If London wants Crossrail 2, the Treasury will need to stump up a lot more cash

Image: TfL.

Is there no end to the gentrification of central London? Ageing bohemians still haven’t got over the demolition of several clubs to make way for Crossrail – not to mention the closure of Soho nightspot Madame Jojo’s last year.

They recently had another bout of hypertension, when Transport for London (TfL) released a map showing that they might want to knock down the Curzon, an arthouse cinema down the road, to make way for Crossrail 2. (There was much less clamour about the possible demolition of Electrowerkz in Angel; evidently, goths have poor lobbyists).

Both Crossrail, the new east-west railway tunnelling its way under London, and Crossrail 2, its southwest-northeast younger brother, have the effect of pushing up house prices wherever they go, and encouraging the owners of Madame Jojo’s and the like to put their assets to more profitable use.

Already, large and very bland looking slabs of shops and offices are being planned for the new Crossrail stations on Oxford Street; a shopping centre on top of the Canary Wharf station is to open this spring, three years before the first train arrives. So would Crossrail 2 see even more cultural vandalism, as critics would say, if it gets approved?

Perhaps not. Perhaps the railway won’t get built at all. Because at the moment, it’s facing a funding gap of several billion pounds.

Crossrail 2 would cost what infrastructure professionals would call “a lot of money”. The current estimate is around £25bn: that’s compared to £14.8bn for Crossrail, or as much as 30 per cent of a new “Boris Island”-type airport in the Thames Estuary. Phew. And nobody really knows where all that money will come from.

The reason why Crossrail has spurred the redevelopment of parts of London, for better or worse, is that a) there was land ripe for redevelopment and b) the route connects up places where high value earners want to travel to, like the City and Canary Wharf. Crossrail 2 will go to neither, and the amount of property development it’s expected to spark is consequently lower. What’s more, many of the most attractive sites for redevelopment, in places like Oxford Street, have already been snapped up due to, er, Crossrail.

That might be fine, if there were serious quantities of taxpayer cash on the table. There isn’t.

The proposed route. Click to expand.

TfL, the Greater London Authority and Network Rail are borrowing roughly two-thirds of the cost of Crossrail – debts they’ll repay through local funding sources, such as a supplement on business rates. That leaves roughly one-third of the project’s cost that’s been covered by a grant from central government.

When TfL commissioned financial advisers at PwC to look at how to pay for Crossrail 2, they found only half of the cost could be met by local funding sources – leaving the Treasury on the hook for a larger share of a larger project.

Far from paying a bigger chunk, however, City Hall seems to think Whitehall would be tighter when it came to Crossrail 2. Isabel Dedring, Boris’ deputy mayor for transport, has said that public funding will have to be “substantially smaller” this time round. With more austerity and the building of HS2 round the corner, this looks entirely plausible.

London could try to borrow money against the additional business rate revenues it expects to get from new property developments that get built as a result of Crossrail 2: that is exactly how TfL is paying for the Northern Line Tube extension to Battersea, which will see a new housing development built nearby.

But Crossrail 2 simply isn’t expected to trigger that much building. As PwC wrote:

“ [Incremental business rates income] is forecast to contribute a relatively small amount to the project’s funding requirement, in the region of 0.7 per cent... It is questionable whether it is worth separately identifying and gathering it, unless there is a significant increase in forecast commercial development around the Crossrail 2 stations.”

So not only is Crossrail 2 not likely to cause much demolition, it may not cause as much gentrification as its predecessor either. That’s if it ever gets off the ground at all.

René Lavanchy is a recovering infrastructure finance journalist and tweets at @InfraPunk.

 
 
 
 

The Tory manifesto promises to both increase AND decrease the rate of housebuilding

Housing secretary Robert Jenrick. Image: Getty.

In his 2014 Mansion House speech, the then-chancellor George Osborne expressed with uncharacteristic honesty the motives at the heart of how the Conservatives see British housing politics: “The British people want our homes to go up in value, but also remain affordable; and we want more homes built, just not next to us.”

Five years later these contradictions remain unreconciled and present in their manifesto, which contains two different and contradictory – but clearly extensively targeted and focus-grouped – sets of policies.

The Conservatives have two housing targets. The first is to make significant progress to hitting “our target of 300,000 houses built a year by the mid-2020s”. The second is their aim to build “at least a million new homes” during the next parliament, which implies a target of 200,000 homes a year. This is not only 100,000 lower than their initial target but also lower than the current rate of housebuilding: 213,660 new homes a year. They have therefore implied at separate points in the same manifesto that they intend to simultaneously increase and decrease the rate of housebuilding.  

There are similar conflicts in their approach to planning. They intend to make the “planning system simpler” while simultaneously aiming to introduce community-led design standards for development and planning obligations to provide infrastructure for the local community.

None of this is unsurprising, The Tories don’t seem to know if they want to build more houses or not – so of course they don’t know whether they wish to make it easier or harder to do so.  

Politicians like obfuscation on housing policy to placate NIMBY voters. Take for example prospective Conservative MP and ‘environmentalist’ Zac Goldsmith’s crusade to save treasured local car parks. The manifesto can equally be accused of pandering to NIMBY instincts, protecting their shire voters from all housing, including ones they might actually need or want, by promising to protect the greenbelt.  

Instead, Conservatives intend to foist development on Labour-leaning inner-city communities and prioritising brownfield development and “urban regeneration”. This requires massive, infeasible increases in proposed density on brownfield sites – and research by Shelter has shown there are simply not enough brownfield sites in cities like London. Consequently, it is not clear how such a policy can co-exist with giving these inner-city communities rights on local design. Perhaps they intend to square that circle through wholesale adoption of YIMBY proposals to let residents on each street opt to pick a design code and the right to turn their two-storey semi-detached suburban houses into a more walkable, prettier street of five-storey terraces or mansion blocks. If so, they have not spelt that out. 

Many complain of NIMBYism at a local level and its toxic effects on housing affordability. But NIMBYism at the national level – central government desire to restrict housebuilding to make house prices rise – is the unspoken elephant in the room. After all, 63 per cent of UK voters are homeowners and price rises caused by a housing shortage are hardly unpopular with them. 


There is anecdotal evidence that protecting or inflating the value of homeowners’ assets is central to Conservative strategy. When George Osborne was criticised for the inflation his help to buy policy caused within the housing market, he allegedly told the Cabinet: “Hopefully we will get a little housing boom, and everyone will be happy as property values go up”. More recently Luke Barratt of Inside Housing noted that most Conservatives he spoke to at the 2018 party conference were scared “they’d be punished by their traditional voters if the values of their homes were to fall”. He was told by a Conservative activist at the conference that, “If you build too many houses, you get a Labour government”.

But the senior figures in the Conservative Party are painfully aware that the continuing housing shortage presents major long-term problems for the Party. As the manifesto itself acknowledges: “For the UK to unleash its potential, young people need the security of knowing that homeownership is within their reach.” Perpetual increases in house prices are incompatible with this goal. The problem has greatly contributed to the Conservatives’ severe unpopularity with a younger generation priced out of decent accommodation. 

Equally, there is increasing evidence that ‘gains’ from rising house prices are disproportionately concentrated in the south of England.  The differences in housing costs between regions greatly reduce labour mobility, suppressing wage growth in the north and midlands, which in turn leads to greater regional inequality. The policy of coddling southern homeowners at the expense of the economic well-being of other regions is a major long-term stumbling block to Conservative desires to make inroads into the ‘red wall’ of Leave-voting labour seats outside the south.

Before dealing with the issue of where housing should go, you must decide whether you want to build enough housing to reduce the housing crisis. On this issue, the Conservative response is, “Perhaps”. In contrast, even though they may not know where to put the necessary housing, the Labour Party at least has a desire in the abstract to deal with the crisis, even if the will to fix it, in reality, remains to be seen. 

Ultimately the Conservative Party seems to want to pay lip service to the housing crisis without stopping the ever-upward march of prices, underpinned by a needless shortage. Osborne’s dilemma – that the will of much of his party’s voter base clashes with the need to provide adequate housing – remains at the heart of Conservative housing policy. The Conservatives continue to hesitate, which is of little comfort to those who suffer because of a needless and immoral housing shortage.

Sam Watling is the director of Brighton Yimby, a group which aims to solve Brighton’s housing crisis while maintaining the character of the Sussex countryside.