Newham's housing saga is just the latest episode in a larger London story

http://www.guardian.co.uk/commentisfree/2012/apr/27/newham-housing-saga-london

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News that the London borough of Newham, one of the capital's least plush areas, has responded to the impact of government housing benefit caps by seeking alternative accommodation in Stoke for some of its poorest residents has had Conservative politicians pointing fingers and clutching fig leaves at the same time. Some instructive self-exposure has ensued.

Housing minister Grant Shapps accused the Labour-run authority of "playing politics" and claimed that private sector rents were falling, thereby making King Canute look like a realist. Boris Johnson, London's Tory mayor, insists that mass outward migration won't occur. He's been doing that for 18 months, yet allies in true-blue boroughs have already explored population export options in Derby and Hull.

Newham's overtures to the distant north-west are just the East End version of many London councils' response to the implications of the caps, whose hugely disproportionate impact on high-rent London has been predicted since day one. The only mystery concerns whether the government didn't see this coming or always wanted it that way. Whatever, these exodus scenarios are but the latest episodes in a much larger London story that's been unfolding for years, even decades – a grand saga of unaffordability.

The bigger housing benefit picture provides one insight into this. Behind the George Osborne-driven media hunt for Kensington's biggest spongers, House of Commons figures show huge rises in the numbers of Londoners qualifying for small – and therefore uncapped – amounts of housing benefit despite being in work. While rents have been rising, wages have been stagnating. The taxpayer is now making up the difference.

Logic argues that this collectively enlarging welfare bill would be smaller were more public money invested in housing that more Londoners could afford, but austerity ideology forbids use of the brain. Cuts in funding to housing associations mean that a new generation of "affordable" homes for rent will be little cheaper than their market counterparts. Meanwhile, the price of buying has soared beyond the stratosphere. Young Londoners with average incomes clinging to the home-ownership dream will be middle-aged before they've saved up a deposit.

Accommodation is the core reason for London's crazy living costs and it is hurting the city's very soul. Business lobby groups, London School of Economics sages and London politicians across the mainstream non-Tory spectrum are united in their concern that low- and even quite well paid middle-income households are being priced out to the detriment of London's economy. Even the mega-rich Square Mile needs its middle-income white collars, its caterers and cleaners. It is becoming a cliche that only the very rich and the very, very poor can live securely within their means under a London roof any more.

The deepening housing crisis is a factor in a long-term changing demographic scene. The large number of Londoners who move to other parts of Britain every year – well over 200,000 in 2009 – tend to be less well qualified than the slightly smaller quantity who make the opposite journey and the still smaller number arriving from abroad. The trend seems consistent with the recent evolution of London's economy, with its post-industrial shift towards office-based business services while manufacturing has rapidly declined. Work options for the London working class have narrowed just as housing options have.

The irony of Newham is that it is the vanguard Olympic borough, scripted to be at the thriving heart of the capital's triumphant eastwards regeneration. Its leader Sir Robin Wales has blamed a rise in local private rents on a rise in local demand due to people being priced out of more affluent London areas. The same market force means that private landlords who do have places to let don't want or need claimants as tenants any more – an outcome long foreseen by neighbouring Barking and Dagenham and no doubt by Newham, too.

But the East End's ambulant poorest are only the latest manifestation of far wider crisis of housing supply failing to meet housing demand. London is in desperate need of greater public investment and of more productive regulation of its growing private rented sector. Yet neither the national government nor the current London mayor seem eager to provide.

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