Mind the gap - how will the next Mayor make London affordable?
House prices in 28 of 33 London boroughs are now at least 10 times average salaries, with prices in London’s most expensive borough, Kensington and Chelsea, now 38 times earnings, making them out of reach for all but the super-rich, according to research by the property crowdfunding platform Property Partner.
So, with affordable housing the key electoral battleground, can Londoners expect an improvement under one of the two frontrunners, Zac Goldsmith or Sadiq Khan? Property Partner has compared the records of current and former mayors, Ken Livingstone and Boris Johnson.
Property Partner has analysed the latest data from the Department for Communities and Local Government, showing the ratio of average house prices to average earnings for London boroughs and English regions from 2000 to 2015.
When Ken Livingstone became London’s first directly-elected mayor in May 2000, the ratio of house prices to earnings across the capital stood at 5.6. By the time he left office in 2008, this figure had jumped 47% to 8.3 times average earnings.
In 2000, many of London’s less affluent boroughs were affordable by UK-wide standards. Houses in Barking & Dagenham cost on average 3.4 times earnings, in inner city Newham they were 4.3. But during Ken’s tenure as mayor, prices in these boroughs rocketed away from local earnings, by 113% in Barking & Dagenham and 110% in Newham.
Since Boris Johnson was elected in 2008, house prices have also marched upwards, albeit at a slower rate. Prices across London have risen to 11 times average annual pay, with all but 5 of the 33 London boroughs (Barking and Dagenham, Bexley, Tower Hamlets, Croydon, Havering) into double-digits. Under Boris, the tech and hipster haven of Hackney has become less affordable, faster than any other local area in the UK, with prices rising to 14.7 times average earnings.
On instruction from the Bank of England, most mortgage lenders restrict borrowing above 4.5 times salary. Unsurprisingly, these more ‘affordable’ outer boroughs are now seeing the strongest house price growth, presenting the best opportunities for first-time buyers and investors.
Outside London, the South East and East of England, the picture is very different. Housing affordability levels are still below their pre-Global Financial Crisis peak in every other region. In England as a whole, the affordability ratio has stretched by just 0.02% in the nine years from 2007 to 2016.
Dan Gandesha, CEO of Property Partner, says: “This research shines a harsh spotlight on the desperate issue of affordability in the capital, proving London’s current and former mayors - Ken and Boris - both failed on housing.
“Whoever wins on Thursday needs an innovative approach to help resolve the supply crisis. Neither of the two frontrunners have even been able to define ‘affordable’. What is crystal clear is that most Londoners are being priced out of the housing market as properties now stand at eleven times average earnings.
“The solution to the housing crisis in the capital must be radical. There’s no time to waste. Potentially unpopular solutions, like building on the green belt, should be seriously considered. Housebuilding needs to double to meet demand. It’s time to put options like property crowdfunding on the table as part of the answer.
“But perhaps the British obsession with mass home ownership needs to change too. With government support for build-to-rent initiatives, long-term renting could eventually fill the gap, with larger institutional landlords taking over the sector, providing affordable rents and professionally-managed properties rather than multiple, small private ones.”