What is London ‘affordable’ housing and how can we get more of it?

by Dave Hill

For the past few weeks, as new parts of the housing supply picture under Sadiq Khan’s mayoralty have emerged, I’ve been intending to write a clear and succinct guide to what is now meant by the term “affordable” housing in London, how much of it there is and needs to be and what sorts of “affordable” homes are truly worthy of the word (thereby liberating us all from those annoying quote marks it seems so necessary to put around the word “affordable” these days). But perhaps think tank the Institute for Public Policy Research (IPPR) has saved me the trouble.

A briefing paper, written by Luke Murphy and Darren Baxter and entitled Priced Out?, describes and quantifies London’s need for a big increase in its supply of new homes within the price reach of low to middle income households, sets out the (often bewildering) array of affordable and not-so affordable housing types presently available, and proposes some sound and achievable measures for addressing a cost of living issue that has long existed in London but which has lately reached crisis levels among a widening income range, wastes taxpayers’ money on homelessness costs and housing benefit, and threaten the city’s social balance and economic health.

Much of the document covers ground that was explored in detail in the report of the IPPR’s London Housing Commission, published during the mayoral election campaign last year. Key elements of it are here distilled into a 30-page core text that reminds us that London has for years needed to build around 50,000 new homes or more a year, of which at least half should be properly affordable, but has actually been managing an average of only 31,125 overall, of which the affordable proportion has fallen even further short of what’s required. The GLA’s most recent annual London Plan Monitoring Report says (page 29) that a net total just 7,803 “affordable units were completed in 2014/15 and any even smaller 6,675 in 2015/16.

Priced Out? underlines four long term problems that have inhibited London’s ability to match housing supply to need: 1, the supply of land; 2, complexities of the planning process; 3, insufficient financial investment; 4, lack of capacity in the construction industry. It shows how the vagueness of the term “affordable” stretches from national government, which provides no legal definition of it, to the often baffling array of “affordable products” on offer in the capital (a total of 13 are listed). A widely accepted benchmark is that no more than 35% of a household’s income after tax and including any benefits should go on housing costs. Some of those products, in many parts of the metropolis, just don’t make the cut, notably Help to Buy.

The briefing recommends that “a universally understood affordability measure, linked to earnings, should be developed and agreed for London and applied transparently for every affordable housing product”, not least to exclude those “affordable” types, notably London Help to Buy, that appear not to assist the right people. This is not to rule out new products being devised or ideas such as the “council housing deals” offered by the Conservatives at the general election, which aimed to help councils use compulsory purchase powers more easily in order to buy land more cheaply.

It also says that Mayor Khan has made a promising start on addressing some of the problems, but notes that London Mayors can do more to adjust the percentage of new homes that are affordable they they can to increase housing supply in general and that even those powers are limited. It recommends that national government initially boosts the amount of money (“capital subsidy”) it gives to City Hall to help fund affordable supply but over the longer term replaces that with a devolved power “to set and retain property taxes in the capital”. The IPPR is not alone in calling for this reform. There is a sustained clamour for it. When will a major political party be brave and sensible enough to embrace it?

Read the whole of the IPPR’s Priced Out? briefing here.

 

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