MIPIM UK 2015
Housing Shortage Threatens
London’s Economic Future
London’s status as one of the pre-eminent cities in the world is rarely
questioned. But its status as a global hub for business and a viable
place to live is under serious threat due to the lack of housing which
is affordable for the average worker.
London’s Housing
Shortage:
Over 50% of Londoners
surveyed consider access to
affordable housing in London
as unacceptable.
New research conducted by FTI Consulting for MIPIM UK
2015 of more than 1,000 people who live or work in London
found that an overwhelming majority felt that the high cost
of housing would hold back businesses and discourage
individuals from living in London.
91% of senior business
A majority also felt that the private sector had failed in its efforts to provide a
solution to the problem of unaffordable housing in London, and it was up to
centralised bodies such as the Government or the Mayor of London to intervene.
80% say access to housing
To put the situation in context, in 2014 18,240 new homes were built in London,
according to the Department for Communities and Local Government. This
represents a 10% uplift on the 2013 figure, but the effect of the credit crunch is
highlighted by the fact that 2014’s figure represents a 27% drop on 2007’s figure.
managers worry they will miss
out on graduate talent due to
housing shortage.
should be #1 priority for the
next London Mayor.
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MIPIM UK 2015 – HOUSING SHORTAGE THREATENS LONDON’S ECONOMIC FUTURE
The Housing Crunch
However these figures barely touch the sides when it comes to
matching the need created by London’s population growth. In
a revised report on its housing strategy (‘Homes for London’)
released last year, the Mayor of London’s office estimated that
London will need 42,000 new homes per year to house the extra
1m people who will move to London over the next ten years.
Graph 2: Likely Consequences of a Lack of Affordable
Housing According to Senior Business Managers
Q. How likely or unlikely do you expect the following to be
a consequence of a lack of affordable housing in London?
96%
91%
89%
83%
79%
But broker CBRE has estimated that the true number is likely to
be 52,000. It found that an average of 17,350 new homes a year
had been built each year in London over the past 20 years.
This is clearly a situation with huge social and economic
implications. Of the 1,000 people surveyed by FTI Consulting,
84% consider access to affordable housing to rent as very or
extremely important, while 55% consider the present situation as
being unacceptable (Graph 1). The figures are near identical when
it comes to home purchasing; the same percentage also consider
‘affordable housing to purchase’ as very or extremely important,
while 56% consider the present situation as being unacceptable.
Graph 1: Affordable Housing in London
– Importance Vs Reality
Q. How important do you consider the following are
in relation to improving London?
Q. How would you rate London overall for the following?
84%
Access to affordable
housing to rent
55%
Miss out on
new graduate
talent
Move closer to
major overground
transport hubs
for employees
Subsidise
their employee
transportation
costs
Pay their
employees more
to help cover
their living costs
Base: Senior Business Managers (n=112)
The survey also throws an interesting light on what the general
public means when it talks about “affordable housing”, and what
should be provided when developers build new schemes. It is very
different from the official terminology.
The Government definition of affordable housing is housing
rented out at 80% of market levels. “Social housing” was housing
rented at 50% of market levels, and is increasingly rare in the
UK. The amount of affordable housing developers must provide
in order to receive planning permission for a new scheme differs
around the country, but is generally between 25% and 35%.
For those surveyed however, the definitions were crucially
different. When presented with different definitions, the term
most Londoners think this refers to is ‘overall cost to purchase
relative to wages’, identified by 48% of those surveyed and
‘housing for first time buyers’, identified by 46% (Graph 3).
In contrast, a significantly lower proportion, 30% consider it to
be about ‘housing for essential service workers’, and 29% for
‘housing for those on benefits’.
Important
Unacceptable
84%
Affordable housing
to purchase
56%
For those doing business in London, this is a big worry. Senior
business managers are understandably concerned, with 91%
believing that it’s likely they’ll miss out on new graduate talent
and an even greater proportion, 96%, considering that they’ll
also miss out on experienced professional talent (Graph 2).
They also feel that it will impose significant new costs on
business: 89% think businesses are more likely to move closer
to major overground transport hubs, while 83% believe they
will need to pay their employees more to help cover their
transportation costs.
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Miss out on
experienced
professional
talent
Graph 3: Definition of Affordable Housing
Q. When you hear the term ‘affordable housing’ in London,
what do you think it refers to?
Overall cost to purchase
relative to wages
48%
Housing for first
time buyers
Housing for essential
service workers
Housing for those
on benefits
46%
30%
29%
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MIPIM UK 2015 – HOUSING SHORTAGE THREATENS LONDON’S ECONOMIC FUTURE
This is significant given the current disparity between wages and
housing costs in London, which is at a record high. The average
salary in London is £28,000 a year, according to DCLG, whereas
the average house price was £493,000. DCLG data shows that
the average deposit required to secure a house in London is
23%, or £113,390 of a £493,000 home. That would leave a buyer
requiring a £380,000 mortgage, which would be 13 times the
average salary.
Graph 5: Solving the Lack of Housing in London
Q. Which of the following should London consider
to alleviate a shortage of housing?
61%
46%
The situation is not much rosier for those renting, according to
DCLG. An annual salary of £28,000 equates to £2,333 a month
before tax, whereas the average monthly rental cost of a onebedroom flat in London is £1,155.
Those surveyed felt that the real definition of affordable
housing did not match that in general use, and they also felt that
developers should be made to build more of it. A vast majority,
84%, felt that any new development in an area should include at
least 50% affordable housing. And 73% felt that there should be
more housing benefits to help first time buyers.
28%
Redeveloping town
centres & suburbs with
new housing & retail units
Solving the Problem
Graph 4: Best Placed to Solve Lack of Affordable Housing
Q. Who do you think is best placed to solve the lack
of affordable housing in London?
UK Government
47%
Mayor of London
The private sector
22%
Private landlords
Other
15%
Concentrating housing
redevelopment around
existing transportation
hubs
Building on London's green
belt land (an area of open
and undeveloped land
around a city)
A more controversial solution is building on London’s green
belt land with a significantly lower 28% supporting this. However,
when a map of the green belt was shown to respondents, 56%
showed some support, although just 22% were very supportive
(Graph 6).
Yet interestingly, and confounding a possible ‘NIMBY’ (Not In My
Back Yard) mentality, 77% were supportive of affordable housing
being built in their area of residence.
Graph 6: Support for Green Belt & Local Development
Q. How supportive or
unsupportive would you be
of proposed building on the
green belt to create new,
affordable housing?
Q. How supportive or
unsupportive would you be
if new, affordable housing
was planned to be built in
YOUR area of residence?
22%
32%
Very supportive
9%
No one
34%
In terms of solutions to the problem, there was a clear feeling
that the private sector had failed. Only 9% of those surveyed
felt that private landlords were best placed to solve the lack of
affordable housing, and just 15% felt the private sector in general
had the answer (Graph 4).
Slightly supportive
45%
Slightly unsupportive
19%
Not supportive
In contrast 47% felt that the UK government was best place to
solve the problem. The Mayor of London’s office was seen as the
answer by 22%, and 80% felt that the next Mayor should make
housing their number one priority.
The most popular solution to boosting supply is redeveloping
town centres and suburbs with new housing and retail units,
an idea supported by 61%. The next is concentrating housing
redevelopment around existing transportation hubs, which
46% support (Graph 5).
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12%
25%
12%
Ultimately, our survey highlights the fact that the housing market
in London is no longer an issue limited to superficial discussions
at dinner parties. It is a crucial issue of infrastructure that must
be given the same priority in Government as transport and
energy. London’s economic viability depends on it.
FTI Consulting, Inc.
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RESEARCH METHODOLOGY
This research was conducted online by FTI Consulting’s Strategy Consulting &
Research team from 17th to 21st September 2015, involving n=1,003 respondents
living or working in London. Further information on the results and methodology
can be obtained by emailing [email protected].
Please note that the standard convention for rounding has been applied and
consequently some totals do not add up to 100%.
Sue Brown
+44 (0)20 3727 1076
Clare Hartnell
+44 (0)20 3727 1421
Dan Healy
+44 (0)20 3727 1239
[email protected] [email protected]@fticonsulting.com
About FTI Consulting
FTI Consulting, Inc. is a global business advisory firm dedicated to helping organisations protect and enhance enterprise value in an
increasingly complex legal, regulatory and economic environment. FTI Consulting professionals, who are located in all major business
centres throughout the world, work closely with clients to anticipate, illuminate and overcome complex business challenges in areas
such as investigations, litigation, mergers and acquisitions, regulatory issues, reputation management and restructuring. The views
expressed herein are those of the author(s) and not necessarily the views of FTI Consulting, Inc, its management, its subsidiaries,
its affiliates, or its other professionals, members or employees.
www.fticonsulting.com ©2015 FTI Consulting, Inc. All rights reserved
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