July 26 (Bloomberg) -- Five thousand meters from London’s gleaming, white-spoked Olympic Stadium -- a 3.1-mile distance that games organizer and gold medalist Sebastian Coe once ran in 14 minutes and 6 seconds -- Christine Lyons has ferreted out a modern-day scene evocative of Victorian England.
In a side street with cracked, weedy paving covered in litter and rubble, just past an old stable, she knocks at a whitewashed shed built of bricks. A Hungarian couple in their 20s open the door to the single room they rent for 155 pounds ($240) a week. There’s barely space to walk around a bed, a chair, a table, a bicycle, a rack covered with drying clothes and a sink on the wall. A bathroom is closed off in a corner. A bare light bulb hangs in the middle of the ceiling.
“This was built as a store to put things in, not somewhere to live,” says Lyons, 45, the chief planning enforcer of the London borough of Newham, host of the Olympics. The shed was improperly built and lacks insulation, she says. The owners have been sent a warning letter that they may be cited for violating planning laws. The maximum fine is 20,000 pounds, Lyons says.
Armed with a thermal map produced by a flyover in March, Lyons is searching for unlawful “sheds with beds,” as the borough council calls them. There are as many as 10,000 outbuildings where people may live illegally in the 14-square-mile East End district, she says. Raids have found as many as four people sleeping in a single backyard shed and sharing a filthy shower and toilet that aren’t always properly connected to the sewage system.
(For a graphic on crowding in London, click here.)
Over the past four years, Britain committed 9.3 billion pounds to building structures for the 2012 Summer Olympics opening tomorrow, most of them in Newham, north of the River Thames. In addition to the 80,000-seat stadium and other sporting venues, the projects include an athletes’ village of elegant, cream-colored apartments with glass balconies and polished woodwork, set in sculpted parkland. After the games, the village will be converted into 2,818 homes, almost half of them for people on low incomes.
During that same period, Newham also became ground zero for a British housing crisis that has grown acute since the 2008 financial crash. The credit crunch reduced U.K. homebuilding last year to the lowest peacetime level in nine decades. More than a million people face debt arrears or homelessness, according to the Chartered Institute of Housing, and almost 7 million borrowed last year to pay rent or mortgages, according to an estimate by Shelter, a London-based housing nonprofit. The supply of publicly subsidized housing in Newham has declined even as jobseekers poured in, raising demand.
After the U.K. deficit ballooned in the recession, the government of Prime Minister David Cameron said in 2010 that it would cut welfare benefits for the poor by 18 billion pounds, or almost twice the amount committed to the Olympics. Citing an “overheating” rental market with the approaching games, the Newham Council in March sought to pay for accommodations for 500 poor Newham families in Stoke-on-Trent, a 170-mile drive northwest of London’s most crowded borough.
That got Labour Party Mayor Robin Wales accused of “social cleansing.” While he denies such a motivation and vows to tame the sheds-with-beds explosion, the council he leads is moving to tear down one of the remaining borough-owned housing units, the Carpenters estate, next to the Olympic Park.
The council operates out of a 111 million-pound mostly glass cube overlooking London City Airport. Its website depicts a borough of shiny new high-rises, and Wales calls it “the last great development opportunity in London.”
The housing shortage is only the latest crisis to hit the financial capital of Europe. Since 2008, London has been battered by the global banking meltdown, the deepest recession since the 1930s, Occupy London protests over economic inequality, last summer’s riots, the political drive for austerity and now the Libor-rigging scandal.
The lack of affordable housing is the biggest problem facing the city, according to London Citizens, a community organizing group that has successfully campaigned for a higher minimum wage in the British capital and has challenged excesses of the finance industry. London has the world’s second-most expensive residential real estate after Hong Kong, according to broker Savills Plc.
“London councils are reluctant to set aside land for cheap housing because they can earn so much money by selling it to developers,” says Neil Jameson, director of London Citizens. “Without cheap housing, people have to move away from their families.”
Britain is more polarized over inequality in housing wealth than at any time during the mortgage financing era, which began in the Victorian period of the 19th century, according to Danny Dorling, a University of Sheffield professor. He published a report on housing inequality for Shelter in 2004 and says the rise in top prices since means that disparity has widened.
The global downturn made it tougher for people on low incomes and no incomes to find housing, from London to San Francisco. While people crammed into Newham sheds, tent cities sprang up across the U.S., from Olympia, Washington, to Lakewood, New Jersey. Last year, hundreds of thousands protested soaring rents by pitching tent cities in Tel Aviv.
In London, the historic docks of Newham for more than a century made it the borough where the poorest immigrants entered England. Today it has the second-cheapest property prices among the city’s 33 boroughs behind neighboring Barking & Dagenham, according to the consulting company CACI International Inc. Jobs in London attract people from Britain, Europe and the world.
Those are the reasons people land in places like the brick shed that Christine Lyons visited one morning this month. The 672 pounds that the landlord charged for a month was 38 percent below the London average for a legal one-bedroom apartment, according to the Valuation Office Agency. Kensington & Chelsea, the second-least crowded borough, has the most expensive one-bedroom apartments at 1,874 pounds a month.
Minutes after her inspection, standing by the old stable on a street lined with London plane trees, Lyons says dwellings like this are sending living standards back to the 19th century.
“You can’t believe that we’ve gone back to that,” says Lyons, the Newham Council’s leader of planning enforcement. Raw sewage running down streets from poorly connected pipes is one of her concerns, she says. Lyons recalls finding a shed in which the residents had dug a hole that served as a shower drain and toilet.
“We’re now bearing the brunt of the economic failings of the world,” she says.
Newham’s 308,000 residents are the most crowded in England. For each 100 housing units, there are 301 people, according to data from the 2011 census published this month. That is 50 percent more than in the wealthy borough of Kensington & Chelsea, with 199 people for each 100 houses. In the past decade Newham’s population rose by 64,000, or more than 25 percent, the biggest gain in London, while Kensington & Chelsea’s fell by 221 people to 158,700.
Aside from the manicured 246-hectare (608-acre) Olympic Park, the borough presents an urban landscape of terraced housing, high-rise apartment blocks, betting shops, fast-food outlets and storefronts with signs in English, Bengali, Polish and other languages. Asian women in colorful head scarves navigate sidewalks crammed with rubbish bins.
The projected 1 billion television viewers of the Olympics opening ceremony are promised a different image. Danny Boyle, the Oscar-winning director of the 2008 film “Slumdog Millionaire,” announced plans to present Britain as a “green and pleasant land,” inspired by the final words to a 200-year-old William Blake poem.
Newham has the second-worst income deprivation in England behind the neighboring borough of Tower Hamlets, according to University of Oxford researchers, and it has London’s highest unemployment, government statistics show. Many residents are just passing through in search of work or benefits; two people out of every 10 either left or entered Newham in 2008. More than a third of the children live in poverty. Together, its residents speak more than 100 languages.
The district is the setting for the 2012 film “Ill Manors,” made by the Newham-raised musician Ben Drew, also known as Plan B. He sings of going on an “urban safari” where illegal immigrants may be seen. “Oi look there’s a chav,” the song goes. “That means council-housed and violent.”
The borough has one of the highest crime rates in London, according to the Metropolitan Police Service. Newham was the scene of the murder of a child accused of witchcraft in the Congolese community and the stabbing of a member of Parliament. In 2010, a council study found that the rate of violence against persons -- at 9.9 attacks for each 1,000 people -- was the worst in a sampling of 15 similar U.K. areas.
The crowding brings with it ill health. Life expectancy in Newham is below average for England. Levels of tuberculosis and diabetes are among the highest in the nation. So are hospital admissions for asthma and the rate of people living with HIV, according to the U.K. Health Protection Agency.
Back in 2005 when London won this year’s Olympics, the games were pitched as a catalyst to help fight poverty in the poorest corner of the capital. Sebastian Coe, the London 2012 chairman who won gold medals for Britain in the 1,500 meters in 1980 and 1984, took Newham children with him to Singapore, where they helped sway the International Olympic Committee.
Instead, gentrification is likely to be part of the legacy, as destruction of low-income housing and construction of new, high-priced apartments push out the poor, according to Marc Lancaster, an adviser at Shelter. He assists Newham residents with housing in an office 2,000 meters from the stadium. The government neglected a chance to emphasize affordable housing as an Olympic legacy, he says.
“Things will get worse,” Lancaster says. “The pressures of the housing benefit cuts are forcing people to smaller accommodations.”
Newham’s young residents are eager to make more of the games. Voltaire Taiwo de Campos, 16, received an award from the Dalai Lama for compassion this year. After his cousin was stabbed to death by a gang in 2010, the teenager became an advocate of nonviolence. He is working on a project to build a peace garden in the Olympic Park to unite young people who fight in gangs marked by their postal codes.
“I want the world to know that Newham, no matter how it looks, no matter the crime rate, Newham is full of people with big hearts,” says Taiwo de Campos, who was born in Britain and whose ancestors hail from Nigeria, Brazil, Angola and Portugal.
Hundreds of school children wearing brightly-colored carnival costumes paraded through Newham’s Central Park on July 21 at a party to welcome the Olympic torch.
Newham residents on low incomes can try to rent private accommodation if they can’t get a council-owned property or a place from a nonprofit housing association. A private one-bedroom apartment in Newham costs about 818 pounds a month, more than double the average monthly council rent of 345 pounds. The average monthly housing association rent is 419 pounds. Newham’s average rent for a private one-bedroom apartment is the 12th-lowest in London.
Landlords who illegally overcrowd properties with multiple renters can double what they make on a property, Lyons says.
Government housing benefit payments are set to cover the bottom third of rents in each area, as long as they are within national limits. In London, rising prices are pushing rents above those caps. In March, Newham wrote to the Brighter Futures Housing Association in Stoke, asking it to take families needing housing. The council would pay the rent in Stoke.
“We described this as ‘social cleansing’ because they wanted to move their poorest and most needy people out of their borough,” says Gill Brown, the chief executive officer of Brighter Futures. “It’s not good for people who are homeless and extremely vulnerable to be moved away from their families and friends to a place where their chances of getting a job are much less.”
Wales, the Newham mayor, says he is stuck in a difficult situation.
“People are exploiting vulnerable people by building sheds and putting them in,” Wales says. “As benefit cuts bite, and indeed as the recession bites, you get more and more people living in one property.”
The number of Newham families on waiting lists for public quarters rose 33 percent to 32,045 in 2011 from 2007, as the economy declined, according to data compiled by Shelter. The total receiving housing benefits climbed 9.9 percent to 37,720 in April from November 2008. Meanwhile, in the last decade the supply of council-owned houses declined 24 percent as properties were sold off to occupants or developers, Shelter reported.
That has left people crowding into the remaining council housing as families grow with no bigger spaces available. Hifzur Rahman, a British citizen of Bangladeshi origin, lives in a two-bedroom flat provided by the Newham Council along with his wife and nine children, whose ages range from a few months to 16 years. The toilet mechanism doesn’t work, so they pour in water to flush it.
Rahman’s repeated requests for a larger apartment have gone unheeded, he says. The two small bedrooms are crammed with beds. Four children share two of them, sleeping head to toe. Clothes hang on the stair balcony and toys cover the floor. His wife, Hashena Bibi, 42, who speaks little English, feeds one of the children from a green cup.
“How can we manage here?” asks Rahman, 46, an unemployed restaurant worker. “I feel very bad, thinking about this. I am also British, my children also.”
The supply of public housing will probably shrink further. The Newham Council in November announced plans to redevelop the Carpenters housing estate with University College of London for an undisclosed amount.
The new owner would demolish the dwelling places and build new laboratories and research facilities. Properties are currently occupied by families on public assistance and residents who have leases. The council, which also wants to build residential and commercial property there, hasn’t committed to giving residents the right to return.
The Carpenters estate’s rows of 1960s terraced flats and houses are adjacent to the Olympic Park in Newham’s Stratford neighborhood. Small front-yard gardens sit in front of windows decorated with England’s red-and-white cross-of-St. George flag. Last weekend, as the Olympic torch passed nearby, residents staged an “unofficial gentrification tour” to protest the planned redevelopment.
“Twenty years ago no one was even thinking of redeveloping the estate. Now Newham are determined to sell it to the highest bidder,” says David Richards, vicar of the nearby St. John’s Church. “What it says about the Olympic legacy is that Stratford will not be a place for the people who live here at the moment.”
Carpenters residents who face having to move feel besieged, like the London teenagers who fight off an alien invasion in the 2011 film “Attack the Block,” says Osita Madu, a 39-year-old recruiter who lives there. His apartment is opposite the building where the movie was shot, and he can see the Olympic Stadium from his window.
“The big bad alien is the council,” Madu says. “The invasion is obviously taking us out, throwing us off the estate.”
Mary Finch, 72, has lived in a three-bedroom house on the estate since it was built more than 40 years ago. She raised three children there and worked as a teaching assistant at Carpenters Primary School.
“The Olympics is forcing me out,” she says. She voices frustration with Mayor Wales. “Why is he forcing me out of my home that’s got nothing wrong with it?”
With the decline of housing provided by the government, private landlords find profits in illegally breaking up houses into separately rented rooms and building sheds without permits. Christine Lyons, the housing inspector, is leading a crackdown. The national government announced extra funding of 280,000 pounds for Newham in May to stop the spread of inhabited sheds.
“We’ve got a real problem in our borough of landlords that take advantage of people,” Lyons says. The blue-eyed, auburn-haired mother of three has been a housing enforcement officer for 19 years. “It becomes a creeping disaster.”
So far this year, her team has filed enforcement investigations on more than 600 outbuildings suspected of being illegally used as dwellings. That’s more than triple the 170 actions in 2011, and up from 38 in 2008. The thermal imaging map may have identified 5,000 potential new sites to inspect, Lyons says.
During a raid in May, Lyons peered through a spiked fence into a backyard strewn with empty liquor bottles, a broken toilet bowl and soiled mattresses.
“It’s just rubbish,” Lyons said. “You know, a cheap place for rats to run around.”
At one crowded property, Moroccan immigrant Ilham Gallai shows how what looks like a garage actually contains four bedrooms, a shower and a stinking, broken toilet. In a shared kitchen, she perches on a table and tries to count how many people live there. An Italian occupies a room on the first floor. An Asian family with children are on the top floor, she says.
Gallai thought the door next to the fridge “was a cupboard,” she says. Then one day she opened it and found a man living in a tiny room.
“I was so shocked,” Gallai says. “I opened the door, and bless him the guy was sleeping just by the door.”
Enzo Vox, her fellow temporary resident from Bari in southern Italy, says he is glad to be in London because he can find work, even though he hates the filthiness of the house.
“In this country, there are people from all over the world because there’s a chance of getting a job,” says Vox, who has had a series of restaurant jobs, in a mix of English and Italian. “If you become a waiter in Italy, you remain a waiter. Here, there is a chance of becoming a supervisor, then an assistant manager.”
By this month, Gillai and Vox had both left the house.
Hanging on the wall in the kitchen in May was a notice from the council citing the landlord, Jan Assakzai.
Assakzai pleaded guilty in April to housing 12 people when he had a license allowing no more than five tenants, and more than 20 counts of failing to properly manage the house, according to Russell Moffatt, a manager for the Newham Council. Assakzai was fined 5,500 pounds and ordered to pay 300 pounds toward council legal costs and a 15-pound “victim surcharge,” he says. An official at Thames Magistrates Court confirmed the information.
The landlord didn’t respond to calls to his mobile phone and didn’t answer at a house where letters addressed to him lay on the floor, visible through a glass door.
Last month, the Newham Council passed legislation requiring private landlords to pay 500 pounds for a five-year license. Those caught without one face 20,000-pound fines.
Once the Olympic Games finish, the U.K. developer Delancey Estates Plc and Qatari Diar Real Estate Investment Co. will convert part of the athletes’ village into 1,439 homes for private rental. They acquired the property in a 557 million-pound agreement last year. Dido Laurimore, a spokeswoman for Delancey, declined to comment on planned rents.
The housing company Triathlon Homes will convert the remaining units into 1,379 apartments for rent at below-market prices.
Of those, 354 will be rented for about 20 percent less than market rates. A further 350 will be available through a shared ownership program, in which occupants buy part of the property with a mortgage and pay rent on the portion their mortgage doesn’t cover.
The final 675 will be “social rent homes” owned by local councils and housing nonprofits, with more than half of these available to Newham residents.
The project will help offset about 450 housing units that were destroyed to make way for the stadium, and the Carpenters estate, where the number of housing units was originally about 700, according to data compiled by Bloomberg from documents published by the London Development Agency and the London School of Economics.
As this week opened, Olympics Minister Hugh Robertson said the legacy of the event won’t be gentrification.
“The idea is not to create a ghetto of very expensive, private housing out there,” he said. After the games, about 40 percent of development in the Olympic Park will be for public housing, he said.
A walkway crosses above a railroad, connecting the Carpenters estate with the rest of Newham. It is decorated with Olympic images of cyclists, runners and gymnasts and words such as “spirit,” “fair play” and “festival.” At the end of the walkway is a boarded square of empty land with a message on the side.
“A spectacular 26 story tower with a collection of 1, 2 & 3 bedroom apartments & penthouses,” it reads. “Register your interest now.”