London’s housing crisis is pushing young talent we need for growth to Singapore and Dubai

This is clearly unsustainable and puts home ownership impossibly out of reach for most young Londoners. The consequences of not fixing this, both for young people and our economy, will be huge in decades to come.

Our retirement system is rooted in the idea that we are a property-owning democracy, with most pensioners owning their own home and being mortgage-free at retirement. If young people are buying much later in life, or not at all, we risk creating a generation who cannot afford to rent as they reach retirement, creating an existential and very expensive problem for future governments.

While the consequences of declining home ownership rates are widely known, the impact on businesses and UK-wide growth is not. In polling we at the London Chamber of Commerce and Industry commissioned, 77% of large London firms (those with 250+ employees) said that housing costs are damaging recruitment and retention.

The consequences of this are real. If the best and brightest talent cannot afford to live in the capital and instead move to places like Singapore, New York, and Dubai, businesses cannot find the skills they need to grow. If businesses cannot grow, the economy cannot grow, and we will not achieve the Prime Minister's ambition of growth in every UK postcode.

The scale of the problem requires radical solutions for both housebuilding and access to the mortgage market. Planning reforms alone will not solve the problem.

Firstly, we must make building a house financially viable again. Industry experts Molior estimate that half of the land in London is not viable for developers to build on. No developer will build to make a loss. Meaningfully reducing the cost and burden of developing, therefore, is vital for getting London building again in the numbers required.

Establishing London Prosperity Zones with targeted incentives to unlock housebuilding and redevelopment in areas with clear benefits, but where land costs make development economically unviable, would be an important first step. Increased business rates and council tax receipts from regenerated areas would fund the cost of targeted intervention many times over once completed.

Secondly, the mortgage market needs to reflect the property market as it exists today, not as it existed forty years ago. Giving banks and building societies the ability to offer a London Mortgage, allowing middle- and higher-earning renters with strong credit scores to borrow up to 6x their income rather than the traditional 4.5x (or more recently, 5x), would more accurately reflect today’s property prices for young Londoners who earn well but will never be able to save anything close to a £140,000 deposit.

Requiring lenders and credit agencies to recognise rental payment history in mortgage applications, and giving first-time buyers the flexibility to divert their tax-free pension contributions towards their house deposit up to age 28, would also help young renters across the country. Pulling these levers would help give hardworking young people across the country the break they need to get onto the housing ladder, at minimal cost to the taxpayer and at no cost to employers.

These are decisions in the Government’s gift at the Budget. They are levers the Chancellor should pull, giving our young people the same opportunity as previous generations to buy a home of their own, helping businesses find the skills they need, and delivering UK-wide economic growth.

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Karim Fatehi OBE is CEO of the London Chamber of Commerce and Industry.

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