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How profit-hungry developers broke the housing system

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Housing exposes obscene wealth and hard poverty in Britain today. Behind it all is a system where houses are built for profit, not homes, says Isabel Ringrose
Issue 2758
Vauxhall, in south London, has become a symbol of development for profit
Vauxhall, in south London, has become a symbol of development for profit (Pic: Guy Smallman)

In the same week that ­hundreds of thousands of people were facing evictions, rich residents of Vauxhall in London were spotted relishing their sky pool.

House hunters can buy a ­two-bedroom flat for as much as £1,990,000 at Embassy Gardens, Nine Elms. And many are bought as investments, rather than to live in.

Evictions and the vast wealth loaded into luxury accommodation are connected by a housing crisis.

Britain’s housing crisis is fuelled by developers for whom house building is about investment and profit—not ­providing homes fit for people to live in.

During the pandemic, the Tories have helped them along with tax reliefs and development plans.

Schemes are constantly being rolled out to get people buying houses.

In Bolsover, Derbyshire, “first home” properties have been discounted for key workers at 30 percent of the market price.

But the houses will then stay at that price so the owners don’t get to buy and sell at a profit as developers do.

Other developers, funded by the government, lower the amount of deposit required and add it back to the mortgage price.

As London expands, developers pour huge amounts of their money into impoverished boroughs such as Newham, in the east of the city. This doesn’t benefit ordinary people.

Newham has some of the worst overcrowding in England.

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And as of 2020, 4,500 households were in ­temporary accommodation—the highest levels in the country. It also has 2,145 empty homes despite one in 24 being affected by homelessness, and the longest housing waiting list in London at over 27,000.

Newham has been the centre of regeneration since the 2012 Olympics. Former Mayor for London Boris Johnson said the project was “setting the pace for the transformation of east London.”

Its developers the London Legacy Development Corporation plan “the biggest cultural boost” to London via the East Bank in the Olympic Park in Stratford.

The latest £1.1 billion project has received £385 million from the London mayor and £151 million from the Tories.

But the project is behind, over budget, and offers minimal affordable housing.

At the Royal Docks, 12 miles of waterfront in a former industrial area hosts upmarket accommodation.

Millennium Mills—a ­derelict building in the Silvertown area—is the centrepiece of a £3.5 billion redevelopment project to create 3,000 new homes for “entrepreneurs”.

In total around £8 billion will have been invested in the docklands over 20 years creating 25,000 new homes.

Yet these homes won’t help the crippling housing crisis.

Private development that offers a handful of so-called affordable ­housing, and even less socially rented housing, only drives prices up and poorer people out.

The money pumped into ­developing these areas should be invested into those who need it most.

Tories help drive prices up

A “race for space” has seen the total value of homes sold reach £461 billion this year—a 46 percent jump from 2020.

This is the biggest rise since before the 2007 financial crash. The average house price in March had also increased by 10.2 percent in a year—the highest annual growth since 2007.

And the average property price rose by 2.1 percent between February and March 2021 to £256,000.

Prices of detached properties increased by 11.7 percent as a third of buyers looked for bigger houses and gardens during the pandemic. Growth in London was down 0.7 percent to 3.7 percent, showing a shift from working and living in the capital. But house prices are still on average £500,000.

The Tories’ stamp duty holiday brought in last summer, and government guarantees for mortgages, also fuelled the growth.

They offered first-time buyers 95 percent mortgages until the end of 2022. And the stamp duty holiday, extended until September, means properties up to £500,000 incur no tax on sale.

Homeowners have saved £5 billion from the tax break—money that could have been put towards social housing.

It’s just 5 percent of the estimated amount needed to cover rent debts from the pandemic.

‘Affordable’ scheme a scam

London mayor Sadiq Khan wants 50 percent of new developments in the city to include “affordable” housing.

A housing scheme in east London—Chobham Manor—used council money to increase the number of affordable homes to 35 percent from 29 percent.

Under Section 106, money received from council houses being sold, is given to developers, supposedly to provide things such as affordable housing, trees and a play area.  It helps them to justify the development. But “affordable” housing can still be up to 80 percent of market rent.

And developers only agree to this with the incentive of extra council money—despite funding already handed over from the public purse.

They are also able to deliver housing through permitted development rights (PDR).

This means plans do not need to go through the full local planning process, and local authorities cannot scrutinise a development.

So councils cannot require a developer to supply affordable housing, giving developers a ­get‑out clause under the PDR system.

The Tories’ planning white paper looks to expand the PDR system.

Currently one in every ten properties was delivered through PDR.

What sort of housing do we need?

Some 2.6 million council homes have been sold off across Britain since Tory prime minister Margaret Thatcher introduced the “right to buy” in 1980.

Around 40 percent of former council houses are rented out by private landlords, and councils have been known to rent their former housing stock back.

Since 2003 London has lost some 6,748 social and council homes to demolition schemes.

And a further 6,791 are set to be lost if planned schemes go ahead.

Marian Court, an estate in east London, is set to be demolished. It held 135 homes, 85 of which were social rents and the rest owned by leaseholders.

Some 275 new homes are set to be built in its place—80 social rented, 118 shared ownership and 77 for sale.

Similarly in Southwark, south London, some 1,200 council properties were taken down between 2011 and 2014, and replaced by a luxury park with 3,000 homes. Just 82 were for social rent.

The council says it will build 11,000 social rented homes by 2042—but is looking for “underutilised space” on existing estates, such as play areas for children.

Another consequence of the lack of social housing is one in four Londoners are placed in temporary accommodation due to homelessness outside their local area, sometimes in cities up to 200 miles away.

Campaigners have long been calling for “affordable housing” to be fixed at social rented levels.

But the only solution is to provide more council homes—not simply “social” housing from associations that effectively act as private landlords.

Sadiq Khan says he wants to build 100,000 houses.

Building houses isn’t the problem—it’s who and what they’re built for.


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