Soaring house prices “costing the economy £1bn”
The study – published by a new campaign to increase London’s housing supply called “Fifty Thousand Homes” – claims employers across multiple sectors are facing more competition and staff retention problems as a result of the capital’s housing crisis.
The study was conducted by the Centre for Economics and Business Research (CEBR) and 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.
It found that businesses face a £5.4bn wage premium in 2015, equivalent to £1,720 per person. This is set to reach £6.1bn by 2020.
The report also found that high housing costs are impacting the money in people’s pockets. It estimated that housing costs are removing £2.7bn a year in consumer spending, equating to 1.6% of total consumer spending.
Fifty Thousand Homes also paints a bleak picture for many workers in London, who are being priced out of living in the capital. It claims that 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.
Meanwhile rent takes up more than half the salaries of social workers, librarians, museum attendants, teachers, postal workers, and gym employees, putting them under extreme financial pressure.
Only the best paid workers – including company directors and those in financial services – earn enough to rent in central London “affordably” (spending 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 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.”