Alex Morton is Research Director for Housing, Planning and Urban Policy at Policy Exchange
Boris Johnson wrote recently that, “It’s mad to blame our housing crisis on ‘blooming foreigners’” and that, “the answer to house-price inflation is to build more homes.” Indeed, the Mayor went on to say that in London, “We can build hundreds of thousands of homes.”
Cripes! Hundreds of thousands of homes. Yet if it were that simple then how come there were only 18,060 new homes built in the last twelve months in the Capital? Even more depressing only 16,610 homes were started in the last twelve months in London. By contrast, Boris has himself committed to a figure of 1 million homes in just over 20 years, or roughly 50,000 homes a year. So the data shows Boris oversaw building just 30% of the homes that he himself argues London needs.
How can we be building so few homes at a time when house prices and rents in London are at such
In part it is due to City Hall’s current obsession, (I do not use the word lightly), with ‘viability’. This reasonable concept, that it must be worthwhile for developers to build new homes, long ago left reality behind. In London, the cost of building an attractive home, the type that uses attractive materials and has had a bit of design input, is just £175,000 or so.
Given the cost of a new home in London, according to the Land Registry, is £475,000, new development should be ‘viable’ under pretty much all circumstances.
The problem is that ‘viability’ now means ‘whatever the developer agrees to pay for land, the land needs to go up in value before the finished houses are completed’. The cost of actually building homes is a small minority of the final property cost. It should only take a moment’s reflection to work out that if land in most of Central London is valued at least £10 million a hectare, and in most of Outer London at least £5 million a hectare, what ‘viability’ under the current Johnson administration means is that to build houses (to make housing less expensive) we need houses and land to consistently get more expensive (to make it worth developers’ while to build) from prices that are themselves already too expensive. Confused? You should be. It is a logical non-starter.
On top of this fundamental confusion there is a desperate scramble for a handful of sites where development is allowed, Section 106 and obligations squeezed out of each site, and layers of planning bureaucracy that all take time and money. The rules also often make it impossible to build the types of houses people want to see near them, pushing toward the plastic-clad unattractive flats I am sure many of us can all think of when we think of new development.
The current approach has failed. There is no other word for it. At a time when houses in London are eye-wateringly expensive, we are building a fraction of the number that the Mayor himself argues we need. In addition, while the Mayor’s 2020 vision argues for ‘Buildings of Lasting Quality’ how many of us can recall walking past a recent development that we thought was worthy of lasting two hundred years, as so many of our great London homes have done. Boris argues in his 2020 Vision in favour of terraced development – yet the Mayor’s own rules make it very much harder on at least 13 counts to build these popular forms of housing.
The reason that this is likely to damage Boris is that while he commits to certain ideas (lots of nice terraced homes), City Hall is delivering something quite different (a small number of new homes, often flats). Labour strategists have noticed the current difficulties in this area, and it was notable that David Lammy, with one eye on the Labour 2016 nomination perhaps, wrote an article in the Evening Standard focusing squarely on the housing crisis. Meanwhile Tory MPs in London note housing is a key issue for more and more voters, while for the many home county Tory MPs, every home Boris fails to get built on brownfield sites in London means more housing on green field sites.
Boris’ Achilles heel in terms of perception is that he is a great blonde ball of charisma, but unable to actually solve difficult problems, or get to grips with detail and government machinery. Regardless of if he aims for Number 10 or City Hall in future, unless he gets to grips with housing it may haunt him.
The tragedy is that there is a viable alternative. By committing to a mass programme of redevelopment of existing crumbling concrete slab estates, and leading on brownfield sites such as Strategic Industrial Land (SIL), the Mayor could find the land to build new homes on. By utilising neighbourhood planning, ripping up brownfield bureaucracy, and creating new models of land risk that move beyond the stale nonsense of the ‘viability’ test the Mayor could get the system necessary to deliver his 50,000 homes a year, and do so while creating Boris Homes that are truly inspired.
All administrations eventually collapse when they become more obsessed with defending their past record rather than tackling current and future issues. Boris is absolutely right to prioritise house-building. But building 16,000 homes a year in the midst of a major housing crisis is clearly not enough. Carpe Diem, Boris – get London building. Creating streets can be good for London, and good for you.
(*) These are up to Q2 2013, the most up to date figures available