The capital will require nearly £50 billion from national government over a ten year period if its need for various kinds of new “affordable” housing by 2032 is to be met, according to calculations published by City Hall.
The figures, compiled by the Greater London Authority’s housing and land department in conjunction with boroughs, leading housing associations and other housing sector experts, model the funding support necessary to help supply an annual 32,500 new affordable homes comprising social rent level, “intermediate” rent and shared ownership dwellings from financial year 2022/23 – nearly half the overall 66,000 a year needed accorded to Sadiq Khan’s draft new London Plan.
Of the 32,500 total, 22,750 (70%) would be for rent at social rent levels, 3,250 (10%) at intermediate rent levels and 6,500 (20%) shared ownership dwellings. The funding would represent 48% of the estimated total cost of all the grant-funded new affordable homes and enable their supply to be in line with the Mayor’s aspiration to increase “genuinely affordable” supply to 50% of the total.
The scenario set out in the model envisages a large increase in financial support and delivery compared with the Mayor’s current affordable homes programme, which aims to see an average of just 16,600 “genuinely affordable” homes completed per year – barely half the target set in the draft new London Plan – with a greater emphasis on shared ownership, due to the terms set by national government.
The City Hall analysis defines a “subsidy gap” in the cost of building 32,500 affordable homes a year of around £7.5 billion a year.
It assumes that 9,600 affordable homes per year could be generated by private developers meeting conditions placed on planning consents (section 106 contributions), which would be the equivalent of a £2.3 billion financial contribution.
It also builds in the expectation that borough and housing associations can cross-subsidise affordable home construction to the tune of £0.3 billion a year, derived from building and selling 5,700 homes at full market prices each year.
This leaves a need for £4.9 billion a year from government to be distributed by London’s Mayor between 2022/23 and 2031/32 in order to meet the cost of 32,500 new affordable homes of the types required every year, or 325,000 over the ten-year period.
This level of grant funding would amount to around seven times what London presently receives, due to the larger size of the provisional programme, the far greater focus on social rent level homes and the expected impact of inflation, according to the analysis.
It concludes that its calculations support “the basic and inescapable economic logic of funding social rented homes in London” and that doing so requires a level of subsidy per home “far greater in cash terms than even a decades ago” due to cost inflation.
OnLondon.co.uk is dedicated to providing fair and thorough coverage of London’s politics, development and culture. The site depends on donations from readers and is also seeking support from suitable organisations. Read more about that here.