In order to tackle London’s rising homeless epidemic, we must transition towards a more sustainable economy – and focus on the just distribution of resources.
The United Kingdom is in the midst of an intensifying housing crisis which has resulted in the highest levels of polarisation in housing wealth than any other time since the Victorian era[i].
As outlined by housing charity Shelter, the housing crisis can be broadly attributed to the rising costs of housing, making home ownership unattainable for younger generations forcing more families into the private rental sector. As a consequence thousands of households have been displaced from their homes and communities are becoming reliant on overstretched local authority to provide temporary accommodation, or face the harsh realities of homelessness[ii].
London has become known as a melting pot of different cultures and ethnicities, however, it also embodies a metropolis of unrivalled paradox; the UK’s most affluent city is also cohabited by the largest contingent of the homeless. 8,100 people were recorded as rough sleepers in 2017[iii]. 48,000 households were recorded as living in temporary accommodation in 2015; three times higher than the rest of England combined. This also amounts to 74,000 children without a permanent home, within one of the richest cities in the world[iv]. Spending from local councils to meet their obligations to rehouse the homeless has been valued at £170m in London alone, a situation which is likely to further increase[v].
Ecological economist Herman Daly highlighted distribution as a central component of economic theory; however, it has become regarded as superfluous to many mainstream economists[vi]. Neoclassical economists have long been fixated on the efficient allocation of scarce resources through the mechanism of the market. A neoclassical economist would advocate increasing the supply of new homes in London to meet the rising demand, and therefore, reducing house prices and helping to tackle homelessness in London.
This is a heavily reductionist view because housing demand is far more nuanced than a simple economics formula[vii]. Instead, we must shift our focus away from the ideals of mainstream economics, to that of just distribution. The rising epidemic of homelessness has stemmed from the ever increasing wealth and income inequality in the city, which has been proliferated by the housing sector.
The lack of affordable housing has reduced the number of people who can gain access to this lucrative market as the more affluent in society increase their wealth by expanding their housing stock. Those in a position to benefit from owning multiple properties to rent, profit from this additional revenue. Those who cannot get on to the housing ladder are forced into the exorbitant private rental sector which further reduces their already-limited income, in turn widening income inequality even further[viii]. Government statistics have shown a significant portion of the increase in homeless acceptances have resulted from the end of a private tenancy[ix]. The housing crisis has widened the gap between the ‘haves’ and the ‘have-nots’ with regards to the distribution of wealth and income, pushing more people into homelessness.
This polarisation of property wealth poses serious questions with regard to the just distribution of land. The consolidation of many housing developers to dominant oligopolies has highlighted this disparity, through the process of ‘Land Banking’; where developers exploit the undersupply of homes and increasing the cost of land by delaying the construction and transacting of housing units. This process perfectly embodies the unfair distribution of wealth within the U.K. In 2015 the five biggest housing developers reimbursed 43% of their profits to shareholders, totalling £936m[x], simultaneously there remain over 200,000 empty homes in England[xi]. It is evident that we must realign our view that a house is a basic human right and not a commodity.
Inequality and homelessness within the U.K dates back to the 1980’s when the Thatcher era advocated increased privatisation of social housing and minimised state intervention within the housing market[xii] – a neoliberal utopia. Research has shown the number of social houses has reduced by 300,000 in the past decade as the number of people on the waiting list for social rented accommodation has grown to 1.8 million households[xiii].
Unfair distribution of income, wealth and land, have all contributed to the surging epidemic of homelessness in London. Distribution needs to be at the forefront of economic policy on housing, as we need to realign our values to more pluralistic goals, treating housing as a human right, rather than a commodity. This could be done through increasing state intervention by supplying more social housing and affordable homes. The World Economic Forum heralded Canada’s efforts as the ‘forefront of inclusive growth,’ after investing $95 billion into public infrastructure, including affordable housing so that everyone can share the benefits of a growing economy[xiv].
A land value tax is also necessary making land banking less profitable for developers and going some way to addressing the unfair distribution of land between the ‘haves’ and the ‘have-nots’ in London.
[i] Homes or investments? (2017) Available: http://england.shelter.org.uk/campaigns_/why_we_campaign/the_housing_crisis/what_is_the_housing_crisis/homes_or_investments. Last accessed 12/11/2017.
[ii] What is the housing crisis. (2017) Available: http://england.shelter.org.uk/campaigns_/why_we_campaign/the_housing_crisis/what_is_the_housing_crisis. Last accessed 09/11/2017.
[iii] Homelessness. (2017) Available: https://www.trustforlondon.org.uk/data/topics/homelessness/. Last accessed 12/11/2017.
[iv] Aldridge, H. Born, T. Tinson, A. MacInnes, T. . (2016). Trust for London: Tackling Poverty and Inequality. Available: http://www.npi.org.uk/files/5714/4533/2889/LPP_2015_report.pdf. Last accessed 12/11/2017.
[v] Local Government Association. (2017). HOUSING OUR HOMELESS HOUSEHOLDS. Available: https://www.local.gov.uk/sites/default/files/documents/5.12%20HOUSING%20AND%20HOMELESSNESS_v08_4.pdf. Last accessed 10/11/2017.
[vi] Daly, H.E. Farley J., (2011) Ecological Economics: Principles and Applications, 2nd ed. Island Press, Washington, DC. Chapter 16: Distribution (pp. 301-320) and Chapter 23: Just Distribution (pp. 441-456)
[vii] May, N. (2016). Building more houses cannot solve the housing crisis.Available: http://www.ucl.ac.uk/grand-challenges/sustainable-cities/our-work-so-far/rethinking-housing/building-more-houses. Last accessed 09/11/2017.
[viii] Travers, T. Sims, S. Bosetti, M. (2016). Housing and Inequality in London. Available: https://www.centreforlondon.org/wp-content/uploads/2016/08/CFLJ4292-London-Inequality-04_16_WEB_V4.pdf. Last accessed 10/11/2017
[ix] Aldridge, H. Born, T. Tinson, A. MacInnes, T. . (2016). Trust for London: Tackling Poverty and Inequality. Available: http://www.npi.org.uk/files/5714/4533/2889/LPP_2015_report.pdf. Last accessed 12/11/2017.
[x] Archer, T. Cole, I. . (2016). Centre for Regional Economic and Social Research . Profits before Volume? Major house builders and the crisis of housing supply. 1 (1), 1-36.
[xi] Davies, B. (2014). Back on the Market: Bringing Empty Homes Back Into Use. Available: https://www.ippr.org/files/publications/pdf/back-on-the-market_Dec2014.pdf. Last accessed 11/11/2017.
[xii] Olgun, H. (2013). ‘The New Right’ and the Welfare State: Housing Policy in Britain in the Thatcher Era . Review of Public Administration. 7 (3), 85-107.
[xiii] Department for Communities and Local Government. (2016). Statutory homelessness, January to March 2016, and homelessness prevention and relief 2015/16: England. Available: https://www.gov.uk/government/publications/2010-to-2015-government-policy-rented-housing-sector/2010-to-2015-government-policy-rented-housing-sector. Last accessed 09/11/2017.
[xiv] World Economic Forum . (2017). The Inclusive Growth and Development Report 2017. Available: http://www3.weforum.org/docs/WEF_Forum_IncGrwth_2017.pdf. Last accessed 12/11/2017.