Sadiq Khan’s affordable housing budget is big money: £4.8 billion of capital funding allocated by Whitehall for 2016 to 2022 – now extended to 2023 due to the pandemic – and a further £4 billion for the current funding round covering 2021 to 2026. It is earmarked for contributing to the costs of almost 200,000 new homes in all.
Where has that money been going? Are these “affordable” homes really within the reach of those in most need? These questions prompt familiar arguments at City Hall. The Mayor is either “miles behind” on his affordable housing promise to Londoners or his programme is not only on target but seeing the building of more “genuinely affordable” homes get underway than at any time since records began in 2002. What’s the reality?
Starts and completions
Predictably, the government’s money has come with strings attached. For Khan, that’s meant agreeing a target for construction to start on 116,000 new affordable homes by April 2023 under the 2016-23 programme, and a further 82,000 under the 2021-26 programme. Just over 65,000 homes have been started since 2016 so far.
Why is the number of “starts” the target, rather than “completions” of new homes? As Conservative London Assembly member Andrew Boff regularly points out, “Londoners can’t live in a housing start” (this, incidentally echoes regular Labour complaints about Boris Johnson’s record on finishing rather than starting).
Starts are actually the favoured metric of the Conservative government, designed to provide a clearer focus on individual mayoral performance, given that the time it can take to get a home built, particularly on larger schemes, means that completion rates often depend on what had happened during a previous mayoral term.
Recent performance bears this out. An average of some 9,000 starts a year in Johnson’s second term translated to 10,000 homes completed in Khan’s first two years. Starts under Khan have met the government’s targets every year, peaking at 17, 256 in 2019/20. This was heralded by Khan as the highest total “since records began” in 2002/3.
Despite the inevitable dip in the pandemic-hit 2020/21, the number of affordable homes started under Khan continues to run ahead of Johnson’s totals – 65,000 since 2016, compared to 47,500 in Johnson’s first term and 35,700 in his second.
Starting the 50,000 new homes by March 2023 required to meet the government’s 116,000 target is a continuing challenge though, while Khan’s completions rate, averaging 6,900 a year, remains below Johnson’s 9,400 a year overall.
How affordable is “affordable”?
It is clear that the mayoral focus has switched significantly since 2016, with rental affordability previously defined as up to 80 per cent of local market levels now measured using benchmarks closer to “traditional” social rents.
Where the money goes is ultimately determined by the government, meaning that more than half of the 2016-23 funding had to be for “intermediate” affordable housing – primarily shared ownership schemes and Khan’s London Living Rent tenure aimed at helping middle income Londoners work towards home ownership.
But Khan has been able to shift away from what he has consistently called the old “dodgy definition” of affordability for the rental part of the programme. In 2019/20, his funding allocations helped more council homes to be started than in any year for more than three decades – some 3,300 – and an 80 per cent increase on 2018/19 in the total number of homes at social rent levels
In 2018, Khan successfully persuaded the government that some £1 billion should be earmarked specifically for council housing and his “building Council Homes for Londoners” programme. As a result, last year council homes made up a quarter of all new homes funded by City Hall and 53 per cent of Khan’s £4 billion 2021/26 package will be go towards homes for social rent.
It’s a “renaissance” in council housing, according to the Mayor. As well as drawing on City Hall funding, London’s boroughs have had greater freedom to borrow against their housing revenue accounts thanks to Theresa May’s government in 2018,
As Khan’s housing deputy Tom Copley told last month’s London Assembly plenary session, councils building homes has provided an additional source of supply at a time when housing associations, the main providers of affordable homes in the capital, are increasingly preoccupied with cladding issues and building safety post-Grenfell.
The pressure on housing associations highlights a major constraint on Khan’s ambitions – City Hall distributes the funding, but relies on others to get the homes actually built.
Major housing schemes can take years to come to fruition and opposition to development seems to be growing, despite 61,000 homeless families currently living in temporary housing and estimates that London needs some 65,000 new homes a year to meet increasing need.
The new Conservative AM for Bexley & Bromley, Peter Fortune has called for a rethink on widely-opposed Transport for London schemes for housing on Tube station car parks, while Communities Secretary Robert Jenrick recently blocked the 443 home development of the old London Fire Brigade HQ on Albert Embankment and has also “called in” plans already approved by Brent Council for 450 homes, 40 per cent affordable, at Wembley Park station.
Government rules have also restricted the amount of grant Khan can contribute per unit to what Copley has called “historically” low levels. The limit for a social rent home is £60,000, which covers just 15 to 20 per cent of construction costs. This adds to the pressure on the “cross-subsidy” model, whereby market value housing helps to pay for affordable homes.
The upshot is that housing associations and councils alike are increasingly “expected to deliver more with less,” according to the London Assembly’s annual housing update. Building costs are going up as well, with the new London Plan stipulating higher safety, daylight and space standards.
All this contributes to a consensus that more subsidy is needed. “If we are going to deliver at a scale that matches need and our ambition,” says Copley, “we need £4.9 billion a year every year for 10 years.”
Could that happen? As the London Mayor has said, “Increasing the supply of affordable homes in London is intrinsically linked to the future economic growth of the capital…I will continue to call on government to give London all the tools and funding it needs to increase the supply of affordable homes in the capital.” The Mayor in question was Mayor Johnson, by the way, back in 2013.
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