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Priced out? The housing prices dividing London

Can a new council house scheme aimed at middle income families help to solve the housing crisis in London? And will it preserve the mixed communities the capital is famous for, or increase polarization?

London boasts some of the highest-value real estate in the world. Since the onset of the economic crisis, the capital has attracted even more foreign investment from buyers hoping to shore up their precious fortunes in bricks and mortar, rather than in unstable stock markets.

But the popularity of housing in the capital, and property speculation, have forced prices up and up to an unreachable level for many people - even those earning what used to be considered a good wage, of more than 40,000 pounds (50,000 euros; $64,000) a year.

Graffiti in London reading: Sorry! The lifestyle you ordered is currently out of stock. (Photo: Daniel Karmann dpa)

The creeping reality for the middle classes

Many are having to move further out of London in order to afford a property, and family homes, even in formerly poor boroughs like Hackney, run into the million-pound bracket.

All parties agree that London needs to provide housing for all sections of society, not just the rich. So, in a bid to address this, three central London councils have put forward a pilot scheme to provide homes for households earning 40,000-60,000 pounds a year.

Middle-class council housing?

In the London borough of Westminster, Conservative councilor Jonathan Glanz is in charge of the scheme. He wants to borrow about 50 million pounds on existing council-owned housing stock to provide 300 homes for the so-called "squeezed middle." He doesn't yet know whether the scheme will go ahead, but the main aim, he states, is to "avoid polarization" in London, and to ensure "mixed, vibrant communities."

But critics fear that it will divide the capital. Opposition Labour councilor Paul Dimoldenberg has this prediction:

A picture from London showing a poor man picking left over sandwiches from the rubbish bags at the end of the day outside a sandwich shop(Photo: Jon Almasi/UPPA )

Poverty and riches live side by side in London

"[London] will become like Paris, where the center is only for the rich, and the poorer residents can only live on the periphery. There will be a series of sink estates on the outskirts of the capital where few people have jobs, few people have opportunities. It's the end of hope and expectations which breeds its own problems," he told DW.

Rooting out the undeserving poor?

It is perhaps in recognition of the insane cost of living in London that the ruling Conservative Party, which is closely associated with the mantra that owning your own home is best, has decided to invest in public housing once again. Jonathan Glanz defends the apparent U-turn, saying that the Conservatives are responding to a new reality:

"I think it's an acceptance that the world has moved on, and what we need to provide are flexible solutions for an increasingly flexible world."

London police officers stand in Croydon after a third day or rioting in August 2011(Photo: EPA/FACUNDO ARRIZABALAGA)

Many people blamed social unrest and polarization as causes of the riots in August 2011

Dimoldenberg, though, thinks this is purely a political move: "I think that the long and short of it is that they would rather not have poor people in the center of London and they would rather have middle-class people, and that's not unconnected with the fact that they think those middle-class people will vote for them, rather than the poorer people."

Glanz denies this strenuously, stating that they will continue to provide 25 percent of housing for the most vulnerable, but he does admit that the community would be better served by people who can participate, for example by spending money in the shops. This, he says, is "the lifeblood of the city." 

Doing the sums

Perhaps there really is a need for so-called "Middle-Class Council Housing." Foxton's estate agents say that the average private rent in Chelsea is currently at 768 pounds per week - that's over 3,000 pounds a month.

The new scheme though, says Dimoldenberg, is really just a drop in the ocean. There are some 9,000 families currently on the council's waiting list, and more than 1,900 people in temporary accommodation in the borough.

A street shot from Chelsea in London(Photo:PA Video, Leanne Rinne/AP/dapd)

Chelsea, one of the richer boroughs in London, participating in the pilot scheme

"There are plenty of families with low incomes of 15-20,000 pounds a year, [who] should be the target of the council's efforts, and it's those people that the council should be looking at helping, rather than those who are not in acute housing need," Dimoldenberg notes.

Council housing outside London

Like most other London boroughs, Westminster is forced to house people outside the borough, and in some cases outside London. "It's absolutely terrifying for many families, and particularly for those moved to the outskirts of London - they have to commute in, and have to spend money on commuting back and forward to pick up their children in nurseries, or to a job or college," says Dimoldenberg.

Glanz admits that this is the reality in a borough which covers just eight and a half square miles. Building is not really an option, so they are looking, with the money borrowed, to "increase the intensity of occupation on existing estates," and "facing the possibility of changing some of the commercial properties to residential properties" to meet the needs.

Living wage

Britain's Mayor of London, Boris Johnson (Foto:Sang Tan/AP/dapd)

Mayor Boris Johnson wants a rise in the so-called living wage

On Monday, London's mayor Boris Johnson announced a rise in London's living wage - the minimum income necessary for a worker to meet basic needs. Johnson encouraged businesses to employ people at a minimum of 8.55 pounds an hour, a couple of pounds more than the national minimum wage of 6.19 pounds per hour.

The mayor said "By building motivated, dedicated workforces, the living wage helps businesses to boost the bottom line and ensures that hard-working people who contribute to London's success can enjoy a decent standard of living."

But if you earn the living wage, you'd have to work almost every hour in the whole year to earn the kind of money that could pay for the average rent in Chelsea.

Working a 35 hour week would take you to about 15,000 pounds for the year, not enough to afford rents even in some of London's poorest boroughs, and not enough to qualify for one of these new housing schemes. Suddenly, the concept of a living wage starts to have a fairly hollow ring to it.

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