Employers could provide a unique new source of housing supply. Here’s how

New homes in Bristol, 2015. Image: Getty.

In the general election, the voice of business was curiously absent. But following the result and amidst political uncertainty, the need for employers to make their voice heard and play a role in tackling the housing crisis will be crucial.

The case for recognising housing as a form of infrastructure, capable of contributing to economic growth, has been made by housing bodies and economists for years, and has gained particular salience as housing development reached historically low levels.

Since the market crash, continuing challenges in driving new supply upwards, changing tenancy patterns and increased cost of housing has encouraged organisations such as the Confederation of British Industry (CBI) to enter the debate, citing the housing crisis as a problem for business. In its report, the CBI pointed to the lack of affordable housing as hindering firms’ ability to recruit and retain staff, leading to long commutes impacting on workers’ productivity.

Business is right to voice its concern. The relationship between the cost of housing and incomes has been dysfunctional for years. This is evident from data showing the extent to which housing costs constitute a drag on incomes. A recent Resolution Foundation report shows that, when costs were included in a wider consideration of living standards, over half of households across the working age population have seen flat or falling incomes since 2002. The role of housing wealth, debt and costs needs to be much better understood by policy makers as we plan for the future.

But it also needs to inform employment and local economic policy. The availability of affordable housing is critical to employers’ access to talent, and to their competitiveness.

The 2017 white paper was an opportunity to provide renewed policy focus on the relationship between the housing and labour markets, between house prices and wages, and set a direction for greater involvement of employers in housing supply. The paper made references to the extortionate costs of housing and the 2.2m people with below average incomes who spend more than a third of their income on housing. It also recognised the importance of the proximity of a skilled workforce for growing businesses.

However, the solutions it offered to these problems are generic and linked to boosting supply overall, rather than focusing on practical actions to bring together employers, local authorities, planners and housebuilders. I would argue that employer partnerships have the potential to provide a unique new source of housing supply.

Early attempts to target affordable housing to particular profiles of workers were mainly government-led, but some employers also began work to secure affordable housing for their staff. NHS Keyworker first emerged in the early 2000s: by proactively using its land assets, it established partnerships with housing providers to develop affordable residential accommodation for its staff.

Since then, the model has developed in scale and popularity, with several housing associations in England developing sites in partnerships with NHS employers. Universities across the UK have also increasingly considered large-scale development of staff accommodation, using their own land, as an opportunity to attract global talent.

Scaling up this model throughout England and further afield is possible. But its growth is dependent on more employers being willing and able to invest land assets in housing, on making the model more flexible, and allowing employers to find new ways to use subsidy more effectively. It will require employers and government to think innovatively and there are a number of steps that could be taken to expand this form of provision.

First, options should be sought to attract other entrants to employer partnerships: for example, an NHS Trust could work in partnership with a local commercial employer, using land and other capital as subsidy. Second, planning policy could play a greater role in encouraging employer partnerships. If employer partnerships in health are considered a priority, plans should be made to contribute to local health needs.

Third, VAT exemptions on affordable housing schemes should be extended to key worker schemes delivered through employer partnerships. Fourth, models should be considered to attract other public sector employers to invest land or other forms of subsidy. Finally, local authorities are best placed to offer incentives to companies considering investment in their area.

The soaring cost of housing on employee incomes, and the scale of in-work poverty, presents an enormous challenge for government and for employers to recruit and retain talent. There are excellent lessons to learn from partnerships between NHS Trusts and housing associations, and in time, between other public sector employers with land to invest in housing.

A combination of vision, proactivity and smart use of land assets by employers, local government and housing associations give great cause for optimism. While there are benefits to be gained for all stakeholders, the ultimate prize is a productive and happy labour force, with decent living standards.

Grainia Long is the non-executive director of Thames Valley Housing.

This is a shortened version of an essay which will appear in the Lyons Edited Collection to be published by the Institute of Public Policy Research (IPPR) on Thursday 15 June.

The essays in the collection build on the work of the original Lyons Housing Commission in seeking to help the new government to orchestrate a bold and sustainable increase in the supply of new high quality homes of all tenures.


The Adam Smith Institute thinks size doesn’t matter when housing young professionals. It’s wrong

A microhome, of sorts. Image: Wikimedia Commons.

The Adam Smith Institute has just published ‘Size Doesn’t Matter’, a report by Vera Kichanova, which argues that eliminating minimum space requirements for flats would help to solve the London housing crisis. The creation of so-called ‘micro-housing’ would allow those young professionals who value location over size to live inside the most economically-active areas of London, the report argues argues.

But the report’s premises are often mistaken – and its solutions sketchy and questionable.

To its credit, it does currently diagnose the roots of the housing crisis: London’s growing population isn’t matched by a growing housing stock. Kichanova is self-evidently right in stating that “those who manage to find accomodation [sic] in the UK capital have to compromise significantly on their living standards”, and that planning restrictions and the misnamed Green Belt are contributing to this growing crisis.

But the problems start on page 6, when Kichanova states that “the land in central, more densely populated areas, is also used in a highly inefficient way”, justifying this reasoning through an assertion that half of Londoners live in buildings up to two floors high. In doing so, she incorrectly equates high-rise with density: Kichanova, formerly a Libertarian Party councillor in Moscow, an extraordinarily spread-out city with more than its fair share of tall buildings, should know better.

Worse, the original source for this assertion refers to London as a whole: that means it includes the low-rise areas of outer London, rather than just the very centrally located Central Activities Zone (CAZ) – the City, West End, South Bank and so forth – with which the ASI report is concerned. A leisurely bike ride from Knightsbridge to Aldgate would reveal that single or two-storey buildings are almost completely absent from those parts of London that make up the CAZ.

Kichanova also argues that a young professional would find it difficult to rent a flat in the CAZ. This is correct, as the CAZ covers extremely upmarket areas like Mayfair, Westminster, and Kensington Gardens (!), as well as slightly more affordable parts of north London, such as King’s Cross.

Yet the report leaps from that quite uncontroversial assertion to stating that living outside the CAZ means a commute of an hour or more per day. This is a strawman: it’s perfectly possible to keep your commuting time down, even living far outside of the CAZ. I live in Archway and cycle to Bloomsbury in about twenty minutes; if you lived within walking distance of Seven Sisters and worked in Victoria, you would spend much less than an hour a day on the Tube.

Kichanova supports her case by apparently misstating research by some Swiss economists, according to whom a person with an hour commute to work has to earn 40 per cent more money to be as satisfied as someone who walks. An hour commute to work means two hours travelling per day – by any measure a different ballpark, which as a London commuter would mean living virtually out in the Home Counties.

Having misidentified the issue, the ASI’s solution is to allow the construction of so-called micro-homes, which in the UK refers to homes with less than the nationally-mandated minimum 37m2 of floor space. Anticipating criticism, the report disparages “emotionally charged epithets like ‘rabbit holes’ and ‘shoeboxes,” in the very same paragraph which describes commuting as “spending two hours a day in a packed train with barely enough air to breath”.

The report suggests browsing Dezeen’s examples of designer micro-flats in order to rid oneself of the preconception that tiny flats need mean horrible rabbit hutches. It uses weasel words – “it largely depends on design whether a flat looks like a decent place to live in” – to escape the obvious criticism that, nice-looking or not, tiny flats are few people’s ideal of decent living. An essay in the New York Times by a dweller of a micro-flat describes the tyranny of the humble laundry basket, which looms much larger than life because of its relative enormity in the author’s tiny flat; the smell of onion which lingers for weeks after cooking a single dish.

Labour London Assembly member Tom Copley has described being “appalled” after viewing a much-publicised scheme by development company U+I. In Hong Kong, already accustomed to some of the smallest micro-flats in the world, living spaces are shrinking further, leading Alice Wu to plead in an opinion column last year for the Hong Kong government to “regulate flat sizes for the sake of our mental health”.

Amusingly, the Dezeen page the ASI report urges a look at includes several examples directly contradicting its own argument. One micro-flat is 35 m2, barely under minimum space standards as they stand; another is named the Shoe Box, a title described by Dezeen as “apt”. So much for eliminating emotionally-charged epithets.

The ASI report readily admits that micro-housing is suitable only for a narrow segment of Londoners; it states that micro-housing will not become a mass phenomenon. But quite how the knock-on effects of a change in planning rules allowing for smaller flats will be managed, the report never makes clear. It is perfectly foreseeable that, rather than a niche phenomenon confined to Zone 1, these glorified student halls would become common for early-career professionals, as they have in Hong Kong, even well outside the CAZ.

There will always be a market for cheap flats, and many underpaid professionals would leap at the chance to save money on their rent, even if that doesn’t actually mean living more centrally. The reasoning implicit to the report is that young professionals would be willing to pay similar rents to normal-sized flats in Zones 2-4 in order to live in a smaller flat in Zone 1.

But the danger is that developers’ response is simply to build smaller flats outside Zone 1, with rent levels which are lower per flat but higher per square metre than under existing rules. As any private renter in London knows, it’s hardly uncommon for landlords to bend the rules in order to squeeze as much profit as possible out of their renters.

The ASI should be commended for correctly diagnosing the issues facing young professionals in London, even if the solution of living in a room not much bigger than a bed is no solution. A race to the bottom is not a desirable outcome. But to its credit, I did learn something from the report: I never knew the S in ASI stood for “Slum”.