The Washington Post
By: Anthony Faiola
June 20, 2011
LONDON -- The choice of the London A-list, St. John's Wood is a neighborhood of ethereal wealth, its leafy avenues lined with the ample mansions of Paul McCartney, Ewan McGregor and Kate Moss. And yet, they share the most unlikely neighbors -- the Kastrati family.
Poor immigrants struggling to survive in one of the world's most expensive cities, the family of four nevertheless lives in a sunny, two-bedroom flat in an enclave of urban privilege. Their benefactor: the British government, which covers 85 percent of their $3,600-a-month rent through welfare benefits giving tens of thousands of low-income earners access to even the best neighborhoods. But the clock on such subsidized London lifestyles is suddenly running out.
The Conservative-led government is rolling out Britain's most sweeping welfare reform since the 1940s, taking aim at the ballooning bills in cities such as London, where a few families receive as much as $160,000 a year to ensure economic diversity and quality housing for the poor in some of the priciest districts in the world. Yet as benefits are rolled back, academics are warning of a major side effect: an exodus of the poor from central London in numbers not seen since the demolition of soot-caked Dickensian slums in the 19th century.
London's population shift may emerge as one of the most dramatic examples of the deficit-busting crusade taking place across Europe and now under serious debate in Washington. On this side of the Atlantic, cash-strapped nations from Greece to Ireland -- drowning in debt in the wake of the Great Recession -- are rolling back famously generous welfare programs that they can no longer afford.
Few have been as ambitious as Britain, where the government's push is igniting a fierce debate about the fading European ideal of a right to a good life despite one's economic standing.
Critics say the reforms could result in a polarization of the classes in this city of 8.6 million, ultimately giving rise to American-style ghettos. Over the next four years, experts say that roughly 82,000 poor families are likely to be forced from expensive apartments in central London and, quite likely, into cheaper accommodations on the fringes of the city or beyond. By 2016, one University of Cambridge study shows, the cuts would leave only 36 percent of London neighborhoods accessible to low-income earners, down from about 75 percent in 2010.
"Families are going to move from inner London to outer London, and as rents keep rising, they're going to have to move even farther out," said Helen Dent, chief executive of Family Action, a London-based charity. "This is going to change the nature of London."
The archbishop of Canterbury, Rowan Williams, has decried the reforms, calling them "social zoning" that would push out the poor. London Mayor Boris Johnson went further, describing them as "Kosovo-style social cleansing." Although he backed off those comments after stinging rebukes by fellow conservatives, the comparison remains particularly poignant for Shpejtim Kastrati, 25, whose family fled to London from Kosovo in the 1990s.
Now, he said, he, his wife and their two young daughters might soon join the coming ranks of London's economic refugees. They have already received notice to find other accommodations by January, when their monthly housing subsidy will be cut from $3,100 to $1,660. Given the stratospheric rents in elegant St. John's Wood -- in the same London borough as Westminster Abbey and Big Ben -- the only options on Kastrati's $800-a-month salary as a hotel waiter, he said, will be relocation to a less expensive neighborhood or temporary housing in a homeless shelter.
"They just want the rich people here now," he said, holding his 4-year-old daughter, who was scheduled to start kindergarten at a well-kept St. John's Wood school next fall. "They want us out."
A city of contrasts
The most expensive apartment in the world rests atop a new steel-and-glass monument to luxury on the southeast corner of London's Hyde Park.
Vibrant displays of fresh-cut tropical flowers scent the stark lobby, entered through monstrously large glass doors that soundlessly open for fabulously wealthy residents and guests. The 30,000-square-foot, three-story penthouse at One Hyde Park sold for $216 million. Its ceilings are electronically chilled for climate control. The bathrooms boast marble from 15 countries.
A floor below, a walk through a $108 million, five-bedroom apartment offered a glimpse into a new kind of Londoner, a global class of the mega-rich more likely to speak Russian, Chinese or Arabic than English as a first language. The master suite -- 1,500 square feet -- is larger than most London homes. Buildings like this did not exist here a decade ago, said Simon Walker, a real state agent on the property.
"London is now the global hub of the world's high earners," he said.
After years of population losses, London began a renaissance in the late 1980s with its rise as a global financial center rivaling New York. As the city became more international, and ever more affluent, neighborhoods that were once bastions of the working classes -- Chelsea, Notting Hill -- became untouchably expensive for the average Londoner.
Although prices blipped down during the recent financial crisis, rents in particular have bounced back with a vengeance. The average rent for a central London property stands at $6,400 a month, surging 19 percent last year alone.
Yet with few exceptions -- think exclusive Mayfair -- most central London areas remain a patchwork of the classes, with truly poor neighborhoods largely peppering the more distant vectors of the city. How can the poor survive amid such affluence? For hundreds of thousands of Londoners, the answer is social welfare.
Across London, there are 823,000 government housing units, most charging a small fraction of market rents. But with a waiting list of 326,000 families, anyone applying now faces a 10-year wait. By then, experts say, the era of such generosity might have run its course. A new government measure would effectively compel all new public housing units built in Britain to charge substantially higher rents.
Given the massive waiting list, however, low-income families have been given a golden ticket since the late 1980s -- the right to live in private apartments and houses with the state picking up most of the tab. The number of families now claiming that benefit tops 150,000 in London, and 1.6 million nationwide. It has pushed Britain's housing benefits bill up 50 percent over the past decade, to $34.4 billion, officials say, a figure they hope to slash by at least 11 percent.
It is only the beginning of a broader reinvention of welfare that by 2013 would see all benefits -- from housing aid to unemployment checks -- combined into one "universal credit" capped at $41,000 a year, or the average wage of a British worker.
With the welfare bill in some London boroughs higher than those of entire British cities including Manchester and Birmingham, the cuts will be overwhelmingly concentrated here. A study by London's Center for Social and Economic Inclusion, a nonprofit research center devoted to social issues, estimated that a single parent of two in London, for instance, would see a cut of about $8,000 a year.
To make its case, the government is highlighting some of the most outrageous examples. A single mother of eight, for instance, is reportedly living in a $4.1 million Notting Hill villa, the state picking up her $10,200-a-month rent. But many have also zoomed in on more average cases like the Kastratis, who live in a wood-floored apartment equipped with a giant flat-screen TV in a neighborhood that, without state aid, is out of reach for the vast majority of British families.
"It's a very complex psychological issue," said Lord David Anthony Freud, the British government's welfare reform minister and the great-grandson of Sigmund Freud. "The issue is, what set of expectations is the state breeding in people? . . . We need to wean them off the state."
Freud dismissed critics warning of a coming exodus of the poor, calling such talk "scaremongering." But he acknowledged that some Londoners, perhaps justly, would be forced to move. "If people have to move down the road, out of the kind of road where Russian oligarchs like to live, then I don't think people would feel that was wrong."
Yet many welfare recipients, critics say, are simply trying to get by in a city whose shocking affluence makes that harder every day.
'We'll have to move out'
Even in the galaxy of quirk that is London's Camden Market, the Ryans stand out like supernovas. This is the heart of London's Goth scene, and mother Louise, a struggling artist, leads the way, her electric turquoise hair burning bright. Her sixth-grader, Georgia, trailed behind, sporting baby-doll frills and a shiny nose ring. Third-grader Kiefer, wearing a full Liverpool soccer uniform punctuated by a crystal stud earring, picked up the rear.
Since 2010, the family has been living in a three-bedroom apartment in nearby Islington, a neighborhood where Louise Ryan spent most of her childhood growing up in social housing. With both Ryan and her husband, who suffered a recent mental breakdown, out of steady work, the state covers their monthly rent of $2,800. They have received notice, however, that as of January, the most they can obtain for housing help will be $2,173.
"We don't have the money," she said. "We'll have to move out."
She has flipped through real estate listings, but what was an affordable neighborhood in London in the 1960s and '70s is now a high-rent district. The transplants famously include Tony and Cherie Blair, who moved there in the 1990s. The average rent for a three-bedroom apartment in the area is $3,530 a month.
Pressure is mounting on the government to roll back the welfare cuts or at least grant special compensation for residents of London, where prices far exceed the cost of other British cities. This week, the government announced a number of exemptions for vulnerable groups, including the disabled, and promised more funding to help individual families transition to life on lower benefits on a case-by-case basis. But with London rents still rising, critics are sounding warning bells.
Louise Ryan had wanted to raise her children in Islington, near their favorite stomping grounds at Camden Market and close to Georgia and Kiefer's school friends.
"But I don't think it's going to work out that way," she said. "They're trying to drive us out. All that will be left in parts of London are the rich and the tourists."
Special correspondent Eliza Mackintosh contributed to this report.