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Housing

Only a renaissance in social housebuilding will end London’s affordability crisis

By 20/08/2021No Comments

Backing the social sector now could make serious gains in the government’s targets on homelessness reduction, give a shot in the arm to London’s economic recovery, and provide thousands with a decent and affordable place to call home, writes Jamie Carswell

Picture: Getty

Picture: Getty

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Backing the social sector now could make serious gains in the government’s targets on homelessness reduction, give a shot in the arm to London’s economic recovery, and provide thousands with a decent and affordable home, writes Jamie Carswell #UKhousing


In London, the gap between supply and demand in affordable housing is deep, prolonged and looks set to continue.

This is the warning of a new interim report from the London Housing Directors’ Group and the G15 group of housing associations.

Together we’ve assessed the range of challenges facing the housing market in the capital and highlighted the urgent need for a renaissance in the building of new social homes. A key lesson emerging from our ongoing research is that London’s housing crisis is fundamentally an affordability crisis and that the market is unlikely to address this need.

Forecasts provided by Savills show a continuing over-supply of new homes in the capital aimed at higher earners, with an under-provision of homes for low and middle-income households.

And yet the need for more affordable housing is acute. Savills estimates that 42,500 sub-market homes are needed each year in London – an estimate in line with the 2017 Strategic Housing Market Assessment that provided evidence for the revised London Plan. This compares with an average of 7,900 sub-market homes that have been delivered annually since 2015/16.



London’s affordability challenge is much starker than elsewhere in the country. Average house prices in the capital are 93% higher than the UK average compared with wages that are 49% higher. London’s house price to earnings ratio is 12.5, compared with the national average of 7.7.

These are all major factors leading to London suffering the highest homelessness rates in the country, with around 165,000 homeless Londoners living in temporary accommodation.

Inadequate supply of affordable homes for Londoners on low and middle-income represents a clear market failure. It also demonstrates the need to boost social housing provision to meet the shortfall.

“A key lesson emerging from our ongoing research is that London’s housing crisis is fundamentally an affordability crisis and that the market is unlikely to address this need”

The sector has already shown its commitment towards this goal. London boroughs and housing associations alike have ambitious plans to deliver new affordable housing – including developing council housing at significant scale for the first time in over 30 years.

But there are stark and growing challenges for the social sector. Data from the G15 revealed that government grant rates cover a smaller proportion of development costs than a decade ago, while the cross-subsidy model looks increasingly risky in the face of rising market exposure and interest cover.

And although boroughs welcome the increased flexibilities granted over Housing Revenue Account borrowing, there remain all sorts of hurdles undermining development funding. These include the high costs related to servicing debt, continuing restrictions on the use of Right to Buy sales receipts, and the need to invest in existing stock to meet safety and decarbonisation commitments.

The boroughs are also still establishing the required capacity and skills base within their development teams, while wider challenges are developing across the sector around the supply of materials and escalating costs.

Our interim report starts to sketch out the policy changes needed to address these issues and to support the affordable housebuilding we all want to see.

The government should back social house builders through increased grant funding and ensuring that place-based investments are linked up and focused in a way that maximises new supply and improves existing housing conditions through regeneration.

“Ultimately, inaction on affordable housing only leads to greater problems downstream”

Funding for councils to undertake assessments of land opportunities would open the possibility for new areas of regeneration and delivery. On top of direct grant funding for building new affordable homes, the government could also provide financial backing for housing associations and councils to act as a ‘buyer of last resort’ for bulk purchase of unsold market homes where they deliver value for money.

Complete flexibility over Right to Buy receipts would give councils the autonomy to function in a practical and sustainable way. Revenue funding is needed to grow skills and development capacity within local authorities. A post-Brexit visa system for construction workers would support all house builders within the sector in both the short and long term.

Ultimately, inaction on affordable housing only leads to greater problems downstream, with spiralling homelessness rates, high costs for temporary accommodation, and the impact of living with chronic housing instability on individuals and families.

By committing to back the social sector now, we can make serious gains in the government’s targets on homelessness reduction, give a shot in the arm to London’s economic recovery from COVID-19, and deliver on our commitment to providing every Londoner with a decent, secure and affordable place to call home.

The interim report – Delivering on London’s Housing Requirement – can be found here. Stakeholders are welcome to submit comments and evidence by Friday 17 September.

Jamie Carswell, co-chair, London Housing Directors’ Group

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