London was promised Britain's first "Garden City" in 100 years this week. As announced by Chancellor George Osborne, a brand new town, with 15,000 new homes, will be built in the riverside Ebbsfleet area, an ex-industrial district beyond London's official limits but still fewer than 20 minutes by train from its center.
The chancellor’s announcement is opportune: London is currently desperate for affordable housing. The current schemes for coping with the city's housing problems, however, seem to be pulling the city in several directions at once. Indeed, London's housing development problems mirror the difficulties many big cities have: the city wants more new, affordable homes, but it doesn’t want to eat into developers' profits or deflate the housing market.
The government's lynchpin idea for squaring this circle is a program called Help to Buy, an attempt to revive the construction industry after the downturn. Rolled out across the country, this project (now extended to 2020) gives first-time home buyers low-interest government loans (currently 1.75 percent) on newly built housing. Buyers can borrow up to 20 percent of the value of new properties costing below £600,000 (less in broadly cheaper Scotland and Wales), and a mortgage to cover the rest. The point is to channel first-time buyers' cash toward new builds, providing investment funds for the construction industry and thereby ideally lessening Britain's housing shortage.
To critics, Help to Buy looks like a sub-prime bubble in the making, luring people into paying prices they couldn't otherwise afford and simultaneously removing market pressure for these costs to fall. In London, the scheme already seems to be linked to rising property values, partly by broadening the pool of buyers chasing a finite number of properties but also by raising sellers' expectations. I have some experience of this myself. As someone who has been looking for a London apartment, I have been advised often by both real estate agents and sellers to make an offer "before Help to Buy truly kicks in and things go really crazy."
But while major construction companies love the idea of government creating a market for them through subsidy, they're not necessarily rushing to build. U.K. home prices are so high that they are doing just fine selling houses in a highly profitable dribble. The government is at least aware of this problem. It is now setting up a £500 million finance fund for small and medium-sized developers, who might now be able to compete better with the construction industry's major players.
The new Ebbsfleet Garden City will have to operate within this skewed construction landscape. On its own, it certainly has good points, even if its model is rather backward looking. Still largely un-built, Ebbsfleet already has a (currently deathly quiet) station on the Eurostar high-speed rail link, connecting it not just to central London, but directly to Paris, Brussels, and Lille. It's on the Thames Estuary's southern banks, an ex-industrial area of marshy islands, wind farms and power stations that has some charisma but whose chief asset is proximity to London. Rebuilding here, on the site of an old cement works, would spare green land elsewhere. London is lucky to have this brownfield space on its doorstep, and the estuary is the location for endless pipe dreams concerning the city's future, including an artificial island-based airport.
Still, given London's real needs, the Garden City plan looks like a small pebble on the surface of Mars, even if the plan turns out to be just the tip of a construction iceberg slowly floating up the Thames. London boroughs estimate that the city will need between 50,000 and 80,000 new homes a year for a decade just to keep up with current demand – that would mean at least 18 Olympic Villages being built every year. The city's real delivery falls far short of this. Last year was a boom year for new housing, but it provided just over 26,000 properties (albeit it with more beyond the city’s border), many of them aimed at wealthy investors. Within this figure, the amount of "affordable" housing seems to have remained at a broadly constant 12 to 14,000 homes, though in London, the term affordable itself has become so diluted as to be almost meaningless. With construction still far short of demand—and Help to Buy and international investment keeping home values pumped up—one new town will do little to satisfy London's hunger for affordable housing. In fact, hunger-wise, it probably won’t even touch the sides.
Top image: Ebbsfleet. Image courtesy of Flickr user Matt Buck.