Chris Blackhurst: Bellyaching about foreign investors, empty properties and taxes won't stop a bubble. We must get building

Midweek View: People must be encouraged to head to east London where land is cheaper and more plentiful

What's to be done about the London housing crisis? You would think, wouldn't you, that after the crash of 2008, we would be acutely aware of allowing bubbles to form and grow, that we would go out of our way to prevent such an occurrence.

But no, six years after the economy hit the buffers, we're watching the seeds of another disaster take root before our very eyes. The chat is of ever-rising prices, and of the "doughnut effect" of a city devoid of residents, the properties owned by investors who don't reside there.

It matters to all of us, regardless of whether we live and work in London or not, because the capital is the engine room of the economy; if it falters, the country suffers; such is its dominance that everything depends on its well-being.

Several factors have created the bubble. There was already a backlog, a shortfall in property supply. That's been made worse by the continuing rampant rise in London's population and the changing nature of demand for housing. Family units have altered, so there are now far more singles and singles with children. Developers need to offer wider variety, which puts additional pressure on their ability to provide.

Property has become a store of value, an asset class all on its own, which has attracted domestic and international money in an unprecedented fashion. Add to these the availability of cheap money and the ability to leverage, and the ingredients are in place for soaring demand. How can it be solved? "Supply, supply, supply," says Gerard Lyons, the Mayor of London's chief economic adviser.

Other solutions don't work. Trying to cut off foreign investors piling into London will not get off the ground. If anything, people overseas are finding it easier, not more difficult, to buy in London as more tower blocks are built. In the past, if they bought an apartment in a converted building they had to sort out its upkeep and security – today, they can choose from commoditised units where everything is taken care of and included.

In theory, asking questions about sources of wealth may seem easy and reasonable, but in practice they are difficult to answer. The unintended consequences, of driving away overseas investment from the UK, may far outweigh the benefits of reducing the number of foreigners snapping up London residential property. Legally and politically, too, it's a minefield: EU citizens can't be barred, but non-EU citizens would rightly claim they were being unfairly discriminated against.

Why stop at foreigners? One of the unexplored aspects of the current London boom is the relatively high numbers of buyers of Sub-Continent and South Asian origin paying cash. Querying where they get the money from – do they pay all the tax they're obliged to pay? – is regarded as a social hot potato and best-avoided.

Much is being made of properties lying empty due to foreign-buying. Islington Council likes to complain it's a worsening issue, but recent figures show that only 3 per cent of new-builds in the borough had no registered elector living at the address. It's a problem but nowhere near as big as is being portrayed.

There is another solution to the crisis: making London's economy less powerful and transferring that dynamism elsewhere in the UK. While that has been attempted by successive recent governments and lies behind projects such as the moving of much of the BBC to Salford (and future ones such as the HS2 rail link), the impact has so far been negligible: London is still the major national and international draw.

Changing the taxation system won't make much difference either. The UK taxes property more than any other nation in the world. While it is true that inheritance tax is the most ludicrous tax there is, getting rid of it won't provide a cure to London's housing ills. Neither will the proposed mansion tax. It's a crazy tax, one that will lead to properties not being refurbished. Why do so if it takes the value over the taxation threshold? Someone uses their post-tax income to improve a property that only sees them pay more tax – it does not make sense.

The mansion tax is unfair, hitting only one type of person – middle-class owners who put their wealth into one property (the rich will always find ruses to avoid paying; their advisers will come up with new wheezes). They get hit with the mansion tax, but the landlord who owns 20 properties worth £200,000 each pays nothing – discuss.

No, the only real answer to London's housing woes is to get building and to keep on building. We did it before, on a similarly large-scale, in the 1930s and 1960s. We have to do so again.

We must remove all the unnecessary regulatory obstacles. The brownfield sites must be developed. Abandoned industrial plants need to be demolished and built on. Empty shops and the flats above them, which are also frequently unoccupied, ought to be converted to residential use.

We need to raise density levels. Before everyone rushes for the hills, that does not necessarily mean more towers going up everywhere.

What is the area of London affording the highest potential population density? Answer: the part around Sloane Square. The numerous eight-storey mansion blocks making up that district could house more people, potentially, than the skyscrapers in other, poorer, neighbourhoods.

I say potentially, because many of those mansion flats are lived in by single occupiers. But if all the bedrooms were taken, some of London's smartest streets could provide the densest housing.

Build on brownfields, add to the density, and go east. This means making a cultural shift as well as adding thousands of new-builds. Too much emphasis is placed on west London as the place to be. People have to be encouraged to head east where land is cheaper and more plentiful – so improve the transport links, something that has already occurred with new services at Stratford and Barking. It's not only infrastructure – mind-sets need altering, so that instead of wanting to live in Putney, someone is attracted to live in Leyton, where the journey times to the centre are quicker.

It can happen. The repeats of old TV series such as The Sweeney show car chases taking place through rundown areas. Now those same locations are trendy. Take Balham, not so long ago a working-class area, now very much a fashionable destination. What is needed is ambition. Bellyaching about foreign investors, empty properties and taxes won't achieve anything. Boosting the rest of the country could work but it takes for ever and, so far, has not come close to countering London's appeal.

We've inherited a housing shortage, it gets worse not better, and we must respond accordingly; we have to slow the growth of that bubble. We must get building.

Start your day with The Independent, sign up for daily news emails
i100 In this video, the late actor Leonard Nimoy explains how he decided to use the gesture for his character
Robert De Niro has walked off the set of Edge of Darkness
news The Godfather Part II actor has an estimated wealth of over $200m
Arts and Entertainment
Fearne Cotton is leaving Radio 1 after a decade
radio The popular DJ is leaving for 'family and new adventures'
Robbie Savage will not face a driving ban
football'Mr Marmite' faced the possibility of a 28-day ban
Life and Style
Nearly half of all young people in middle and high income countries were putting themselves at risk of tinnitus and, in extreme cases, irreversible hearing loss
It was only when he left his post Tony Blair's director of communications that Alastair Campbell has published books
people The most notorious spin doctor in UK politics has reinvented himself
ebooksA special investigation by Andy McSmith
Arts and Entertainment
arts + ents
Life and Style
Arts and Entertainment
James Franco and Zachary Quinto in ‘I Am Michael’
filmJustin Kelly's latest film tells the story of a man who 'healed' his homosexuality and turned to God
Arts and Entertainment
Public Service Broadcasting are going it alone
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Recruitment Genius: Office Manager / Financial Services

£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...

Jemma Gent: Year End Accountant

£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...

Jemma Gent: Management Accountant

£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...

Day In a Page

HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?
How we must adjust our lifestyles to nature: Welcome to the 'Anthropocene', the human epoch

Time to play God

Welcome to the 'Anthropocene', the human epoch where we may need to redefine nature itself
MacGyver returns, but with a difference: Handyman hero of classic 1980s TV series to be recast as a woman

MacGyver returns, but with a difference

Handyman hero of classic 1980s TV series to be recast as a woman
Tunnel renaissance: Why cities are hiding roads down in the ground

Tunnel renaissance

Why cities are hiding roads underground
'Backstreet Boys - Show 'Em What You're Made Of': An affectionate look at five middle-aged men

Boys to men

The Backstreet Boys might be middle-aged, married and have dodgy knees, but a heartfelt documentary reveals they’re not going gently into pop’s good night
Crufts 2015: Should foreign dogs be allowed to compete?

Crufts 2015

Should foreign dogs be allowed to compete?
10 best projectors

How to make your home cinema more cinematic: 10 best projectors

Want to recreate the big-screen experience in your sitting room? IndyBest sizes up gadgets to form your film-watching
Manchester City 1 Barcelona 2 player ratings: Luis Suarez? Lionel Messi? Joe Hart? Who was the star man?

Manchester City vs Barcelona player ratings

Luis Suarez? Lionel Messi? Joe Hart? Who was the star man at the Etihad?
Arsenal vs Monaco: Monaco - the making of Gunners' manager Arsene Wenger

Monaco: the making of Wenger

Jack Pitt-Brooke speaks to former players and learns the Frenchman’s man-management has always been one of his best skills
Cricket World Cup 2015: Chris Gayle - the West Indies' enigma lives up to his reputation

Chris Gayle: The West Indies' enigma

Some said the game's eternal rebel was washed up. As ever, he proved he writes the scripts by producing a blistering World Cup innings
In Ukraine a dark world of hybrid warfare and murky loyalties prevails

In Ukraine a dark world of hybrid warfare

This war in the shadows has been going on since the fall of Mr Yanukovych
'Birdman' and 'Bullets Over Broadway': Homage or plagiarism?

Homage or plagiarism?

'Birdman' shares much DNA with Woody Allen's 'Bullets Over Broadway'
Broadchurch ends as damp squib not even David Tennant can revive

A damp squib not even David Tennant can revive

Broadchurch, Series 2 finale, review
A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower: inside the mansion of Germany's 'Bishop of Bling'

Inside the mansion of Germany's 'Bishop of Bling'

A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower