Rebecca Lewis from Morgan Sindall Investments is the REalyst’s guest blogger of the month. As both a Londoner and with a well-found career in the City’s property sector, she explores its future affordability. Does the solution to the housing crisis lie in innovation?
Read Time: 6 minutes
Wrapping up against the cold frosty morning, I begin my long commute to work in the dark, while wondering to myself: ‘Surely there must be a better way?’
When I moved to London 5 years ago, I realised the decision would mean compromising by living in a damp, at times rodent-infested, shoe box rental flat. However, the opportunities London has presented to me made all these sacrifices worthwhile.
Yet, even though we’re all drawn to this incredible city, the high cost of living here results in many of us not being able to stay once we enter our 30s and 40s – as the prospect of being able to afford to buy property seems impossible. So instead, we move out of London.
In the meantime, we spend much of our time travelling across the city to jobs in order to remain living in London. We face hours of stressful commuting, standing uncomfortably with our faces shoved into each others armpits. We finish the week totally burnt out and spend the weekends recharging in order to begin the cycle all over again.
Now, this is a rather extreme view perhaps, but it’s a daily reality for a huge proportion of the capital’s workforce. There are a number of companies now actively encouraging their employees to work differently, to think differently, and therefore to create a better balance between work and life in order to address the issues of affordability. But is this shift really enough?
At the root of the problem are two macro economic factors:
From these main macro economic forces, other issues soon start to present themselves, such as pressures on infrastructure in London and an impactful shift in behaviours in the workplace.
The last tube line delivered in London was the Overground in 2013, a route that was instrumental in addressing the call to solve a lack of decent infrastructure in east London. Yet, until Cross Rail (hopefully) opens in 2020, the city will have faced 7 years without any significant infrastructure upgrade. Even then, it will be opening 2 years later than planned.
In the same period of time, the population of London has grown by 87,000 people per annum. This has put a significant amount of pressure upon the housing stock of London. In the boroughs of Camden, Hackney, Southwark and Wandsworth, properties have increased by circa £200 per sqft in the last 7 years, as we can see in the graph plotted below.
With affordability becoming such an issue, not just in London, but across the country, more of the population needs employment. The Office for National Statistics (ONS) reported that the number of working mothers in the UK has surged by 1.2 million over the past two decades.
There are now 4.9 million mothers with dependent children in the workforce, up almost a third from a figure of 3.7 million in 1996. This statistic, combined with the overall population increase in London, has resulted in peak time trains being pushed to the limit. A situation caused, for the most part, by the inflexible working hours created by employers.
A psychologist recently told me that the concept of the eight hour workday came about during the industrial revolution. The 9-5 structure provided a focus for factory workers as at 5pm they would be rewarded by clocking off from work. For many of us, the world we live in now couldn’t be further from this. It is unlikely any of us finish at 5pm, with work emails pushing notifications to our smartphones, a pervasive ‘always on’ mentality and the global nature of our economy. Yet, employers still implement 9-5 in the majority of work contracts.
There’s no simple solution to either of these issues. The current proposal of simply ‘building more houses’ to meet with demand appears to be having a limited impact, as REalyse has shown in previous analysis on the problem with the ‘affordability’ tag.
Looking forward at what the next 20 years will bring, as someone in the industry I challenge myself to think of the main disruptors that will allow us to start to solve the issue of affordability in London and the South East.
The emergence of a new main stream tenure in the form of Build-to-Rent looks to offer an immediate solution. By introducing alternative tenures, moving away from the traditional built for sale model, the housing system in the UK is now able to offer flexible and affordable accommodation to occupants. This model allows households greater scope to pick their ideal location, size, style and price point, all based on their lifestyle and individual needs.
Build-to-Rent not only offers an alternative tenure, but can also use technology to embed great customer service, which in turn helps reduce costs for end users. By pioneering new initiatives such as alternative deposit schemes, income linked rents, customer service guarantees and furniture packs, renting could offer an affordable alternative to buying, thereby starting to become a tenure of choice as it is in both the U.S. and Germany.
The term ‘Big Data’ has been floating around for the last 5 years. Big Data companies have forged an industry in that time all of their own, prompting a huge amount of technological advancements in a variety of industries. Its role in real estate and the built environment is yet to be truly felt.
The arrival of Big Data in the built environment is a game-changer. It enables technology to be embedded within the infrastructure that will guarantee your travel times, allow you to understand passenger movement to undertake ‘smarter commutes’, with the ultimate goal being fully automated transportation. With the rise of big data will come the rise of knowledge, with the rise of knowledge, businesses and employees will be able to fully endorse ‘agile’ or ‘flexi’ working practices and eradicate the ‘peak time’ rush, and in turn allow people to commute from further away more efficiently.
Well, logically, if you apply a very scientific argument concerning volume, the following will occur: as the volume of people spreads, house prices will moderate themselves as the forces of demand and availability become equal. Now, that would be a perfect world! There is a long way to go before Londoners have access to truly affordable houses that will allow us to gain a better work life balance, however I still believe it is vital that we, as a sector, are the ones to push the boundaries of innovation and open our eyes to the possibilities just starting to emerge.
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