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UK housing crisis ‘costs London's economy 1bn a year,’ new data reveals

UK housing crisis ‘costs London's economy 1bn a year,’ new data reveals

London First

3 min read Partner content

Rocketing house prices and rents are costing London’s economy over a billion pounds a year and thousands of jobs, according to new research published today. 

The data, complied by the Centre for Economics and Business Research for the Fifty Thousand Homes campaign, found that businesses faced a £5.4bn wage premium in 2015, equivalent to £1,720 per person, which is set to reach £6.1bn by 2020.

The research, which will be launched tomorrow, also raises concerns over employers’ facing increasing staff retention problems as a result of the capital’s housing shortage.

It suggests that nearly 11,000 extra jobs could have been created in 2015, as a result of businesses benefiting from greater revenue and therefore being able to generate more jobs.

Looking at the wider implications, the study found that the economic growth (GVA) lost by diverting money away from more productive expenditure will be £14.5bn between 2006 & 2020 – equivalent to £1.04bn a year.

The knock-effect on the high-street was estimated to be a loss of 1.6% of total consumer spending with unnecessarily high housing costs removing £2.7bn a year in potential revenue.

Workers that are being priced out of living in the capital include those working in retail and hospitality, cleaners and admin staff.   

Social workers, librarians, museum attendants, teachers, postal workers, and gym employees were identified as under extreme financial pressure as a result of rents taking up more than half their salaries.

Only the best paid workers, the study suggests, 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 added: “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.” 

Fifty Thousand Homes is a business-led campaign to double housebuilding in London to at least 50,000 homes a year by the end of the next Mayoralty in 2020, in order to protect and enhance the capital’s competitiveness as a global city.

The campaign coalition includes over one hundred business leaders, along with the support of London First, CBI London, FSB London, Shelter, and others.

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