Nearly half of the capital’s 25-45 year olds are ready to leave over unsustainably expensive housing, according to a new study.
In fact, two in three are regularly borrowing money to pay housing costs, most commonly turning to credit cards, payday loans and family support, according to a new report from Pocket Living.
“The pressures facing not only young Londoners, but those into middle age, have deepened significantly over the past two years,” Paul Rickard, chief executive officer at Pocket Living, said.
“What was once generation rent is now, for too many, becoming generation debt,” he added.
Rents costs in the capital have risen by more than a third since 2022, driven ever-further upwards by high mortgage rates, changes to taxation laws, and demand far outpacing supply.
Pocket Living’s research, conducted among 1,000 Londoners in early September, found that the pressure risks “hollowing out the very workforce that keeps the capital’s economy and public services running”.
Private renters on an average household income in the capital paid 41.6 per cent of their earnings on housing last year, up from 38 per cent in 2023 and the highest figure since 2021.
In fact, the cost of London’s housing pushed England’s affordability ratio above the 30 per cent affordability threshold in 2024, despite most English regions being below the figure, according to the Office for National Statistics.
Why is London housing so expensive?
There are a number of reasons the capital is suffering from such a severe housing crisis.
The first is a lack of construction. The building of both affordable and luxury flats has dramatically slowed as companies come up against a wave of costs and red tape.
London has a target of building 88,000 homes a year to ease the crisis, although it’s not expected to come anywhere near that figure in the next few years.
London is “by some accounts” the most expensive city in the world to build in, according to the GLA – land values and construction costs have risen around 40 per cent since the pandemic, compared to a 20 per cent increase in house prices.
Another reason is high demand. The cost of housing means it’s not just early-career tenants looking for places to stay, but older renters who in previous decades would have bought homes but who are stuck renting.
International buyers, too, drive up prices in central and well-connected areas, in turn pushing up prices in those and surrounding areas.
These structural reasons have all been compounded by high mortgage costs, a post-pandemic flood into the city, and changes to tax structures which increase the amount landlords must pay the Treasury.
Labour pledges to fix housing crisis
The government has made fixing the housing crisis a cornerstone of its economic policy, with a £39bn 10-year investment in social and affordable housing announced earlier this year.
Along with a string of planning changes and investment announcements this and last year, Labour recently enacted emergency measures to “tackle the housebuilding crisis in London and unlock tens of thousands of homes across the capital”.
Affordable housing quotas will be relaxed, Mayoral powers to wave through schemes will be expanded, and £322m of initial funding will be put in a City Hall Developer Investment Fund.
An MHCLG spokesperson said the government will “leave no stone unturned to build the 1.5 million homes this country desperately needs and restore the dream of homeownership for young people in London and across the country”.
A spokesperson for the Mayor of London added that tackling the housing crisis is “one of the Mayor’s top priorities”.
“Sadiq is doing everything in his power to deliver more homes of all tenures. We have started more new council homes in London than at any time since the 1970s and, prior to the pandemic, completed more new homes in London than any time since the 1930s.”
“Urgent action is required, which is why the Mayor is working with the government on a package of bold measures to boost social and affordable homes in the capital. The Mayor has taken hard decisions to boost housebuilding, including using call ins to approve more developments, backing new towns in London and committing to a new, streamlined London Plan.
“He is also taking steps to stimulate social housebuilding and encourage investors to back affordable housebuilding as we continue to build a better, fairer London for everyone,” the spokesperson said.
Rickard said that while he was “pleased” to see the changes, the priority must be to “maintain that momentum and turn intent into delivery”.
Berkeley’s chair Rob Perrins has already said that its “stands ready to invest some £3bn into new land and homebuilding activity”.
“For these measures to work in practice, every organisation involved in housing delivery must now get behind them, and act with real urgency and conviction to increase homebuilding at pace.”
Stacy Eden, head of real estate at RSM UK, said that the proposals to reduce affordable housing targets will go “some way” toward making housing developments more commercially viable, but that they “must be matched by property tax reform and continued focus on streamlining the planning system”.
“The potential threats of a wealth or mansion tax are dampening investor appetite and making long-term planning more challenging for developers,” she added.
“While it is encouraging to see a renewed focus on pro-growth levers and planning reform, without addressing tax and regulatory uncertainty, London’s housing market will remain flat”.