Tackling London’s housing crisis — it’s time to go after the suppliers, not just the dealers

Being able to set their own rents might seem like a pipe dream for most young Londoners — but it’s the reality for tenants at the Oxo Tower on the South Bank. In between the glitzy restaurant on the top floor and the cafes at the bottom are five levels of social, co-op housing. The tenants set the rents — they’re some of the lowest in London — and they set the rules. This is my inspiration for London’s future, and we can build enough affordable homes and real communities in our city like at the Oxo Tower, but to do so we need to change the way we build housing.

The symptoms of the housing crisis are familiar. Many more people want to live in London than there are homes. Luxury flats are sold off-plan to foreign investors whilst Londoners are priced out of the areas they grew up in. Rogue landlords letting out cramped properties at extortionate rates whilst failing to carry out repairs and letting agents charging astronomical fees, sometimes just to renew a tenancy. Young Londoners have little of their income left after paying the rent and have little hope of saving up for a deposit.

Politicians and policymakers will always be looking for the best solutions. We’ve all seen the headlines — tenants crawling into their room in a ‘converted’ loft, Londoners renting out beds in kitchens and sheds and windowless basement flats. Rent caps, landlord licensing schemes and banning letting agent fees are important steps we should take to address these problems. These are the visible signs of the crisis. But we need to not just focus our attention on the symptoms we need to also shine a light on the root cause — the failure to build enough homes. It’s understandable to be angry at rogue landlords and letting agents but these are simply symptoms of the problem, not the cause. It’s time to take on the landowners who sit on sites that could be used to build new homes. It’s time to go after the suppliers, not just the dealers, so to speak.

It’s estimated that we’d need to build 62,000 homes a year for the next decade to clear the backlog so supply catches up with demand. Currently we are nowhere near on course to meet this, last year we built around 18,000, and any new ambitious targets are unlikely to be met if we don’t address the real problem that is halting development, London’s broken land market.

The demand for land to build on in London is now so great, many landowners are holding to ransom developers’ ability to build affordable homes. It slows the rate of housebuilding as it is simply too profitable for landowners to hold on to undeveloped land as they know it will rise in value merely by them biding their time. And it means those developments that are built tend to be aimed at luxury buyers, not ordinary Londoners.

There are four elements to the cost of new housing: the cost of land; construction and building materials; affordable housing and infrastructure; and the developers profits. The problem with this equation today is that the high cost of land brought on by the dwindling available supply means that developers spend less on the quality of the homes they build, invest less in local infrastructure, and often try to reduce the number of affordable homes.

Image taken from p.34 of ‘Building the Homes we Need’ report (2015) produced by KPMG in partnership with Shelter

Invariably, smaller developers and custom builders, such as Coin Street Community Builders who developed the Oxo Tower, have little chance at competing with bigger developers with bigger bank accounts.

To bring down the cost of land we need to reform compulsory purchase powers. I would designate zones for housing, in which we should encourage landowners to develop brownfield sites through the credible threat that failing to build would result in compulsory purchase. Currently the process of compulsory purchase is expensive, weighted towards the landowner and takes a long time. As a result it is far from the powerful tool it needs to be to help accelerate housebuilding.

Instead, the amount paid should be based on what the land is worth, plus a reasonable uptick, rather than the current arrangement which is based on what the land might be worth in the future if planning permission was granted and the site developed. Such compulsory purchase powers have been used successfully across Europe, in the Netherlands and Germany particularly. But there’ve also been used successfully in London too, to build Canary Wharf and the Olympic Park. So if it’s good enough in these cases, why not use such powers to help meet the massive demand for more affordable housing in London?

This is not Robert Mugabe-style land seizure, landowners still receive a reasonable price, but the scale of the housing crisis and the sense of hopelessness many Londoners feel about their situation means we must take radical action to reform the broken land market. Because if we want more of the kind of diverse and vibrant communities that exist at housing developments such as the Oxo Tower, we need to find a better way to build the housing we need so that those on average incomes can afford decent homes in our city again. But to be able to achieve this we must first fix London’s broken land market, which will mean stopping just going after the dealers, and starting to go after the suppliers too.

Gareth Thomas is the Member of Parliament for Harrow West, Chair of the Co-op Party and is a Prospective Labour Candidate for London Mayor