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Housing Affordability and Public-Sector Recruitment in London

Recent studies and reports have shed some light into the links between London’s housing affordability crisis and the city’s productivity and economic growth. The argument goes that unaffordable housing is deterring London from attracting the highly-skilled human capital required for the city to retain its competitive economic advantage and global standing. Yet the affordability crisis’ impact goes beyond the issue of attracting just the most skillful individuals. It has also undermined efforts by central government and local authorities to recruit and retain public-sector workers, who form the backbone of the public services that sustain our daily lives.

To illustrate the extent to which London’s housing crisis harms public-sector recruitment, GLA Economics developed a hypothetical scenario involving two entry-level police constables – one resident in London and the other outside of London – to demonstrate the extra financial burden incurred by the London constable to afford a place to either rent or own.

Our analysis reveals that an entry-level police constable in London, earning a typical starting salary of about £37,000, would incur mortgage expenses that could be at least 3.5 times those incurred by a constable based in a borough that resembles the UK median (such as West Suffolk). Moreover, over the past five years, the London-based constable has been spending just under half their income on mortgage expenses, compared to just a fifth in the case of the West Suffolk constable.

The situation is equally concerning if our constables chose to rent instead of buy: The annual rental costs incurred by our London constable since 2018 represented nearly 2.3 times the costs incurred by our West Suffolk constable for an identical apartment. In addition, rental costs exceeded 50% of the London constable’s salary, compared to just under 40% in the case of the West Suffolk constable. While growth of private rental prices in London is slower than the UK’s, London’s considerably higher rents and weaker public-sector wage growth combine to aggravate the financial burden our London constable faces compared to their West Suffolk counterpart.

This difference in housing affordability has already been undermining public-sector recruitment in London. ONS data shows that since 2018, growth in public-sector employee headcount in London (6.2%) was slower than the UK (6.9%) and England (6.7%) averages. With public-sector nominal wage growth in London being slower, this situation is likely to get worse, further harming public-sector employee retention at a time when most public services are based in the capital and when public-sector organisations are in greater need to hire and retain talent than ever before.

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