The importance of infrastructure in stimulating economic growth in a city and attracting inward investment is well understood by city planners. Transport is generally seen as a key area to address. But what is less well recognised is the importance of housing as part of your infrastructure and the role that housing can play in helping your city retain talent.
Grant Thornton UK highlighted the role that housing plays in a city's future when it interviewed thousands of Londoners about their relationship with the city. It commissioned the research to inform Vibrant Capital, a new conversation bringing together academics, business leaders, creatives and policymakers to discuss how London can sustain its position as a capital of enterprise and Europe's best performing city.(i)
The research showed that although Londoners love the city's energy, creative buzz and diversity, many plan to leave the city in the future. Worryingly for London, 32% of these would-be leavers are young professionals aged 25 to 34 – the very people the city needs to retain.
When would-be leavers were asked why they wanted to move away from the capital, almost half said housing affordability was the biggest factor influencing their decision. This finding did not come as a particular surprise. The shortage of affordable housing in London is well-known and now being actively addressed – the city's Mayor has set a target of building 66,000 new homes a year.
But Grant Thornton UK was curious to know how many of these planned new homes were actually being built. So when we discovered that there were no figures on this, we decided to do the analysis ourselves.
"What our analysis showed is that there's a big gap between the number of planning applications being approved and the number of properties subsequently being built within three years," says Will McWilliams, partner and practice leader in Grant Thornton UK's Government & Infrastructure Advisory team.
"In 2015, for example, London's planning authorities approved applications to build 55,000 new properties. But three years later, only 25,000 of these homes had been built – a 46% attrition rate across the city.”
"We then went a step further and looked at the impact of a new London railway on this attrition rate. And that's where the figures get really interesting."
The so-called 'Elizabeth line' is a new 118 km railway that runs across London from west to east. Grant Thornton UK looked at the housebuilding attrition rate within 1 km of the new railway's 41 stations and found that it was almost zero.
"I don't think I've ever seen quite such stunning proof of the power of transport infrastructure to act as a catalyst and attract investment to other areas of infrastructure," says Will.
"The impact on London will be significant. Talent that might otherwise have left the city is now more likely to stay. This will help the capital retain the bright young minds it needs to ensure its continued success as a global city."
London is not the only city to experience the knock-on benefits of investment in transport infrastructure. In Qatar, as part of the national 2030 vision, the Qatar authorities embarked on a major road and rail infrastructure programme. A key element of the programme was the construction of a new three-line metro, alleviating congestion in the long term and also supporting Qatar's bid to hold the World Cup in 2022. Grant Thornton advised Qatar Railway Company on this development and this included work on the commercial development opportunities in and around the major stations.
Grant Thornton is also currently working with state authorities in the US and India to improve the impact of investment in infrastructure. In India, for example, we are working with the Government on the 'smart cities' programme, where the ambition is to enable 100 cities to develop 'smart cities' projects. We are currently helping seven cities to develop, co-ordinate and implement their investment plans. Typical investment programmes are in the order of $300-500m. This funding is then matched at the state level and deployed on a range of projects across technology, information and data to improve city infrastructure and services.
"The debate has moved on from 'Should we invest in city infrastructure?'. Today this is a given. Now the conversation is about how you join up investment across housing, technology and transport to enable safe, vibrant, and growing places to live," says Will.
Meanwhile, back in the UK, further major improvements to London's transport infrastructure are planned. The Crossrail 2 project will liberate significant areas of land for housing development. So, as you would expect, Grant Thornton UK and others who are keen to ensure that the high cost of housing does not price young professionals out of London, are in talks with the city's transport authorities to ensure that the opportunity is maximised.
Affordable housing is London's problem today. But it could be your city's problem too – either now or in the future. Act now to ensure that you create a vibrant city that can retain as well as attract talent.
To continue the conversation about your city’s aspirations for growth and the vital role housing can play, contact Will McWilliams or your local Grant Thornton office.
(i) Source: Milken Institute 2017