London housing crisis becoming ‘an emergency’ as supply falls and rents soar

London housing crisis becoming ‘an emergency’ as supply falls and rents soar

“We are moving from a crisis to an emergency”. That was the verdict of Kensington & Chelsea Council’s housing needs director Kojo Sarpong, as a new London boroughs’ report highlighted the worsening impact of shrinking housing supply and escalating rents on Londoners looking for an affordable home.

Speaking at a Trust for London event marking today’s publication of the analysis, conducted by the London School of Economics and property consultants Savills for London Councils, the trust, the pan-London Capital Letters agency and the London Housing Directors’ Group, Sarpong underlined the grim impact of the crisis in his own borough last year – fewer private sector lets, a three per cent reduction in social housing lettings, and a 14 per cent increase in families presenting as homeless.

Overall, the research shows the number of London properties available for private rent down by a startling 41 per cent since the Covid-19 pandemic, with rents now 20 per cent above their March 2020 level and fewer than three per cent of rental listings affordable to those relying on the Local Housing Allowance (LHA) benefit to cover their housing costs.

There is a particular shortage of larger properties to rent, the report finds, with the overall “downward trajectory of availability” hitting the lower end of the market hardest – meaning fewer options for low-income households and local councils seeking temporary accommodation for residents accepted as statutorily homeless (TA).

Lower turnover of existing tenancies and a continuing shortfall in the supply of affordable housing as well as the shrinking private rented sector are creating  an increasingly “unmanageable” situation, according to London Councils, with 166,000 Londoners living in temporary accommodation, including commercial hotel rooms. The cost to the boroughs is more than £52 million a month, and the TA total is heading towards reaching its highest ever number by the end of this summer.

“This research is the latest evidence of how the capital’s broken housing market is worsening the unsustainable and increasingly unmanageable pressures we face in London,” said Darren Rodwell, London Councils Executive Member for Regeneration, Housing and Planning. “A bad situation is now becoming disastrous. Urgent action is needed from the government to help households avoid homelessness and to reduce the number in temporary accommodation.”

The report also highlighted financial and regulatory pressures on smaller landlords in particular, with those most likely to be working with councils to provide lower-cost temporary accommodation also those most likely to be pulling out of those arrangements or exiting the rental sector altogether. Council procurement of new private rented homes has fallen down 26 per cent in the last year and placement into usually last resort bed and breakfast accommodation had risen by 167 per cent in February, year on year.

The report’s key recommendation is an immediate boost to LHA, which is currently relied on by 300,000 London households to meet their housing costs, raising its level to the 30th percentile of current market rents.

The report finds that the government’s decision to freeze LHA rates since April 2020 contributed to a significant reduction in the number of private rental homes affordable for low-income Londoners. Only 2.3 per cent of London listings on Rightmove in 2022-23 were within reach of those using LHA to pay their rent, compared to 8.9 per cent in 2020-21.

Other recommendations include new arrangements between London’s councils and other public sector bodies, particularly the Home Office, to limit competition for scarce rental properties, which is currently skewing the market and driving up prices.

And as well as an overall increase in funding for new social housing, the government should be helping councils with grants or other capital support to  enable them to buy up properties where landlords were pulling out of the rental market, the report says.

Responding to the report, the Centre for London think tank, whose own analysis of the capital’s temporary accommodation crisis came out last September, said the analysis showed “London is experiencing the sharpest reduction in the supply of privately rented properties of anywhere in the UK”.

Piecemeal solutions ware “not enough”, they added. “The government must work with local authorities and housing providers to get to grips with this crisis before more people are pushed into homelessness or out of the capital entirely.”

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