Tackling London’s living standards exodus

Published on Incomes and Inequality

Everyone knows housing is a disaster in London.

This is most obvious in the ludicrous prices that properties fetch, but London’s housing problems stretch well beyond having to fork out over half a million pounds for a poky flat in Zone 2.

For a start, the way people are housed in London has changed dramatically in recent decades. Home ownership has been falling rapidly, particularly among young people. Just one in five millennials own in London by the time they reach 30 – down from 46 per cent among their parents’ generation at the same age.

For low and middle income households, the fall in social housing has been just as dramatic as falling home ownership. The private rented sector has grown massively to reflect these two shifts. As recently as 1990, council housing was the most common tenure in Inner London – today it’s renting privately with others. And before you file these grim stats away as ‘London-only problems’, remember that home ownership rates are tumbling in other major cities across Britain too.

But it’s not just how people live in London that has changed, it’s how much people pay too. Back in the 1960s, families spent on average a tenth of their income on housing costs. Today they’re spending over a quarter of their income on housing – and over 40 per cent if they live in private rented accommodation. To put these figures into context, had housing costs risen in line with incomes over this period, Londoners today would be £5,400 a year better off. Housing really is a big living standards disaster hanging over the capital.

So how are Londoners responding to this housing crisis? By leaving. That may sound odd given that London’s population has grown by 1.6 million since the millennium. But that growth has been driven by young people, and international migration in particular. London is actually a net exporter of people to the rest of the UK.

The number of people of leaving London really starts to accelerate when they hit their 30s – often the point at which people want to settle down and buy a home. Sky-high rents and no security of tenure may be tolerable in your 20s, but this new model of housing in London doesn’t sit well when you’re bringing up children.

But while the reasons for London’s living standards exodus may be understandable, that doesn’t mean we should accept them. It cannot be right that so many people feel our capital is no place to bring up families in – not least given its high pay and, crucially, high-performing schools.

For national government, the London Mayor and London’s councils, that starts with building more homes, and affordable ones in particular. House building is on the rise in the capital – but it is still falling well short of what the Greater London Authority deems necessary to cope with London’s housing needs. No London Mayor has ever hit their housebuilding targets – that has to change.

But as well as helping more Londoners to afford a home of their own, we also need to improve the offer for people who rent. That should include more low-cost social housing, and greater security in the private rental sector by ending the norm of 6 or 12 month tenancies.

London has so much to offer people, young and old. But for far too many families, the benefits of great jobs, excellent schools and world-beating cultural hotspots are outweighed by oppressive housing costs. Tackling the capital’s housing crisis should be a top priority if we’re to end London’s living standards exodus.