The real victims of London's housing aren't the poor, but the squeezed middle

Callous though it sounds, it is rank extravagance to spend a lot of public money enabling jobless poor people to remain in expensive areas

Canary Wharf rises above an area of council housing in Tower Hamlets (Getty)

The country’s supposed housing crisis has topped almost every list of election concerns, with the parties vying with each other to hold out inducements to favoured groups – first-time buyers, housing association tenants, those affected by the “bedroom tax”, heirs to the family home etc – and penalties, such as a mansion tax and a lower benefits “cap”, to others.

Meanwhile, London’s wealthiest councils have already embarked on some social engineering of their own by moving poor and homeless families out of central London.

Housing may be at the top of voters’ and politicians’ lists, but the discussion, such as it is, has been conducted at a generally abysmal level. So many of the arguments are so muddled; so many of the supposed remedies just so wrong. How so?

First, there is no national housing crisis. In some parts of the country there are swathes of empty housing; there and elsewhere prices have fallen. There are difficulties specific to London, with its fast-growing population, its huge income disparities, its concentration of jobs, the influx of foreign money and the competing interests of developers, investors and existing and aspiring residents. London prices have pulled away from the rest.

Second, however, even London is not “unaffordable”. If it were, the market would bring prices down. Today’s prices are high, but interest rates are steady and very low, which has had its own effect on prices. The difficulty – as the Chancellor recognised with Help to Buy – is finding the deposit now that lenders have – rightly – tightened their procedures in the name of sound money.

Third, the home-ownership boom of the past 20 years needs to be seen as the exception, not the rule. In the olden days (the1980s, say, when my generation was putting down roots), you mostly did not, could not, buy until your 30s. Rules on deposits and mortgage size were strict. Interest rates were variable and high.

Fourth, London has long been a city of the very rich and the very poor, not only because of the rich fuelling prices at the top end, but because generous social policies have made it possible for the very poor to live in very expensive areas at the taxpayers’ expense, when those with only slightly higher incomes, have been forced to move (or kept out), because they do not qualify for help.

With the middle starting to vanish from London altogether, the economic – and social – wisdom of these policies is finally being challenged. And to me this is no crime. Callous though it sounds, it is rank extravagance to spend a lot of public money enabling jobless poor people to remain in expensive areas – the cap, by the way, applies only to workless households – when the same money could be used to subsidise more people’s rents in cheaper areas and/or build more homes. The absent “middle”, not just families, but professionals, is the really malign trend that needs to be addressed.

So what would I do about it?

I would never even think of selling off housing association homes. I would restrict sales of council housing to those who have occupied them for a minimum of 20 years, and make it a condition of sale that the owner should either remain in the house or flat or sell it, but on no account let it. We have the absurd situation now where an estimated 30 per cent or more of homes sold under “right to buy” are being sublet to tenants in receipt of housing benefit. This is economic madness.

I would put in place restrictions – both financial and residential – such as operate in New York, Copenhagen and other internationally desirable cities that make it either difficult, or punitively expensive – to the point where it negates the investment – to be a non-resident owner. I would also make much more stringent checks on the source of the money used by foreigners to buy London (and other) property.

I would raise all council and housing association rents to commercial levels – to discourage what is now a flourishing and highly corrupt subletting market – and pay housing benefit to those who genuinely cannot afford the new rents with housing benefit.

I would immediately end most tax-breaks for buy-to-let. This would end at least some of the disadvantage faced by first-time buyers who have to compete with investors and would-be landlords for some of the same properties.

When I asked economists at the – now apparently sainted – Institute for Fiscal Studies why no party’s election platform mentioned buy-to-let, I was smartly told that, overall and long term, buy-to-let landlords are actually penalised tax-wise. Sorry, but the (still) burgeoning buy-to-let sector has had an effect on the affordability of housing in London, distorts the market for owner-occupiers, and leaves renters at the mercy of unprofessional landlords. I am with Ed Miliband on the desirability of three-year leases and inflation-related rent increases.

It may well be that the twin problems for the “middle” – affordability and unsuitable housing stock – start to solve themselves if the number of £1m-plus flats starts to exceed demand, as well it could. The rationale for investment then falls, and prices in this part of the market could plummet, with knock-on effects for the rest of the London market.

In the meantime, it is worth noting that the difficulties facing the “middle” in London may be having one potentially beneficial effect. Anecdotally, more professionals are turning their back on London and moving to other cities for the quality of life.

The long-term consequence could be to reduce the economic dominance and social primacy of London. Every cloud, as is said, has its silver lining.