The falls in central London’s luxury property prices could make housing even less affordable

Oh good, more of this. Image: Getty.

All the signs point to a slow-down in the London property market. Central London house prices dropped by 6.8 per cent between 2015 and 2016, while the numbers of new homes under construction plummeted by 75 per cent. The problem is located almost entirely at the top of the market, with sales transactions collapsing by 86 per cent for properties worth more than £10m.

Central London property values are eye-watering, far beyond the reach of most working London households. A fall in house prices might be welcome as a way to make housing more affordable.

But unfortunately, the perverse incentives at play in the way housing is built mean that a slow-down in the market for luxury flats in Kensington & Chelsea can mean less affordable housing is built, not more – and the consequences may be felt right across the country. There are three main drivers of this:

  • There will be less money for affordable housing where private developers stop building;
  • The way land is traded reduces incentives to build anything other than luxury flats;
  • Developers will build more slowly, reducing supply.

Let’s consider them in turn.

There will be less money for affordable housing where private developers stop building

Grants from central government used to fund almost all the costs of building new affordable housing. This meant that when private development experienced a down-turn, social development could step in to fill some of the gap, keeping builders building and having a stabilising influence on the market as a whole. Such grants funded 75 per cent of affordable housing development costs in the early 1990s – but now fund just 14 per cent.

The majority of finance for new affordable developments now comes in the form of Section 106 agreements: payments or land given by private developers in return for planning permission from the council to build profitable market housing. So the more private development there is in a local area, the more money there should be to subsidise affordable housing for rent or sale.

As affordable housing has become increasingly dependent on Section 106 agreements rather than grant funding, any decline in new construction affects the whole of housing supply, including the bits we care most about – genuinely affordable homes for ordinary families. This means that, unless the slow-down in luxury property development in central London can be balanced out by other kinds of private developer activity, there will be less finance available for affordable housing in the capital.


The way land is traded reduces incentives to build anything other than luxury flats.

That shouldn’t be a problem: there is a huge need for more housing across the country, and especially in London. If luxury flats are getting harder to sell, developers should be able to build and sell something else and still make a profit. Right?

The problem is land. Landowners, advised by their agents, sell their sites for the highest possible price, based on extracting the greatest commercial value from the land. In the case of central London, this often means more luxury flats. Once developers have paid sky-high prices for land on this basis, the only profitable option open to them is to actually build those luxury flats and sell them for the highest possible price.

In this way, the price of land distorts construction away from meeting housing need. Estate agents Savills estimate that 58 per cent of housing need in London is for homes costing less than £450 per square foot – but such homes represent just 25 per cent of new builds planned between now and 2021. On the other hand, 2015-16 saw a significant oversupply of luxury flats as developers tried to recoup the high cost of land, with 1.6 starts for every 1 sale of a home priced above £1000 per square foot.

Developers will build more slowly, reducing supply

But if the bottom has fallen out of the land market surely developers and landlords will readjust? Sadly not. Most landowners are likely to hold on to their assets in anticipation of recovery in the most profitable luxury market, rather than accepting a lower price that would allow different kinds of homes to be built.

In the current market, developers have invested heavily in land for luxury housing. If they build and sell these homes at a lower price, or if they build something else for a lower sale price, they risk not making back the money they spent on that land. Many developers will now instead choose to hold on to the land, restricting supply in an attempt to bolster prices, waiting out the market and building out slowly when prices start to recover. This will put even more pressure on housing supply and on affordability.

So what do we need to do?

We need to create a situation in which developers are incentivised to build affordable homes, not just luxury flats, to meet housing need across the country.

Shelter’s New Civic Housebuilding report sets out a vision for how we can achieve the new homes we need, based on clearer and lower land values. We’re calling on central government to update the rules on land valuation and enable public bodies to use their land holdings to build more affordable homes.

In these ways, we can provide land at prices which enable development to respond to housing need, not just the highest bidder.

Rose Grayston is senior policy officer at Shelter, on whose blog this article originally appeared.

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America's cities can't police their way out of this crisis

Police deployed tear gas during anti-racism demonstrations in Los Angeles over the weekend. (Mario Tama/Getty Images)

As protesters took to the streets across the United States over the weekend to express their anger at police killings of unarmed black Americans, it was hard to miss the hypocrisy coming from local authorities – including the otherwise progressive, left-leaning officials who are in power in most major American cities. 

Many US mayors and their police chiefs had issued public statements over the past week that seemed – only briefly, as it turned out – to signal a meaningful shift in the extent to which the Black Lives Matters movement is being taken seriously by those who are in a position to enact reforms. 

The sheer depravity of the most recent high-profile killing had left little room for equivocation. George Floyd, 46, died last Monday under the knee of white Minneapolis police officer Derek Chauvin, while three additional officers helped to hold Floyd down, doing nothing to aid him as he begged for them to stop and eventually lost consciousness. The officers had been attempting to arrest Floyd on suspicion of having used a counterfeit $20 bill at a deli. All four have since been fired, and Chauvin was arrested Friday on charges of third-degree murder and second-degree manslaughter. 

“The lack of compassion, use of excessive force, or going beyond the scope of the law, doesn’t just tarnish our badge—it tears at the very fabric of race relations in this country,” Los Angeles Police Chief Michel Moore told the Washington Post in response to the Floyd case. Meanwhile Moore’s boss, Los Angeles Mayor Eric Garcetti, on Friday claimed that he understood why his city, which is no stranger to police brutality, was protesting. “We absolutely need as a nation, certainly as a city, to voice our outrage, it’s our patriotic duty to not only stand up for George Floyd but for everybody who has been killed unnecessarily, who’s been murdered for the structural racism that we have in our country,” Garcetti said. 

Normally, US police chiefs and mayors tend to ask citizens to withhold judgment on these types of cases until full investigations can be completed. But a 10-minute video recording of Floyd’s killing had made what happened plain. Police chiefs across the country – and even the nation’s largest police union, which is notorious for defending officer abuses – similarly condemned the actions of the Minneapolis officers, in a rare show of moral clarity that, combined with the arrest of Chauvin, offered at least a glimmer of hope that this time things might be different. 

As the events of the weekend have since shown, that glimmer was all too fleeting. 

In city after city over the past three days, US mayors and their police chiefs made a series of the same decisions – starting with the deployment of large, heavily armed riot units – that ultimately escalated violent confrontations between officers and protesters. Images widely shared on social media Saturday and Sunday nights made it clear that members of law enforcement were often initiating the worst of the violence, and appeared to treat protesters as enemy combatants, rather than citizens they were sworn to protect. 


In New York City, two police SUVs were seen plowing into a crowd of protesters, while elsewhere an officer was recorded pulling down a young protester’s coronavirus mask in order to pepper spray his face

In Louisville, the city where Breonna Taylor, a 26-year-old black woman was fatally shot by police on 13 March, state police in riot gear were captured confiscating and destroying protesters’ supplies

In Minneapolis, forces opened fire with nonlethal rounds on residential streets, much to the shock of homeowners standing on their own front porches. 

Images of police pushing or shoving peaceful protesters were almost too numerous to count, including, in Salt Lake City, an elderly man with a cane

In many places, police also targeted journalists who were covering the protests, firing at clearly identifiable media crews with rubber bullets, injuring and even arresting reporters

Some protesters did commit acts of vandalism and looting, and the leaders of cities where that happened generally responded in the same ways. 

First, they blamed “outside agitators” for the worst protester behaviour, a claim that harkens all the way back to the civil rights era and for which the evidence is murky at best

Next, they enacted sudden curfews with little to no warning, which gave law enforcement an excuse to make mass arrests, in some cases violently. 

In a pair of widely criticized moves, Garcetti of Los Angeles closed the city’s Covid-19 testing centers and suspended the entire mass transit system Saturday evening, stranding essential workers on their way home from daytime shifts. Late Sunday night in Chicago, the city’s public school system halted its free meal distribution service for low-income children, citing “the evolving nature of activity across the city”.  

Governors in at least 12 US states, in coordination with city leaders, have since called in National Guard troops to “help”. 

At this point it’s clear that the leaders of America’s cities are in desperate need of a radically different playbook to respond to these protests. A heavily armed, militarised response to long-simmering anger toward the heavily armed, militarised approach to American policing is more than ironic – it’s ineffective. Granting police officers wider latitude to make arrests via curfews also seems destined to increase the chances of precisely the tragic, racially biased outcomes to which the protesters are reacting. 

There are other options. In places such as Flint, Michigan, and Camden, New Jersey – both poor cities home to large black populations – local law enforcement officials chose to put down their weapons and march alongside protesters, rather than face off against them. In the case of Camden, that the city was able to avoid violent clashes is in no small part related to the fact that it took the drastic step of disbanding its former police department altogether several years ago, replacing it with an entirely new structure. 

America’s cities are in crisis, in more ways than one. It’s not a coincidence that the country has tipped into chaos following months of emotionally draining stay-at-home orders and job losses that now top 40 million. Low-income Americans of colour have borne a disproportionate share of the pandemic’s ravages, and public health officials are already worried about the potential for protests to become Covid-19 super-spreading events.

All of this has of course been spurred on by the US president, who in addition to calling Sunday for mayors and governors to “get tough” on protesters, has made emboldening white nationalists his signature. Notably, Trump didn’t call on officials to get tough on the heavily armed white protesters who stormed the Michigan Capitol building over coronavirus stay-at-home orders just a few weeks ago. 

US mayors and their police chiefs have publicly claimed that they do understand – agree with, even – the anger currently spilling out onto their streets. But as long as they continue to respond to that anger by deploying large numbers of armed and armored law enforcement personnel who do not actually live in the cities they serve, who appear to be more outraged by property damage and verbal insults than by the killings of black Americans at the hands of their peers, and who are enmeshed in a dangerously violent and racist policing culture that perceives itself to be the real victim, it is hard to see how this crisis will improve anytime soon. 

Sommer Mathis is the editor of CityMetric.