London has always risen again.
This is the 350th anniversary of its greatest resurrection. Our ancestors in 1666 reacted to the Great Fire with a speed and coordination that defies belief.
Monday 31 October 2016 6:30am
Bruce Dear is head of London real estate at law firm Eversheds.
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| We built Wall Street on Water in the Docklands through an unprecedented package of development incentives (Source: Getty) |
London has always risen again.
This is the 350th anniversary of its greatest resurrection. Our ancestors in 1666 reacted to the Great Fire with a speed and coordination that defies belief. They tax-incentivised developers, ran the first national charitable appeal, invented modern fire insurance, and worked day and night for free. Compared with the Great Fire, Brexit is barely a gnat bite. As we deal with it, we should be inspired by their resilient example.
We must fight as hard as they did to renew London's infrastructure and housing. A city that cannot provide homes, healthcare and easy travel for its people is a city that cannot succeed.
As part of Eversheds’ “Illuminating Insights” Museum of London series, we hosted a panel last week with Bill Hughes, head of real assets at Legal & General Investment Management, and John Dickie, head of strategy and policy at London First. We focused on London’s infrastructure and housing challenges, as it strives to remain a pre-eminent global city.
Cyclical housing and infrastructure crises are a perennial part of London’s success, as ever more millions come to live and work here. Infrastructure strain is the growing pain of a thriving city. So we must constantly readdress it. Otherwise, we will not have a functioning global metropolis and, with London paying a third of the UK’s tax, that would be national disaster.
These challenges are always multifaceted and can only be solved by a coordinated public and private sector alliance. When both sectors work together, London has achieved housing and infrastructure feats little short of miraculous. For example, between 1918 and 1939, 860,000 homes were built in Greater London. In 1934, 1,500 suburban London homes were being built every week. Again, between 1945 and 1970, over 450,000 council houses were built in London.
Contrast our pale performance with the turbo-charged achievement of our immediate predecessors. London’s population is currently growing at 100,000 a year. Over the next decade, that’s equivalent to all of Birmingham moving to the capital. We need to build over 50,000 homes a year to house these new Londoners, but we are limping along at around 20,000 new homes a year.
We are failing as house builders. Our grandparents could do it, but we seem incapable or unwilling to match them. What can they teach us about delivering mass housing and infrastructure?
- First, they had active local authorities with the power to borrow and raise revenues to build. Between 1969 and 1989, English councils built almost 1.5m homes. Between 1992 and 2012, they built less than 15,000. Throughout most of the twentieth century, local authorities were fundamental to British housing policy. They must become so again, and be empowered to do much more to finance, facilitate and deliver housing and infrastructure.
- Second, at least until the early 1960s, there was an active private rented sector (PRS). It was then tarnished by some unscrupulous landlords and extinguished by over-regulation. We need to nurture and professionalise that sector again. Regulatory, tax and investment incentives should be given to encourage the institutions who stand ready to invest. PRS is well-placed to answer the needs of middle market renters; while council and housing association provision helps those in more straitened circumstances. We need to create a renting culture and move away from our national home ownership obsession.
The other lesson here is that regulation kills golden geese. Rent controls (an over-reaction to some bad landlords) pushed private sector landlords and institutions out of the market from the 60s onwards. In 1960, 42 per cent of London homes were privately rented. By 1981, it was only 14 per cent. Result: a mass shortage of flexible smaller scale rooms and flats and, by 1976, 50,000 squatters in London. London needs a government that knows both when to intervene – and when to get out of the way.
- Third, our predecessors were prepared to cut through planning and regulatory restrictions. Contrast that with the frenzy of Nimbyism that breaks out now every time there is a major infrastructure decision. The regeneration of Docklands was launched with tax and investment incentives of mind-numbing generosity. The Isle of Dogs became an early Enterprise Zone and the Bank of England relaxed the rule that banking headquarters had to be in the City. The London Docklands Development Corporation was effectively a red-tape-destroying dictatorship for development delivery. This encouraged US and Canadian investors to build 8m square feet at Canary Wharf speculatively, creating London’s “Wall Street on Water”. In the happy days of the 1920s and 30s boom, the modern planning regime did not exist. Without it, they created Metroland – much derided since, but still the best and most enduring solution to London’s housing problem.
- Fourth, they were also prepared to borrow to invest in capital infrastructure. We have not been and we must get braver. Although the role of institutional and other patient capital will be vital, prudential public borrowing and bond issues (as part of a full range of funding) have an important role to play. The government must also be willing to share more risk with the private sector. Then it will find the UK institutions willing partners in filling its infrastructure funding gap.
- Fifth, our London predecessors were masters of comprehensive combined private and state solutions – multi-tenure and multi-sector. We must recapture that joined-up philosophy. There are hopeful signs that Theresa May’s government is moving away from its predecessors’ more one-track approach (for example, in adopting a multi-tenure housing policy).
- Lastly, our grandparents had what HG Wells called “whoosh and go”. They believed in the power of the private and public sectors and in their own ability to solve problems – however severe. London spirit meant constant innovation, confidence and the diverse talents of millions pulling together. We need to rediscover that self-belief.
The next time you see one of those ridiculous tweets saying “Is 2016 the worst year ever?” think of this. During the Blitz, the City lost a third of its pre-war floor space, including 6m square feet of offices, well over 100,000 London houses were destroyed and more than 30,000 Londoners died. Yet they recovered to build a thriving megalopolis open to the world and all its commerce. A city like London can take Brexit and infrastructure strain in its stride and build a new future at the heart of the world’s economy.
