Support for the squeezed middle: could public subsidies tackle London’s housing crisis?

apartment building in Nottingham UK

A new report from the Centre for London has highlighted the potential of intermediate housing in supporting Londoners on middle incomes.

The report – Fair to Middling – argues that not only could publicly-subsidised housing help those on modest incomes in London find better places to live, but could play a vital role in ensuring that the capital retains the school teachers, bus drivers, chefs, nurses and other workers it needs to sustain its economy.

Chaired by the leader of Haringey Council, the Commission on Intermediate Housing was set up by the Centre for London to investigate the strengths and weaknesses of current housing policies with respect to those on middle incomes. Its latest report builds on a 2014 analysis, which found that house prices, rents, transport, energy and childcare costs were substantially higher in London than in the rest of the UK.

The new report paints a stark picture of London’s housing crisis. The Commission selected six households on modest incomes and charted the relationship between their earnings and house prices in four London boroughs. Among its findings:

  • Kensington and Chelsea is now unaffordable for all the selected households, and has been unaffordable for all but one of the households for the entire period covered;
  • Only the two highest earning households – a doctor, and a solicitor/journalist – can now afford to live in Haringey, but they will be priced out of the market in 2016 on present trends;
  • On present trends, both the nurse and the teacher households will find London unaffordable in two years, while the electrician household will only be able to afford Barking and Dagenham, and Enfield.

The authors warn that, unless action is taken to support the people it depends on to keep the city going, the consequences could be widespread and severe:

“Rising housing prices will inevitably squeeze these people out of the city or harm productivity in other ways – long commutes and unstable and overcrowded accommodation eventually affect performance.”

The benefits of intermediate housing
Fair to Middling makes the case for public subsidised housing in London, arguing that intermediate housing can:

  • help make housing more affordable for low-to-middle income earners;
  • keep London competitive and boost its economic success;
  • foster mixed income and stable communities.

Options for the future
The report describes overall supply of intermediate housing in London as “lamentably small”, amounting to less than 2% of the capital’s housing stock. Shared ownership – the most common type of intermediate housing – is, according to the Commission, an unfamiliar and complex product, and in the most expensive parts of London it is completely unaffordable.

The report suggests that intermediate rent offers the best deal to housing providers and investors.

“Local authorities and other housing providers should make appropriate use of intermediate rent products as well as those offering a route towards low cost home ownership. Intermediate rent policies should be offered at a range of levels to meet the needs of different types of household and households confronting expensive locations.”

The report also identifies examples of employers, such as universities, helping their staff secure affordable housing. It suggests that an employer-backed shared ownership scheme could help employees buy a share in a home that they otherwise could not afford, and help the employer attract and retain valuable workers while making a good return on its investment.

The Commission’s findings offer another reminder that, while solving the housing crisis won’t be easy, failing to tackle the problem risks creating challenges that may be much harder to overcome.

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2 thoughts on “Support for the squeezed middle: could public subsidies tackle London’s housing crisis?

  1. Pingback: Going through the roof: could building upwards address London’s housing problem? | The Knowledge Exchange Blog

  2. Pingback: Rent controls: lessons from Berlin? | The Knowledge Exchange Blog

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