A call by the Mayor of London for the city to be allowed to keep stamp duty revenue from house sales so that the money can be invested back into affordable housing is being backed by others in the housing industry.
The Mayor Sadiq Khan says that the move is needed to sort out the generational housing gulf in London which means that young people cannot afford to buy a home and also points out that other international cities that do have control of their housing tax have been able to outpace the rate of new home building seen in the capital.
He revealed that new figures from the latest housing report from City Hall show that home ownership rates among younger Londoners have fallen dramatically since the 1990s, and a lack of social housing means only one fifth of London households now live in social homes.
The report shows how the Right to Buy scheme has seen more than 300,000 homes sold by councils in London since it was introduced in 1980, with just one in five having been replaced. As a result, social housing has gone from being the capital’s largest housing tenure in the 1980s to the lowest in 2017, accounting for just 21% of London’s households.
It has also meant the numbers of private rented households with children have more than doubled in a decade, from 140,000 in 2007 to 320,000 in 2017.
London’s overall home ownership rate has also fallen in recent decades but the data shows stark differences in the trends for different age groups. In 1990, around half of London households headed by a 25 to 34 year old owned their own home, with around half of the households headed by someone over 65 owning too.
But in less than 30 years this picture has changed dramatically and the proportion of young people owning their own home has fallen to around a quarter, whilst amongst the over 65s the opposite has been the case, with the proportion having risen to almost three quarters.
The Mayor currently receives around £0.7 billion a year from national Government to invest in affordable housing. City Hall calculations show he would need four times that, around £2.7 billion a year, to build the social rented and other genuinely affordable homes that Londoners need.
The capital’s rising housing costs now generate £3.4 billion in stamp duty receipts, and Khan believes this should be devolved to City Hall, alongside other taxes, so that these receipts can be reinvested into building genuinely affordable housing.
A major report last year from the London Finance Commission showed that London raises far less of its own funding than similar cities around the world, and recommended that property taxes be devolved to London so that it could invest in new homes and infrastructure.
‘London’s housing landscape has worsened dramatically over the past 30 years, and we now risk a whole generation of Londoners being blocked from enjoying the benefits of a good quality, genuinely affordable home. This data shows that accessing social housing or homeownership is now a pipe-dream for too many,’ said Khan.
‘London’s rocketing house prices mean we are contributing billions of pounds in stamp duty to the Treasury, when we could be using it to build new social rented and other genuinely affordable homes. Control of stamp duty has been devolved to Scotland and Wales and it’s vital that Ministers devolve it to London too, which has a population larger than Scotland and Wales combined,’ he pointed out.
‘City Hall is doing everything we can to ensure new genuinely affordable homes get built, including our programme dedicated to helping councils build more housing. But the housing crisis facing our city, and in particular young Londoners, is immense. The Government must rise to the scale of the challenge and provide significantly more powers and funding so we can build the homes that Londoners so desperately need,’ he added.
The data also highlights how the capital is lagging behind major international cities whose housing growth has outstripped their population growth over the last five years, including Singapore, Tokyo, and Paris.
In contrast, London’s population grew 1.4% a year over the last five years, but its housing growth rate was only 0.8% a year. All of these other cities have far greater control over their tax revenues than London.
According to Terrie Alafat, chief executive of the Chartered Institute of Housing, the report makes it clear that young people are paying the price for a national failure to build the genuinely affordable homes needed, particularly in London.
‘We simply cannot go on with the system we have or the implications for future generations will be every bit as significant as the impact of Brexit. For many people on lower incomes, social rent is the only truly affordable option but as we can see from this report, thousands of people are being denied access because of the increasing shortage of social housing,’ he explained.
‘It is vital that the Government thinks creatively about how to shift investment so that we can build more of the right homes, in the right places, at the right places,’ he added.
Richard Brown, research director at the Centre for London, believes that the inability of young Londoners to find affordable housing is becoming an increasingly urgent challenge. ‘London boroughs could play a major role delivering the housing the capital needs. But London has one hand tied behind its back. To support and encourage councils to deliver at scale, Government should allow councils to borrow to build and to mix funding more flexibly,’ he said.
‘The Mayor also has very limited powers over taxation, compared to his counterparts in other capital cities. The Government should also devolve stamp duty alongside other property taxes to enable reform, and investment in housing and other infrastructure. The case for greater fiscal devolution has been strengthened in recent years by the transfer of powers over property and income tax powers to the governments of Scotland and Wales. Now is the time for London to get a deal of its own,’ he concluded.
