I sat on a panel at June’s London Real Estate Forum with a councillor from the London Borough of Hackney. He suggested that developers should be providing affordable workplaces in their new developments, a request I have also encountered from officials representing other inner London boroughs.
I understand the sentiment but I believe it to be misguided and we must do all we can to counter the argument.
This is not because I disagree with the concept of new start-ups gaining a foothold in the London property market – in fact, their growth has been one of the key components of the capital’s strong recovery after the late 2000s banking crash. My objection is based on my feelings about market interference and the law of unintended consequences, which could end up punishing small companies.
To begin with, Savills has completed a search for offices in EC1 at 50% of the top rent just to see what is available, and found there is space available. It is not the smartest, but that is what you would expect, so this should cater for local businesses without the provision of affordable workspaces.
Next, just look at the impact of affordable housing on the residential market: the remaining housing becomes unaffordable because it has to subsidise the affordable. Over the years this political interference has caused massive imbalances resulting in much of the supply of new housing becoming unaffordable for large sections of the population.
Most London politicians admit privately that London has enough housing for the poorest people in the society, and enough for the richest – it is those with low to middle incomes who really suffer and who have been squeezed out by a focus on affordable homes.
It has long been my contention that the relatively loose planning regimes in the City of London and London Docklands has played its part in reducing, in real terms, the cost of office space as a factor of production. In other words, there has been sufficient supply of office space, so it is now a significantly lower proportion in the cost of running a business than it was 25 years ago.
Having to create affordable workspace/offices in our new developments will only push up the cost of the non-affordable space. The cry from the politicians is that small businesses are being forced out. This is a Luddite view and they are missing the point about the cycle of regeneration.
As an area is regenerated with new or refurbished buildings to which new businesses and residents are attracted, some of the start-ups and lower-margin businesses move out to the next area to be regenerated and the process then repeats itself again. Just look at Croydon, which is fast emerging as a new London tech hub.
If you look around the country it is amazing to see how property development has played such a major role in regeneration, creating wonderful new public spaces as well as buildings in which to live, play, shop and work. These developments have succeeded in providing short-term employment for the construction sector and long-term employment for the completed space’s occupiers.
In addition, these developments will have contributed section 106, community infrastructure levy and affordable housing contributions. The property sector is a major contributor to UK plc yet it still attracts bad press from many. Rather than complaining about this we do need to be better at explaining what we actually do, both to politicians and to society as a whole. Because the planning payments are all dealt with at local level, the overall contribution across the UK is not known or publicised. This needs to change and let’s really explain clearly to all the physical and financial benefits the property industry provides for the greater good.
Hackney’s demand for affordable workspaces is symptomatic of a wider need by our sector to better explain to central and London government what we do. Until they get our message we will run the risk of well-meaning officials killing the goose that has laid the golden egg.
Gerald Kaye is chief executive at Helical
