to a Tory-dominated one, and at huge speed

What will be left, as Revd Dr Giles Fraser, priest-in-charge at St Mary's Newington, put it, will be not the economically and socially diverse city that has made London so unique and successful, but 'a playground for the super rich'.

Given political will, the solutions are there

Despite the political ramifications, this isn't a left-right issue. In the last year or two, even right-leaning papers like the Standard have been getting increasingly concerned over property prices, presumably as the market has now become so expensive that even the upper middle-class homeowners that make up many of their editorial team are now realising that 'bank of mum and dad' might not be enough to help their children jump on the ladder.

At the same time, there is a reverse property-ladder effect occurring, with the traditional residents of Kensington and Chelsea priced out by the recipients of huge bank bonuses, by oligarchs and the other global super-wealthy. Members of the former social group are now populating boroughs such as Hammersmith, in turn making these ares unaffordable for the upper-middle class buyers who would have once bought there. And this effect continues, so that the middle and working classes are increasingly priced out of the city completely.

However, on the positive side, we don't just know the problems and their causes. We also know the solutions:
  • We need to build more homes, and re-introduce a minimum requirement for new developments to have affordable - and genuinely affordable (not £500,000 a flat) homes. 
  • We need to ban buy-to-let investments completely, or restrict them to new build developments, and in turn stop treating 'property investment' in the tax system as though it is somehow equivalent to productive hard work. That we have many thousands of people who have made more from rising house prices than through their working lives is bizarre and unsustainable.
  • We need to introduce higher taxes on second homes
  • We need to bring in charges on homes left empty in the capital - legislation that exists in other countries.
Finally, we need to consider something even more dramatic than these measures to tackle the near-unlimited supply of wealth pouring into 'safe investments' in the capital. This money is unlikely to be deterred by higher taxes on second homes or on charges for property left empty. Crucially, this wealth doesn't create significant numbers of jobs, but merely hollows-out districts in the capital. It sustains only businesses - high-end eateries, exclusive shops and clubs - that are of little use to the majority, whilst forcing other, less exclusive shops, bars and restaurants to close. Its negative effects are far more corrosive than any benefits it brings. 

Labour's chance to be different - and popular

If it wants to differentiate itself from a Tory-dominated government who are happy to see the capital of the UK become nothing more than an investment portfolio for City traders, hedge fund-owners, the landed gentry, billionaire oligarchs and Arab princes, then Labour should implement the four suggestions above.

But it should also champion a policy that would demonstrate it is concerned about the living standards of the vast majority of British people and that it is willing to stand up to the dominance of powerful wealthy, about whom hypocritical groups like UKIP are so deafeningly silent.

Labour should ban the sale of property in London to non-EU citizens. 

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