1% fall in house prices in London could yield £7.3bn boost to the economy over a decade, says mayor

8 comments

1. I know I’d certainly be more productive if the cost of my starter flat fell from £600,000 to just £594,000

2. Just thinking of all the flat whites and avo toast people could afford 🤤

3. You can’t talk about the housing crisis in London without talking about the cost of rent. And yet the article doesn’t mention rent once

4. Good luck with that Sadiq, house prices are about to rip

5. Herein lies a great example of the confusion between general affordability (as measured in the study) and “affordable housing” – as wanted by the Mayor.

   The study mentioned measures housing affordability as thus:

   > Housing affordability is measured as the median house price divided by median wage within a 20km radius of each local authority

   They add:

   > House prices are a proxy for housing costs and are highly correlated to private rental prices at the regional level.

   So study is about **market rate** housing – which in turn is highly correlated to **private rental prices**.

   However, the conclusion from the Mayor is that we need to build more “affordable homes” and he makes no reference to affordability more generally. This is problematic, because “affordable homes” are by definition homes offered at below market, subsidised rates – like social rent, affordable rent and so on. They are, definitionally, not what this study is looking at.

   What might seem like an inconsequential difference is actually quite important. One of the ways to increase affordable housing is to have new developments subsidise them – known as the cross-subsidy model. This is very often the case in London, where the Mayor has a strategic target for 50% of new home to be affordable for a development to be approved. [However, affordable mandates this high, can lead to LESS supply overall.](https://ternercenter.berkeley.edu/wp-content/uploads/2024/04/Inclusionary-Zoning-Los-Angeles-April-2024.pdf)

   Less supply means less general affordability. So whilst it might seem oxymoronic at first: mandating more “affordable housing” can make housing generally less affordable, which is what this study is referencing!

6. We can argue this both directions: 

    – House price drops. People have more to spend that otherwise they would spend on housing. Consumption grows 

     – House price increases. Banks create more money. Gdp increases. More tax. Banks give out more loans, fueling the economy. Fat cat bankers use their bonus to invest in more housing.

   Just great the economic theories, it’s pick and choose depending on your desirable pov.  

    For journalists it’s great, they can always write the same headline ” shocker terrible news, because house price went up/dropped”

7. “Sure we could have more growth and opportunities for people to have housing, but have you considered the neighbourhood character?” – Peckham residents fighting redeveloping the Aylesham Centre into 800 units

8. I’m glad the impact that house prices have on economic growth (due to how it cripples disposable income that can be spent and redeployed into productive businesses rather than banks and wealthy landlords) is being publicised more.

   We have become less and less productive as a nation and are seeing lower and lower growth partly because so many people have to spend so much of their money on housing costs. It’s not just renters but homeowners too – your mortgage is tied to the price you bought at of course.

   Then there’s the additional issue of how house prices have increased so much to ridiculous levels, having vastly outstripped wage inflation, that even a single inherited property can allow someone of working age to retire, not bother working hard, or not be ambitious to contribute to society productively when they know they’re already ser. I’m not against early retirement (I’m a follower of the FIRE movement myself), but I am for those that work hard to earn their wealth being rewarded for it. And right now in the current UK economy, youre mainly rewarded by being lucky enough to have parents that own expensive property. We’ve long lost the ability to call our country a meritocracy.

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