Cllr Jonathan Glanz is the Cabinet Member for Housing on Westminster City Council
Trust funds are often associated with the Made in Chelsea brigade, the young people portrayed in the ITV television series who spend their days dining out and sipping champagne on London’s King’s Road. It may be a stretch but in some ways, their fortunes are not entirely dissimilar to some of the benefits enjoyed by social housing tenants in some of country’s most expensive areas.
With some social housing properties in Westminster and other central London boroughs valued at upwards of £2 million, a heavily subsidised rent on a two or three bedroom house a stone’s throw from Oxford Street might otherwise only be affordable for a so-called “trustafarian”. To put it into context, purchasing a property for £2m would likely require:
- Capital in the form of a deposit of around 10% (£200,000)
- An annual household income of £515,000 in order to service the mortgage costs
- A Trust Fund in the region of £12-15m, with a generous annual return of around 4-5%
In addition to the benefits of living in such a property on a weekly rent of less than £200, tenants will also be much more likely to find work within walking distance of their home. Meanwhile, it is not uncommon for someone working in central London and paying their own housing costs to commute from the outskirts of the capital or further afield. Coming in to central London from an outer London borough like Havering, for instance, would cost a London Underground user at least £2,224 per year.
Furthermore, while most long-term tenants have a right to pass their tenancy on to their children, a private owner who wishes to pass on their home will be liable to pay Inheritance Tax with the taxman taking a 40 per cent cut. As I have written about on these pages previously, as the anti-London arguments for “mansion taxes” grow louder, one can only assume that social housing tenants living in what Ed Miliband might call a mansion, would not have to pay this levy while their neighbours who made the mistake of buying an equivalent property next door will be hit with an annual bill of £30,000.
With this in mind, it is about time that we began a serious discussion about the true opportunity cost of building new social housing in the most expensive parts of the country. This is not to say that we should not defend mixed communities and preserve what is already there as a key part of the social blend but taking developers’ affordable housing contributions from local schemes to provide a handful of homes in some of the costliest districts on the planet rather than maximising the number of new homes that can be built is becoming more difficult to defend, especially as housing costs continue to rise and more working people are forced to look further afield for a place to live.