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Another predictable impact: London Olympics leads to rise in house prices

Olympic Games displace people through eviction. They also result in higher land values and the consequent displacement of poorer residents through rises in rents and higher house prices. A recent report by Dr Georgios Kavetsos of the Cass Business School has confirmed that this process is underway in the vicinity of the 2012 London Olympic Park.

There is nothing new or surprising in this finding. Estate agents reported rising values as soon as the 2012 Bid succeeded in July 2005. Martin Slavin of Games Monitor included comments from estate agents in an objection he lodged for the Compulsory Purchase Inquiry. He referred to advice from Haart estate agents who advised potential buyers at the time to act if they wanted to snap up a home in the area. 'As soon as London won, the calls started coming in. We predict that property prices will increase by around 5% in Newham over the year, specifically due to the benefits from reinvestment.'

Martin's objection, which is included as an attachment, went on to provide evidence from previous Olympic cities. It was, unsurprisingly, dismissed. The Inspector wrote in his report

“I am not convinced that the experiences of former Olympic cities around the world, with different social contexts, administrative and regulatory mechanisms and specific characteristics, has any material bearing in anticipating social outcomes in the Lower Lea Valley. There is no evidence to support the proposition; and the LDA has taken account of the experiences of other host cities.”

In his report Dr Kavetsos says: “The statistics from this are undeniable – the impact of hosting the Olympics in London has had a substantial impact on the valuation of property prices. While this is no doubt great news for property owners, it does generate questions about what kind of social impact will this have”.

“The areas within the Olympic boroughs are some of the most deprived regions in the UK and any increase in property prices will not only make it difficult for first time buyers to get on the market, but it will also increase property rents. Rather than solving any problems with social deprivation, a regeneration strategy anchored to the Olympics will actually just transfer the problem to somewhere else.”

Having dismissed the experience of earlier host cities the CPO Inspector then appeared to acknowledge it might indeed be reproduced in London when he said “Any pressures on land values and accommodation, arising from the Games, have to be considered in the context of the very substantial benefits that the project will bring.” He argued that “one of the lasting benefits of the Games will be the provision of a significant number of affordable housing units.”

Martin Slavin’s objection anticipated the Inspector’s confident pronouncement on affordable housing, querying whether the provision would meet the level of demand and how affordable such housing would be. An article in The Times which features the Cass report reveals the same concerns exist today and that housing campaigners consider even a 50% affordable housing element will be inadequate to meet demand. London Citizens, also quoted in the Times article, refer to the present demand for social housing in parts of the East End saying 'Tower Hamlets Housing Services have informed us that the average wait for a one bedroom flat is from 5 to 10 years; from 7 to 10 years for a two bedroom flat; and more than ten years for a family home.'

The level of affordable housing that will be provided after the Olympics will, of course, depend on the economic and political situation post 2012. Just as the plans for the Olympic Park have undergone considerable change so the same can happen for the Legacy. With a project as large as the Olympics planning approvals can easily be abandoned and new plans presented to the ODA for self-approval. Formal proposals for the Legacy were meant to have been presented along with the 2007 revised planning application but have been repeatedly put back. One of the original ideas was to recover the costs of the Olympics by selling off land. Even before the present recession it was pointed out such sales would not cover these costs. Extensive land sales to recover costs will make it harder to reach targets for affordable housing.

For the moment the credit crunch has reversed the Olympic effect on house prices, although this is not expected to last. By turning parts of the Lea Valley over to permanent sports facilities the Olympics may also have reduced the potential for house building in the area, a programme which was already well established as owners of industrial sites were able to make large profits by selling industrial land to housing developers. The Olympic promoters claimed that their project would help to reduce the levels of deprivation in the East End. Objectors warned that this would be achieved by driving out poorer residents and importing a new population, an argument ignored by the Inspector. This report suggests objectors were right.

Olympic Displacements of Private Renting tenants.doc128 KB

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