Even pricey city-centre flats help everyone move up the property ladder

·1-min read

High housing costs are a disaster for living standards, costing private renters more than 30% of their income and giving London the highest poverty rate in the UK.

The economists’ answer is to build more homes in high-cost areas, but that’s easier said than done. Developments are often opposed from the right, for reducing local house prices, and the left, as gentrification.

Opponents accurately say city-centre developers build for richer customers.

But the lasting impact of construction goes beyond the immediate effect of who moves into that property, with the new owner moving out of their existing home and creating an opportunity for someone else. As that continues, it means building in one area can help reduce costs elsewhere.

But does that happen in practice? Yes, at least in Helsinki, is the answer from a new study. Examining new builds in the centre of the Finnish capital, researchers show it’s the better-off who move in. But they go on to track the moving chains that follow and surprisingly swiftly see those on lower incomes and from lower-income neighbourhoods joining the chain. Only 20% of those moving into new city-centre buildings are from the poorest half of the population – but that share reaches 50% once you’re five moves down the chain.

So there are citywide benefits to increased housing supply, even if it happens in the centre. Crucially, that’s most true where cities are less segregated, so different groups move between areas and social housing developments ensure the benefits are spread faster. So we shouldn’t be opposing development – we should be building inclusive cities.

• Torsten Bell is chief executive of the Resolution Foundation. Read more at resolutionfoundation.org