Wonderful places: mai 2016

Metropolitan growing pains

Britain’s capital needs to build more. Its would-be mayors are short on plans for making that happen

THERE are many ways to kill the goose that lays the gold- en eggs. London’s economy makes Britain rich. If Britons were to vote on June 23rd to leave the European Union, London would suffer. But another problem is just as threatening.
Soaring property prices are constraining London’s ability to foster new businesses and create jobs. The great city must overcome that problem if it intends to remain great.
The past

two decades have been kind to the capital. It is growing by more than 100,000 new residents a year. Like other booming cities, including New York, London thrives amid globalisation and technological change, which boost both demand for its financial services and the market for its startups.

Yet if London has given striving people and firms plenty of reason to come, it has done a poor job housing them. Building is maddeningly difficult. London has been adding only 25,000 or so new homes a year (New York City approved nearly that much in half the land area). The median price of a London home has tripled over the past two decades as a result. Office construction lags, too. Commercial property in London’s West End is twice as expensive as in midtown Manhattan.

The main culprit is land regulation, which is strict everywhere in Britain but draconian in the capital. To many Londoners, these rules offer a defence against a tide of change that threatens to transform the very essence of their city. More building might well slow the growth in prices but would sacrifice London’s character for economic expediency, they argue.

Such arguments are misguided. Cities cannot be frozen in aspic. London’s very reluctance to build changes it, just as surely as a construction boom would do. The capital is an increasingly forbidding place for non-plutocrats: between 2001 and 2011 the disposable income of those renting private hous- ing fell by nearly 30%. Businesses are worried, too. In early April more than 50 business leaders called for at least 50,000 new homes to be built each year, arguing that expensive hous- ing was threatening their ability to recruit young talent. Productivity has begun to slow , as promising firms are forced out (see page 52). Overpriced property is costing London the eco- nomic and human diversity on which its prosperity depends.

London needs leaders
Londoners go to the polls on May 5th to elect a new mayor to replace the incumbent, Boris Johnson. You might expect the leading candidates to offer useful prescriptions for curing the capital’s gravest ill. Alas, they do not. The hopefuls pay lip service to the need for more building, but then skitter down side streets. Zac Goldsmith, the Conservative candidate, encourages employers to lend workers the deposit they need to rent homes. Sadiq Khan, his Labour rival, wants a daft new form of rent control. Lamentably, both oppose the single best way to expand the housing supply: building more in the “green belt”.
This swathe of undeveloped land around London’s perimeter contains a fifth of the city’s acreage. Far from being the Edenic retreat that its name suggests, almost half is underused scrub; 7% consists of golf courses for rich people. By one estimate, it includes nearly 20,000 hectares (49,000 acres) with no claim to outstanding beauty that lie within 800 metres of a Tube, train or tram station. Judicious building there could yield nearly a million new houses, while keeping plenty of attrac- tive green space for the enjoyment of residents. In contrast, building on “brownfield” former industrial land a politically more palatable option preferred by both leading candidates is more expensive and less effective. Most economists reckon brownfield development could provide, at best, less than half the new housing London needs.

If it is disappointing that neither mayoral front-runner has the courage to counter the NIMBYist tendencies of London homeowners, it is not surprising. For, bully pulpit aside, London’s chief executive has far less power than he should have over housing. Without the agreement of politicians in West minster, the mayor can neither open the green belt to development nor pursue other useful policies—such as rewarding London councils that allow a lot of house-building by letting them keep more of the extra property tax receipts this generates. The capital’s housing woes won’t be solved until that changes.

If Britons foolishly yank their country out of the EU and send firms and talent packing, London will become more affordable for all the wrong reasons. If they sensibly choose to re- main in the EU, however, London’s health, and the need for more building, will loom as a critical issue for British economic growth. It is time Britain’s leaders realised that.