Think-tank: Give London mayor housing benefit say

Skyline of City of London The think-tank said the national reluctance to fund housing benefit in London was 'exacerbating' the 'housing crisis'

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The London mayor should be given power over housing benefits in the capital, a think-tank has urged.

Newly re-elected London Mayor Boris Johnson must make housing in the capital a policy priority, a report by the Institute for Public Policy Research (IPPR) says.

It also suggested raising London Local Housing Allowance caps by £10 per week.

Mr Johnson promised in his re-election campaign to build 55,000 affordable homes by 2015.

'Distorted impact'

The IPPR report suggested devolving power, resources and responsibility for housing to the mayor to "remove the worst iniquities which he spoke out against during his campaign".

Andy Hull, senior research fellow at the think-tank, said: "London is facing a housing crisis exacerbated by the rest of the UK's reluctance to fund housing benefit costs in the capital.

"Families who find themselves living with a shortfall in their rent as a result of benefit changes are likely to struggle to find affordable alternatives because of the shortage and high cost of housing in London."

Local Housing Allowance rates are set for different types of accommodation in each area, to calculate how much money the state will pay towards the rent of someone on a low income.

On 1 April 2011, limits were introduced which meant, for example, that housing allowance cannot exceed £290 a week for a two-bedroom property.

But the median London rent for a two-bedroom home, according to research by Shelter, is £300 a week.

When the housing benefit cap was announced in 2010, Boris Johnson said he would "not accept any kind of Kosovo-style social cleansing of London" adding: "The last thing we want to have in our city is a situation such as Paris where the less well-off are pushed out to the suburbs."

The IPPR's report also recommends tougher taxes on super-rich foreign buyers to help fund the extra homes the capital needs.

It advocates a new "piggy bank tax" of 2% a year on overseas buyers of London properties worth more than £2m - a measure on which the government is consulting.

Analysis by the IPPR shows that by 2025 London faces a housing gap of 325,000 homes unless serious action is taken.

Mr Hull said: "London's sheer scale and its particular economics mean that national housing policies frequently do not fit with the reality of housing in London and have a distorted impact on those who live in the city."

The report recommends more public land is released for development, saying public authorities in London hold enough land for more than 234,000 new homes.

It also recommends exploring new roles for registered social landlords and forming a London Rent Stabilisation Board to check unreasonable rent rises.

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