One per cent drop in house prices ‘would give London’s economy £7.5bn boost’

A 1% increase in house price affordability would boost London’s economy by £7.3bn over a decade, according to new research.

New research published today by City Hall, London Councils, Trust for London and the G15 and carried out by NERA Economic Consulting, shows such a reduction in house prices across all London boroughs would result in gross value added of £85 per job per year.

It said: “These findings highlight the importance of housing affordability in relation to productivity and provide a quantitative estimate of the potential economic benefits from policies and initiatives aimed at improving affordability in the Greater London Area.

“The findings also indicate the very large external effects on productivity in surrounding local authorities from targeted housing policy interventions. This provides an economic rationale for regional government bodies (rather than just individual local authorities) to be involved in housing supply decisions that affect housing prices and affordability.”

In speech today London mayor Sadiq Khan is expected to say: “If there was ever a time for more public investment in housing then it’s now.

“And if there was ever a place to show how government still has the capacity to improve the condition of people’s lives, then it’s housing.”

Claire Holland, chair of London Councils, said: “Astronomical housing costs absorb a huge proportion of Londoners’ income, make it harder for businesses to recruit, and are a clear drag on productivity.”

Fiona Fletcher-Smith, chair of the G15 and group chief executive of L&Q, said: “Providing genuinely affordable homes for those that need them most is an asset, not a cost, creating all kinds of social and economic benefits.