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Housing crisis strips billions out of London economy

Words: Huw Morris

London's economy is losing more than £1 billion a year because of the housing crisis as the capital becomes a no-go zone for employees, according to latest research.

Rocketing house prices and rents are increasing staff retention problems not just in low-paid jobs, but also in many traditional middle-class occupations, according to the Centre for Economics and Business Research on behalf of London First, which has launched a campaign to double house building in the capital to least 50,000 units a year.

High housing costs mean:
• Businesses face a £5.4 billion wage premium in 2015, equivalent to £1,720 per person - a figure that is set to reach £6.1 billion by 2020;
• Nearly 11,000 extra jobs could have been created this year as a result of businesses benefiting from greater revenue and therefore being able to generate more jobs;
• High housing costs are removing £2.7 billion a year in consumer spending or 1.6 per cent of total consumer spending; and
• The economic growth lost by diverting money away from more productive expenditure will be £14.5 billion between 2006 and 2020 – equivalent to £1.04 billion a year.

The research also revealed that many workers are being priced out of living in the capital as:
• Workers in shops, cafes and restaurants, those cleaning buildings, and office administrators may have to pay their entire pre-tax salary to rent an average home;
• The rents of social workers, librarians, museum attendants, teachers, postal workers and gym employees are taking up more than half their salaries; and
• Only the best-paid workers, including company directors and those in financial services, earn enough to rent in central London.

“If we carry on as things stand, in 10 years’ time London will be a no-go area for employees across sectors and at almost all levels,” said London First chief executive Baroness Jo Valentine.