Rocketing house prices and rents are costing London’s economy over a billion pounds a year and thousands of jobs, according to new research published today. The data also shows the pressure that high housing costs are inflicting on people working not just in low-paid jobs but in many traditionally middle-class occupations.
The research is being published by a new business-backed campaign called Fifty Thousand Homes to be launched tomorrow (Tuesday) as employers across sectors face increasing competitive and staff retention problems as a result of the capital’s housing crisis.
Key findings of the independent study, conducted by the Centre for Economics and Business Reseach (CEBR) for Fifty Thousand Homes, reveal the impact of high housing costs:
– Businesses face a £5.4bn wage premium in 2015, equivalent to £1,720 per person. This is set to reach £6.1bn by 2020.
– Nearly 11,000 extra jobs could have been created in 2015 (a result of businesses benefiting from greater revenue and therefore being able to generate more jobs).
– Impact on the money in people’s pockets: unnecessarily high housing costs is removing £2.7bn a year in consumer spending or 1.6% of total consumer spending.
– The economic growth (GVA) lost by diverting money away from more productive expenditure will be £14.5bn between 2006 & 2020 – equivalent to £1.04bn a year.
Workers hit hardest
It also paints a bleak picture for many workers in London, who are being priced out of living in the capital (see full tables of occupation and industry impact below):
- Workers in shops, cafés and restaurants, those cleaning buildings, and those doing office admin would have to pay their entire pre-tax salary to rent an average private home in London.
- Social workers, librarians, museum attendants, teachers, postal workers, and gym employees are under extreme financial pressure as a result of rents taking up more than half their salaries.
- Only the best paid workers – including company directors and those in financial services earn enough to rent in central London “affordably” (less than a third of their salaries on rent).
Baroness Jo Valentine, Chief Executive of London First, one of the business organisations that helped launch the campaign, said:
“This needless housing shortage needs urgent action. If we carry on as things stand, in 10 years’ time London will be a no-go zone for employees across sectors and at almost all levels.
“I want the next Mayor of London to wake up each morning thinking about how to increase housebuilding – because only doubling our current levels of housebuilding to 50,000 a year will we solve this crisis.”
Scott Corfe of CEBR, which conducted the research for Fifty Thousand Homes, said:
“Our research shows that the housing crisis is resulting in substantial costs to businesses and risks undermining the capital’s position as a global centre of enterprise, talent and success.”
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