The super rich push out the rich push out the middle class push out the poor. Welcome to London the Global City.

Attending Hustings meetings in and around the area where I live – central and inner west London – is a depressing business. The fact that the meetings I have attended are in marginal seats tells me that the population there is more mixed than is commonly supposed. The statistics show that there is a lot of deprivation in the area, children living in poverty, and poor standard housing. There are lots of these meetings but they seem to be dominated by a certain type of punter. Mansion Tax is raised a lot; Bedroom Tax doesn’t get a mention. I doubt if this is true anywhere else in the country.

Savills estimate there are 76,000 properties in London liable for Mansion Tax and all their owners seem to have been to a Hustings in the last few weeks. Two of the meetings I have attended have been organised by faith groups. In one case Mansion Tax was raised by the priest, in the other it was the first pre-arranged question asked. In both cases some people got really hot under the collar about it. Poverty and homelessness didn’t get a look in.

People who are really quite well off by any definition see themselves as victims, and they see Mansion Tax as the last straw. They see themselves as being punished for working hard and buying a property in the area on a big mortgage when houses were just very expensive not mega-inflated like now. They have mixed feelings about what is happening to their community: their properties are valuable because they have been virtuous but they resent the fact that their areas are now falling prey to ‘bankers and foreigners’. Gentrification should only go so far: barristers good, bankers bad, foreigners worst of all. They have no  concept that their riches are a windfall gain, an unearned bonanza, visited on them by stupid housing policies over a generation. They feel they deserve it but they seem to have no awareness that it is much worse for many others.

Some of them are undoubtedly ‘asset rich but income poor’. Partly as a result of Tory propaganda they believe they are going to be taxed out of their family home and out of the area, and are not mollified by the policy allowing deferment for those not earning enough to pay the higher rate of tax: it seems £42,000 is not that much.

It is undoubtedly the case that people are being pushed out of most areas close to the centre of London. It is a process that has been going on for 40 years but it has greatly accelerated in the last few years, especially in the era of London as ‘The Global City’. London property is now one of the favourite places to put your millions for hundreds of  thousands of rich people, especially Chinese, looking for a safe haven and a potential home to emigrate to if the going gets tough at home.

The fact that the feeling of victimhood stretches to people who are merely rich living in £3m houses is an extraordinary realisation. What hope does it offer for people on low and moderate incomes who have never been able to afford to buy anything at all?

An excellent article on the CityMetric website by the Chartered Institute of Housing’s John Perry describes the ways in which people on low incomes are being banished from central London. He identifies five:

  1. Welfare reform means people on low incomes can’t afford to rent: since the caps were imposed, people in receipt of Local Housing Allowance has plummeted, by as much as 30-35% in Westminster and Kensington and Chelsea. Young people fare worst.
  2. Homeless families get a tougher deal in London: homelessness continues to rise rapidly in London, increasingly because people have had their private tenancy ended – 38% of the total. Use of temporary accommodation is rising rapidly and is likely to be offered outside London.
  3. Council housing is being sold off: twice as many homes were sold by London boroughs in 2013-14 as the year before. One-third of right to buy properties are now rented out privately.
  4. Social lettings are going down: the consequence of losing stock is falling lettings, down to a mere 21,400 by councils and housing associations in 2013-14. Waiting list restrictions are also now commonplace.
  5. Social homes are more expensive: housing associations have gone for so-called ‘Affordable Rents’ big time, rents are on average £60 a week more than social rents.

These are the pressures that are leading to an almost un-reported clear-out of people on low incomes from central London. Areas that have been genuinely mixed communities for generations are being changed rapidly. And when people living in £2-3m houses feel that change is happening too fast and are fearful (justified or not) that they might be pushed out as well because of the new Tax, you really do have to wonder what kind of city we are creating.

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6 Responses to The super rich push out the rich push out the middle class push out the poor. Welcome to London the Global City.

  1. ahermens says:

    “And when people living in £2-3m houses feel that change is happening too fast and are fearful (justified or not) that they might be pushed out as well because of the new Tax, you really do have to wonder what kind of city we are creating.” That is such a great + true comment. It shows we have a housing system in London which is just plain broken down + not serving the people who live here.

  2. Come to hustings in Lewisham, with People Before Profit candidates, if you want to hear about the housing crisis and how to tackle it!

  3. Anna says:

    I live in North London and some of the streets around me a filled with £2 million + houses. I am surprised at the number of Labour stickers in the windows of these houses. Lots and lots of “vote Labour” or “vote Lib Dems” but definitely more support for Labour.

  4. danfilson says:

    No, Dan McC, you are wring for a range of reasons.

    Firstly, in my borough, Brent, analysis shows that the highest cane lowest Council Tax bands apart, the standard distribution of incomes of those occupying the remainder of residential properties is pretty much the same. So Council Tax is far from being a progressive tax where the higher your income the more you pay. That may or not apply outside London, but it doesn’t in my part and nor I suspect does it apply in a lot of London, especially central and West.

    I suspect this would still be the case if a wholesale re-basing to a year more recent than 1991 took place and even if an extra band or two were added. All that reducing the rate applied to lower bands would do would be to make studio flats and similar cubbyholes more attractive, demand for them would thus rise, and so price wise this would raise their rents or market values.

    Secondly, the revenues from council tax go to the respective local authority. They pay for services. However tenuous there is a link between how you vote and what taxes you pay. There is no redistribution system. Whereas mansion tax revenues go to the state and whether disguised as paying to save the NHS or simply swallowed as tax receipts, the effect of the concentration of mansion tax paying households in London and the South East is redistributive to the rest of the country.

    Third, mansion tax is a proxy tax on wealth, whereas council tax is at best a proxy tax on incomes and as explained not a very good one. We should obsess less about the top rate of income tax where the yield from say 50% or 45% as against 40% isn’t massive, and instead work out how to make taxes on wealth work. Thus a mansion tax tackles the economic power of accumulated wealth whilst not hitting so hard those who earn what may well be outsize earnings or dividends.but whose incomes may reflect their hard graft or risk taking.

    I have said elsewhere that the handling of the first million over £2million in worth isn’t yet right as current proposals make a £2million property yield the same tax as one worth 50% more. That’s plain daft. But the principle is right and long overdue.

  5. Dan McCurry says:

    The mansion tax is a mistake of presentation. If we changed the Council Tax across the board and lowered the bottom bands, while increasing the top bands there wouldn’t be a fuss. The problem is when you point a finger at middle class people and accuse them of living in a mansion. It is a politically inept way of doing things.

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