The issue of foreign investors pumping money into the London property market has once again been raised by last night’s BBC report on a rise in overseas investment in the outer London boroughs, and how this provides competition for first-time buyers.
The issue of what kind of housing investment is best for London tends to blend together different problems, and indeed, people come at it with a variety of different objections or defend it for a range of motives. As has been pointed out, the issue is not wholly black or white.
But starting from basic principles, we can start to unpick the problems that are raised by this kind of investment and what action is needed by the Mayor and government to make housing work for the future of the city.
The first question is: who should have access to housing? The obvious and eternal answer is those who need or wish to live in it. On that basis, it is not right that first-time buyers are being forced out of the market by potential absent landlords, whether they live abroad or in the UK. The national origin of the speculator is irrelevant, and shouldn't be part of the debate.
It is this principle that led George Osborne to move towards ending the tax advantages buy-to-let landlords previously enjoyed over owner-occupiers, and the one that should motivate Sadiq Khan’s ‘first dibs for Londoners’ pledge. Generation Rent has previously affirmed that ‘Londoners’ in this sense should attain to anyone who wants to make their future in the city, rather than be based on a past residency requirement.
The second and related principle then, is: What should housing be for? Again, we all know the basic answer – to provide secure, affordable and decent homes for all.
Homes used as investments are completely inimical to this principle. Buying property on the basis of ever-increasing prices throws affordability for renters and first-time buyers out the window, and it lends itself to short-term tenancies and sudden sales that undermine security.
It also logically opposes the kinds of regulation that can help drive up living standards in the private rented sector, as additional ‘bureaucracy’ and ‘business costs’. So this kind of investment really does nothing for the kind of regulated private rented sector we need.
Finally, a third broader social principle attains here as well: what role should the housing market play in the long-term future of London? At Generation Rent, we would say that housing should support the mixed communities of the capital, reducing poverty and inequality and supporting opportunity. Does foreign investment of this kind do that?
Generally, ‘no’ would have to be the answer. Crowding out first-time buyers and maintaining an unregulated private rented sector increases inequality, keeps Londoners in a state of permanent insecurity and financial precariousness and cannot provide homes for those most in need.
The alternative then is mass investment from the state in genuinely affordable social housing on the one hand, and regulation of rent costs and security of tenure in the private rented sector. In conjunction, these two approaches would start to stabilise rent and price inflation in London and would ensure those of all incomes could continue to live in the city.
Under such circumstances, with those social outcomes fulfilled, foreign or domestic investors would be welcomed with open arms. Without those approaches in place though, investment of this kind can only worsen, rather than alleviate, the London housing crisis.