House prices in the capital have gone through the roof and continue to climb, putting a first home out of reach for all but the top earning group in the city. The economic and social costs are considerable, both to those seeking to climb the social ladder as well as businesses seeking to attract much needed talent to the city. In a bid to improve the housing situation, five organisations have teamed up to launch 'Fifty Thousand Homes', a business-led body that seeks to add 50,000 new homes per year in London to 2020.
London has a housing problem: increased urbanisation and economic focus in the capital have seen London’s population increase by approximately one million people over the last 10 years, while in the same period 202,000 new homes were built to accommodate the influx. The supply demand gap, as well as foreign investment from the boom years in Asia, has resulted in a significant increase in the cost of housing in the capital. The average price of a house in London is £513,000, compared to £277,000 across the rest of the UK, prices over the past decade have approximately doubled, while private sector rents have increased by 34%.
The effects of the choice not to meet increased demand with additional supply, has come at a considerable cost to the less affluent members of London's society, as well as the business community. £70,000, more than three times the median wage, is the wage threshold at which the number of Londoners finding it easy to service mortgages and rents begins to outnumber those who find it hard, a house now costs more than 14 times the mean annual salary in the city. As it stands, around £1 billion in economic growth (GVA) is lost due to high housing costs in London per year, which is diverted away from productive use – with a total of £14.5 projected to be lost in the 2006–2020 period.
Business leaders from a range of sectors have had enough with the situation, which is not merely pricing a generation out of the housing market and lining the pocket of property holders. 73% of businesses leaders in a recent survey say that the current conditions are hurting economic growth, while two thirds believe it is having a negative effect on access to talent that cannot afford to live in the capital, 70% of Londoners aged 25–39 say the cost of their rent or mortgage makes it difficult to work in London, exuberating the already poor record of social mobility in the UK – something which professional services firms are seeking to stamp out.
Fifty Thousand Homes
In a bid to improve the situation, Fifty Thousand Homes was established. The organisation is business-led and is focused on increasing the London housing stock by at least 50,000 homes a year by the end of the next Mayoralty in 2020, to meet growing demand – the capital is set to grow to 10 million inhabitants by 2020 – and improve the city’s competitiveness. The campaign’s founding partners are London First, CBI London, FSB London, Shelter, and management consultancy FTI Consulting. "Business has a vital part to play in helping London get the housing it needs," comments Baroness Jo Valentine, Chief Executive at London First.
The organisation is supported by signatories from some of the biggest employers in the city, including a range of professional services firms and consultancies such as Arcadis, CBRE, Deloitte, Grant Thornton, Mace, and Royal HaskoningDHV.
As part of its support, Grant Thornton will lead an inquiry into solutions for the current housing problem faced by the capital. The inquiry will consider a number of different ways in which demand for affordable housing in London can be met, including the possibilities of employer-led schemes and a new ‘build to rent’.
Will McWilliams, Partner at Grant Thornton UK, who takes a seat on the London First’s Fifty Thousand Homes campaign advisory board, says the firm is “excited” about the partnership with London First and supporting their Fifty Thousand Homes campaign. McWilliams further states: “London is in the grip of a housing crisis. The chronic shortage of affordable housing in London is affecting everyone: from the business community losing talent to other areas with more affordable housing; to the 283,000 households on London council housing waiting lists; and those families spending 59% of their pay packet on rent, unable to get on the property ladder with the average house price in London now nine times the average annual salary. Together we believe we can convene London's largest employers and key players in the housing market to deliver specific measures that will help increase the supply of housing across the private rented, social and private ownership sectors.”