London’s housing crisis has reached an acute stage. It’s having a profound impact on the lives of residents and upending the national UK economy. The capital has been blowing past its building targets by a huge margin. In turn, homelessness is increasing, and families are being pushed out of the city altogether by exploding housing prices. This descending housing market affects real people and local communities. It breaks down morale and devastates productivity and economic vitality across the country.
According to new reports, London has sorely missed this mark and has not built the needed 88,000 new homes per year. More recently, this shortfall has contributed to record high levels of homelessness across the city. It’s made the housing crisis worse by increasing the supply of affordable housing. Families such as Haddy Folivi’s are symptomatic of this growing crisis.
So in 2021, along with her 2 daughters, Folivi took the hard decision to leave London. She recounted her struggle to find a suitable home, stating, “For a house with a room each for my kids, we were looking at around £500,000. I didn’t want to overstretch myself and pay thousands of pounds a month on a mortgage. I wanted to get something affordable for us as a family.”
The challenges of high housing costs are made even worse by a unique combination of limited land availability and regulatory constraints. These combined factors have forced many of the capital’s young professionals to look for a way out of the capital entirely. According to a new survey, 42% of Greater London residents aged 25-45 could be forced to move. This is a testament to the growing anxiety among younger adults in the region.
Younger generations have the most to lose and are living the effects of inaction today. Almost two-thirds rely on debt to cover their housing costs. The oppressive cost of living in London has pushed many skilled professionals at the same time to commute from even greater distances. This imposed distance disallows them from actively participating in a thriving economic base and productive workforce.
Increased homebuilding in London would make a substantial positive contribution to the UK economy, economists argue. New analyses demonstrate how releasing the new annual housing target could unlock an annual £40 billion economic boost by 2034. This increase has the potential to increase the average Londoner’s take-home pay by as much as £3,700. “Continuing to grow London’s economy is one of the mayor’s top priorities,” stated a spokesperson for Mayor Sadiq Khan. “Sadiq is focused on tackling the housing crisis and is doing everything in his power to deliver more homes of all tenures.”
Experts are calling for urgent action. Without coordinated, effective actions, experts say things will not get better. “High housing costs, fuelled by limited land availability and regulatory constraints are pushing workers further away from their place of work,” said Alexander Harvey, an economist at Oxford Economics.
Liam Sides, an associate director at Oxford Economics’ Cities & Regions team, emphasized the importance of addressing London’s housing issues. He remarked, “London is such a substantial part of the UK economy and its underperformance has become a central part of the UK’s overall productivity slump.”
The state of the city’s housing crisis is not just a social imperative, but an economic imperative that must be acted upon urgently. Simon Carter, CEO of British Land, pointed out that “unlocking a step change in housebuilding” is essential for London’s future growth. He stated, “London’s housing crisis is not just a social issue but an economic imperative.”
While the federal government has taken some steps to tackle these hurdles, industry leaders remain doubtful about their impact. Mr. Rickard pointed out that although some of these levers have been pulled by the federal government, “we need to pull thousands more.” He stressed that there is no point in just building homes if they’re not going to be affordable for those buyers. It’s not enough simply to create new supply – we must ensure that people can afford to purchase them too. Right now, however, both sides of the equation are missing.
At the same time, London’s economy is being hit hard. It is crucial for policymakers to act to increase productivity and raise the standard of living for those who call it home. James Chaplin, CEO of Vacancysoft, urged that the business community needs to be more nimble. “Looking ahead, either the cost of living in London needs to come down or businesses need to increase the packages they are offering.”