Housing crisis stripping billions out of London's economy, study shows

Both low-paid and middle-income earners have been hit by the crisis

Rising rent and property prices spell trouble for the capital (Oli Scarff/Getty Images)

The rising cost of housing in London is losing the capital over a billion pounds a year and thousands of jobs, stark new research has found.

The negative effects of the crisis are felt by both low-paid workers and those in traditionally middle class jobs.

The research was carried out by the Centre for Economics and Business Research (CEBR) and the London First non-profit business group, which are behind the Fifty Thousand Homes campaign to double housing in the capital.

In 10 years’ time London will be a no-go zone for employees across sectors and at almost all levels

&#13; <p>Baroness Jo Valentine, Chief Executive of London First</p>&#13;

Among the damning findings of the study was that retail workers - including those employed in shops, cafes, restaurants - as well as cleaners and admin staff, would have to spend their entire pre-tax salary in order to rent an average private home in London.

Meanwhile, social workers, librarians, museum attendants, teachers, postal workers and gym employees are among those who must hand over more than half of their salaries in order to rent in the capital.

As the capital's residents funnel their money into paying for expensive rent and mortgages, £2.7billion in consumer spending, or 1.6 per cent of the total, is wiped out annually, the report said

Unnecessarily high housing costs also prevented nearly 11,000 extra jobs from being created in 2015, as employers lose out on revenue.

Researchers also revealed that the housing crisis faced businesses with a £5.4bn wage premium in 2015, equivalent to £1,720 per person. By 2020, this figure could rise to £6.1billion.

Baroness Jo Valentine, Chief Executive of London First, one of the business organisations that helped launch the campaign, called on the next Mayor of London to tackle the problem, and said only building 100,000 homes a year would solve the crisis.

"This needless housing shortage needs urgent action. If we carry on as things stand, in 10 years’ time London will be a no-go zone for employees across sectors and at almost all levels."