First study of its kind says London needs £4.9 billion a year for affordable homes
A landmark report has found that some £4.9 billion a year is needed to deliver affordable homes in London, seven times more than the capital currently receives.
The figures come from a new analysis, the first of its kind, by City Hall, London’s G15 largest housing associations, councils, and housing experts with modelling showing that the capital needs a seven-fold increase in funding from Government.
It says that more funding would help meet huge need for affordable housing, a greater focus on social rented housing, and rising construction costs.
The Mayor of London, Sadiq Khan, currently receives around £700 million affordable housing grant per year from the Government. Last year a record 14,544 affordable homes, including nearly 4,000 at social rent levels, were started, more than in any year since City Hall took control of housing investment in the capital, and exceeding the target of 14,000 agreed with Government ministers.
However, the report highlights that if the Mayor, housing associations, and councils are going to be able to meet Londoners’ housing needs, vastly increased Government investment is urgently needed.
The Mayor’s current Affordable Homes Programme, launched in 2016, runs until March 2022. Working with the G15 group of London’s largest housing associations, councils, and other housing sector experts, City Hall examined how much grant funding is needed to deliver a 10 year programme to follow this, until 2032.
Based on the Mayor’s draft London Plan, which identifies need and capacity for 65,000 new homes each year of which 50% should be affordable, this programme aims to deliver 325,000 new affordable homes. Of these, 70% or 22,750 would be social rent, 20% or 6,500 shared ownership, and 10% or 3,250 for intermediate rent.
Delivering this number of new social rented and other genuinely affordable homes will require significant subsidy, the report points out. Furthermore, construction costs are estimated to increase by 3.4% each year until 2023 which, alongside inflation and a variable housing market, mean the subsidy needed to deliver the homes London needs is far greater in cash terms than a decade ago.
‘This analysis shows the vast increase in Government funding required to deliver the affordable homes that Londoners desperately need. City Hall is building record numbers of new council and social homes, but we need far more funding if we are to truly tackle the housing crisis. As a new Prime Minister takes the helm, they must provide the funding we need to turn this crisis around,’ said Khan.
According to Paul Hackett, chair of the G15 group of London’s largest housing associations, housing associations have shown great flexibility in recent years, responding to lower grant rates since 2011 by building more housing for sale to fund a pipeline of affordable homes.
‘But London’s large associations now fund up to 85% of the cost of new homes from their own resources. With the private market slowing, this cross-subsidy model is at breaking point,’ he said.
‘This research shows that to build genuinely affordable homes at the scale required, the Government’s approach to funding needs to fundamentally change. We need to return to higher grant rates and agree a long-term settlement to give us the tools to keep tackling the housing crisis head-on,’ he pointed out.
Before 2008, grant funding consistently covered more than half the cost of a new affordable home. But since the Coalition Government, it has fallen to much lower levels, now at around 15% to 20%, the report says so a return is needed to previous funding levels, with around 48% of the cost of a new home needing to be covered by public subsidy.