To fix London’s housing market, Sadiq Khan needs to stop listening to the big developers

London mayor Sadiq Khan worrying about the housing crisis again. Image: Getty.

For many years now, housing has been the domain of the big guys: big developers have replaced big government.

This is a natural consequence of government’s withdrawal from its post-war promises to house all its citizens.  By passing the buck to the private sector to solve the housing crisis, it hopes for different outcomes.

The only problem is that the new big guys are not delivering.

London’s new mayor Sadiq Khan needs to change this – but he cannot afford to commission another long, protracted strategy to bring about this change. He needs to ignore the big developers, and instead get a small group of people around the table to give their best shot at defining the new London Way of tackling the housing crisis. Have a draft out in a month; tweak it and evolve it within six months.

He should start by starting, and learn by doing. Using rapid and continuous feedback to evolve the London Way, he must always keep it open to challenge. By using simple protocols or rules to ensure open, responsive and collaborative environments, he should make it comprehensible to all.

Here’s what Khan’s strategy should involve.

1. Don’t get caught in the headlights of big numbers.

The big risk is that London continues to do even more of what it did before in the hope that it will solve the problem. This means more big visions, more big masterplans, and more big procurement processes that promise big change but always fail to deliver.

Khan should rather focus on the collective power of many small actions and see how quickly they add up to the big numbers. The best way of solving the affordable housing problem is to have many, many more homes.

2. Develop the conditions for all Londoners to help solve their own housing problems.

The mayor cannot solve London’s housing problems alone and nor should he: housing must move from a problem to be solved to a potential to be realised. That means widening the spectrum of housing players to include the individual, the collective and the institutional.

He must open up many fronts, and not dwell on the big guys alone. He must focus on the small guys, fostering many developers, many small builders and many community makers.  He must make housing a distributed system done by many – like it used to be.

3. Concentrate on early intervention and not being obsessed with fixed endstates in an uncertain future.

Khan should provide the lightest touch up front that will achieve maximum impact later. Instead of trying to command and control the whole process, he must seed projects to give them early life and let things evolve.

In doing so, he must manage in the present and not be caught up in the past. He must be nimble and agile. In order for Londoners to operate within the sweetspot of creativity and innovation, he must provide sufficient constraints in the system without unnecessarily over-constraining the process. By doing this, a new way will emerge, unpredicted outcomes will be found and housing will flourish again.

4. Rethink social and affordable housing contributions

It will always be difficult to eke out the 50 per cent social and affordable housing requirement from large developments, especially in this tight money market. Besides, the big bloated developments of the recent past never seem to deliver the quality of urban life we expect from our cities. 

Khan should take developers’ contributions in the form of a tariff, and spend the money wisely in releasing thousands of development opportunities across London.

5. Create a new Neighbourhood Enabling Agency and provide high-level support to the boroughs.

Khan needs to move his land and property department from a remote, single-focused, large developer procurement authority to a multi-focused, small-scale project based agency operating at the local level.

This means he needs to get some good experience in there. He must appoint wisely; no box-checkers or bean counters. The focus must be delivery at the coalface. Actions speak louder than words.

6. Focus on the popular home by developing a default range of London housing typologies.

The mayor must structure choice: moving away from housing as a developer product to establishing the London Way of building housing that will best serve its citizens.

These should run from the mews house to the townhouse, from the small apartment to the mansion block. To facilitate this, he must develop a common building code or method to drive down the costs of housing and drive up innovation. He must show the way by example. More importantly, he must always be open to new ideas.

7. Don’t let the boroughs think they can solve the problem by building their own housing.

Council housing hardly ever worked and it only made the poor poorer. Let them rather focus on building catalytic projects and social infrastructure that will stimulate action and set the standards for new development. Everything they do must be directed to helping people realise their dreams of having their own home.

Boroughs must give them every support in this process. This means that authorities must act as enabling leaders, using their funds and resources to release potential and create responsive environments.

8. Think creatively about how the housing associations, too, can build neighbourhoods and not just housing.

Housing associations are our great untapped asset and we cannot afford to waste them by just getting them to build houses alone. In addition to providing a whole-life “staircasing” offer, for people to own part, or all, of their home at any stage of their life, they could act in a loan guarantee role to de-risk projects for commercial lenders. This will take advantage of their “Triple A” status and will unlock much more finance.

They could provide a neighbourhood management role alongside the local authority. They could also be agents of the Neighbourhood Enabling Agency, procuring services locally, parcelling land and delivering infrastructure. They could evolve into being the Agency.

9. Allow the suburbs to intensify incrementally. They are doing it anyway, despite government.

The mayor should show a creative way of dealing with the beds-in sheds challenge that afflicts many of our boroughs. This shows that in preventing our suburbs from intensifying, we are stifling one of our greatest natural processes: small-scale incremental change done by many hands.

Just imagine if we released this potential: we wouldn’t have a crisis. Housing must be allowed to start simply and improve over time to make it even more affordable to many. 

We must not set the bar too high. To formalise this, Khan must demonstrate fast track ways of getting planning consents. He could use local development orders, or use his own powers more effectively and fairly. This is where his Neighbourhood Enabling Agency could operate in a targeted way to open up the potential for effective intensification.

10. Create a neighbourhood challenge fund.

Finally, Khan can galvanise people’s inherent creative abilities to solve their own urban problems. Like the UK government’s City Challenge programme of the 1990s, he can direct funds to catalytic projects by making the process exciting and competitive. This will get communities to self-organise around the problem; with this, social capital will be built and valuable relationships will form.

When people work collectively with government in shaping their own environments they achieve far better outcomes that neither could ever achieve alone. This is how we should be thinking of solving our housing crisis and building better neighbourhoods.

On your marks, get set – go!

Kelvin Campbell, founder of Smart Urbanism, runs the Massive Small project. He led the team appointed to produce the London Mayor’s neighbourhood design guide.

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How the pandemic is magnifying structural problems in America's housing market

Justin Sullivan/Getty Images

Long before Covid-19, the United States suffered from a housing crisis. Across the country, working class and low-income Americans struggled to pay rent, while the possibility of home ownership receded into fantasy. In hot markets, affordability became a struggle for even the middle class: In California, 41 percent of the population spends over a third of their income on housing costs. 

The coronavirus pandemic will only make these trends worse as millions are unable to work and the economy dives into a recession. Building could slow down in the medium term, as construction loans (risky bets in the best of times) become harder to come by. Unsubsidised affordable housing is often owned by small landlords, who are more likely to struggle during recessions, prompting flips to home ownership or sales to rental empires. 

New York Times reporter Conor Dougherty documented America’s longstanding housing crisis – and California’s efforts to battle it – in his book Golden Gates, which debuted just before the pandemic hit. “My sense is that right now coronavirus is magnifying a lot of things that were already happening,” Dougherty says.  

While Covid-19 adds new pressures, he says that many of the same issues we were facing still loom over the issue, from developers crowding the higher end of the market, to escalating construction costs, to stagnating wages and vulnerable service-sector jobs that leave ordinary Americans struggling to keep a roof over their heads. “That’s my larger message,” Dougherty says. “I think the structural problems continue to be a much bigger deal than the cyclical problem in housing.”

CityMetric spoke with Dougherty about how his thinking has changed since Covid-19, Donald Trump’s pro-suburban rhetoric, and the apparent exodus from San Francisco. 

I’ve really been struck by how strong the housing market seems to be despite the epic economic crisis we are facing. Costs seem to be higher everywhere. I've heard realtors talk about bidding wars like they haven't seen before in Philly, where I live. But perhaps that's just pent up demand from the big shutdowns?

What you have is an economy that has bifurcated. You have fewer middle-income jobs, more lower-income service jobs, and more higher-end jobs in software and finance. That's how our economy looks and that's a problem that is going to take the rest of our lives to solve. In the meantime, we have this housing market where one group of people have so much more money to spend than this other group. Cities reflect that. 

What's important about this bifurcation isn't just that you have gross inequality, but that these people have to live next to each other. You cannot be someone's Uber driver and telecommute. You cannot clean someone's house remotely. These lower-end service workers have to occupy the same general housing market as the super-high-end workers. 

All the pandemic has done is thrown that even more out of whack by creating a situation where one group of people is buying and expanding homes or lowering their home cost by refinancing, while another group are at income zero while trying to live in the same housing market with no demand for their services. When you see home prices booming and an eviction tsunami coming in the same newspaper, that tells you the same thing the book was trying to show you.

Does America writ large have the same housing shortage crisis as California and the Bay Area more specifically? There are other super hot markets, like New York City, Boston, or Seattle. But in Philly, or in Kansas City, is there really a lack of supply? 

There are three kinds of cities in America. There are the really out of control, fast-growing, rich cities: the Bay Area, Seattle, New York. There are declining Detroits and Clevelands, usually manufacturing-centric cities. Then there are sprawling Sun Belt cities. This book is by and large concerned with the prosperous cities. It could be Minneapolis, it could be Nashville. But the housing crisis in places like Cleveland is much more tied to poverty, as you pointed out. 

Those kinds of cities do have a different dynamic, although they still do have the same access to opportunity issues. For instance, there are parts of Detroit that are quite expensive, but they're quite expensive because that's where a lot of the investment has gone. That's where anybody with a lot of money wants to live. Then you have Sun Belt cities like Dallas and Houston, which are starting to become a lot more expensive as well. Nothing like the Bay Area, but the same forces are starting to take root there. 

I think that the Bay Area is important because throughout history, when some giant American industry has popped up, people have gone to Detroit or Houston. Now tech, for better or for worse, has become the industrial powerhouse of our time. But unlike Detroit in its time, it's very hard for people to get close to and enjoy that prosperity. There's a certain kind of city that is the future of America, it has a more intellectual economy, it's where new productive industries are growing. I think it's an outrage that all of them have these housing crises and it's considered some insane luxury to live there. 

A recent Zillow study seemed to show there hasn't been a flood of home sales in the pandemic that would signify a big urban exodus from most cities, with the glaring exception of San Francisco. Do you think that could substantially alleviate some of the cost pressure in the city proper?

On the one hand, I think this is about the general economy. If unemployment remains over 12% in San Francisco, yes, rent is going to be a lot cheaper. But is that really the reality we're all looking for? If restaurants and bars that were key to the city's cultural life remain shut, but rent is cheaper, is that what everyone wants? I bet you when this is all over, we're going to find out the tech people left at a much lower rate than others. Yes, they can all work from home, but what do you think has a bigger impact on a city: a couple of companies telling people they can work from home or the total immolation of entire industries basically overnight?

I don't want to make predictions right now, because we're in the middle of this pandemic. But if the city of San Francisco sees rents go down, well, the rent was already the most expensive in the nation. It falls 15%, 20%? How much better has that really gotten? Also, those people are going to go somewhere and unless they all move quite far away, you're still seeing these other markets picking up a lot of that slack. And those places are already overburdened. Oakland's homeless problem is considerably worse than San Francisco's. If you drive through Oakland, you will see things you did not think possible in the United States of America. 

Speaking of markets beyond San Francisco, you have a chapter about how difficult it is to build housing in the municipalities around big cities – many of which were just founded to hive off their tax revenues from low-income people.

That’s why you see Oregon, California, or the Democratic presidential candidates talking about shaking this up and devising ways to kick [zoning] up to a higher level of government. We've always done this whenever we've had a problem that seems beyond local governance. Like voting rights: you kick it to a higher body when the local body can't or won't solve it. 

But for better or for worse, this suburban thing is part of us now. We cannot just undo that. This notion of federalism and local control, those are important American concepts that can be fiddled with at the edges, but they cannot be wholesale changed. 

The first time I ever met Sonja Trauss [a leader of the Bay Area YIMBY group], she told me she wasn't super concerned about passing new laws but that the larger issue was to change the cultural perception of NIMBYism. We were living in a world where if you went to a city council meeting and complained about a multifamily development near your single-family house, you were not accosted for trying to pump up your property values or hoard land in a prosperous city. You were seen as a defender of the neighbourhood, a civically-minded person.

What is significant about YIMBYism is that the cultural tide is changing. There is this whole group of younger people who have absorbed a new cultural value, which is that more dense housing, more different kinds of people, more affordable housing, more housing options, is good. It feels like the tide is turning culturally and the movement is emblematic of that. I think that value shift will turn out to have been much more lasting than anything Scott Wiener ever does. Because the truth is, there are still going to be a bunch of local battles. Who shows up and how those places change from within probably will turn out to be more important. 

As you said, we've been seeing a lot of Democratic candidates with proposals around reforming zoning. How does Joe Biden's plan compare to the scope of the ambition in the field? 

There are two big ideas that you could pull from all the plans. First, some kind of renter's tax credit. It is obscene that we live in a country where homeowners are allowed to deduct their mortgage interest, but renters aren't. It is obscene that we live in a world where homeowners get 30-year fixed mortgages that guarantee their house payment pretty much for life and renters don't. If we think that it's a good idea to protect people from sudden shocks in their housing costs, that is as good of an idea for renters as it is for homeowners. 

I tell people that in this country, homeowners are living in the socialist hellscape of government intervention and price controls. Renters are living in the capitalist dream of variable pricing and market forces. Homeowners think they're living in this free market, but actually they're in the most regulated market – there are literally price controls propping up their market mortgages. 

Then there is Section 8 housing. Right now homeowners get access to the mortgage interest deduction. That programme is available to as many people as can use it, yet only about a quarter of the people eligible for Section 8 can get it. I think rectifying that is hugely important and a lot of the plans talked about that. 

The second big idea is using the power of the purse to incentivise people to more robustly develop their regions. You should have higher density housing in fancy school districts, near job centres, near transit. We're going to use the power of the purse to incentivise you, within the bounds of your own local rules, to do this right. Of course, that’s what Donald Trump is running against when he talks about Affirmatively Furthering Fair Housing (AFFH). 

When I was a local reporter in Philly, the city went through with that AFFH regulation despite Trump and HUD Secretary Ben Carson not being interested in enforcing it anymore. The city produced a fat report that maybe a few people read, but I don't think it changed policy. It's this phantom that Trump is running against, an ideal version of the policy that did not exist. It's also a phantom no one's heard of until Trump started tweeting about it. 

It’s been bizarre to watch. But Trump does seem to recognise that suburban politics don’t neatly fit into a red or blue construct. People who live in Texas and claim to want a free market system will turn around and erect local regulation to make sure nobody can build apartments near them. People in the Bay Area who claim to be looking for a more diverse place will use different logic, anti-developer logic, to keep apartments being built near them. 

People like that regardless of how they feel about things nationally. The bluntness with which Trump is doing it is discordant with the electorate and quixotic because people don't know what he's talking about. But the basic things he recognises – can I make voters feel like their neighbourhoods are threatened – he's onto something there. As with many things Trump, his tactics are so off-putting that people may ultimately reject them even if under the surface they agree.

You hear people on the left say the scary thing about Trump is that one day a good demagogue could come along. They're going to actually tax private equity people and they're actually going to build infrastructure. They're going to actually do a lot of popular stuff, but under a racist, nationalist banner. I think the suburban thing is a perfect example of that. There's a lot of voters even in the Bay Area who [would support that policy] in different clothing.

The world has changed completely since Golden Gates debuted just a few months ago. Has your thinking about housing issues changed as a result of the seismic disruptions we are living through?

The virus has done little more than lay itself on top of all of the problems I outline in the book. Whether we have an eviction tsunami or not, a quarter of renters were already spending more than half their income on rent. There's a chapter about overcrowded housing and how lower-income tenants are competing with each other by doubling, tripling, and quadrupling up for the scant number of affordable apartments. We now know that overcrowded housing is significantly more of a risk [for Covid-19] than, say, dense housing. If you live in a single-family home with 15 people in it, that's a lot more dangerous than 40 apartments in a four-story building.

Housing is just a proxy for inequality, it's a way of us building assets for one group at the exclusion of another. It is an expression of the general fraying of American society. I don't feel like that larger message has been affected at all, it's only been enhanced by the pandemic. With the caveat that this can all change, it just doesn't seem to me like there's some uber housing lesson we can learn from this – other than having a bunch of people crowded together is a really bad idea. 

Jake Blumgart is a staff writer at CityMetric.