Will affordable housing be the casualty as London tackles its building emergency? | Housing

Sadiq Khan has known for some time that he has a problem with housebuilding in London. But last week a consultancy firm published figures on the scale of the problem, sparking full-scale alarm in City Hall and Whitehall.

Molior’s analysis showed this New housing construction in the capital had collapsed. Only 40,000 homes are under construction (two-thirds the normal rate) and in the first three months of the year builders started work on just 3,248 private sector units.

“This is a perfect storm of economic conditions impacting residential construction,” a City Hall source said. A senior Whitehall official added: “This is an urgent situation, we look forward to taking action.”

The reasons behind the sudden collapse of the new building are complex.

When Khan became mayor, he increased the amount of affordable housing that developers must include to qualify for the expedited approval process from 20% to 35%, or 50% for developments on industrial or public lands.

It has also tightened the definition of affordable housing, ensuring that it applies mainly to the cheapest rental homes and those sold under shared ownership schemes.

It worked for a while. Although overall housebuilding levels have fallen, the number of social and affordable homes has increased. In 2023, builders started work on more than 116,000 affordable homes in London and more council houses than seen since the 1970s.

However, economic conditions later began to be negatively affected.

Building in the capital has always been expensive, as raw land is scarce and developers often have to demolish existing buildings first. But when inflation soared in late 2022, followed by a sharp rise in interest rates throughout 2023, it became much more difficult for developers to make a business case for launching new projects in the city.

Analysis of government figures by Ben Hopkinson, head of housing and infrastructure at the Center for Policy Studies (CPS), it shows Between 2021 and 2023, the cost of building a home increased by 21%.

In addition, builders faced a raft of new costs and regulations following the Grenfell Tower fire.

The biggest companies have agreed to pay for the removal and replacement of cladding on their buildings, and from next year they will have to contribute to an additional building safety fund for companies that do not make such deals. The tax on landfills is also increasing rapidly.

But the biggest problem may be that many developers are unable to get their plans through the new Building Safety Regulator, which must approve projects over 18 meters but is struggling to process applications. Data from BSR shows that 92% of applications are delayed, with companies having to wait an average of 36 weeks for a decision.

All of this contributes to London’s housing affordability crisis.

The CPS found that the average house in London costs more than 11.5 times the average salary. This compares with a rate of 7.6 across England, well above the level of 5 that the Office for National Statistics has deemed unaffordable.

The report found that the average tenant can expect to pay 40 percent to 50 percent of their income in rent.

The city also has a homelessness crisis. Official figures The report, published on Thursday, showed that 74,720 households with 97,140 children were living in temporary accommodation in London at the end of June. One-third of these households had been waiting for safe and affordable housing for at least five years.

in 32 boroughs of London estimated £5.5 million per day Last year’s emergency housing financing bill is an increasingly unsustainable bill that threatens to push some municipalities to the brink of virtual bankruptcy.

Housing secretary Steve Reed and Khan are trying to find a solution within this framework. However, their proposals face pushback even before they are implemented.

While plans to increase subsidies to developers for affordable homes and allow councils to offer further tax breaks have caused some concern, it is the idea of ​​reducing affordable housing quotas that has infuriated many Labor MPs and campaigners.

A Labor MP in London said: “My council will use this as permission to build more yuppie flats and bring more people into the area so the existing population can pay higher rent.”

Matt Downie, chief executive of homeless charity Crisis, said it would be “really worrying” if ministers softened their affordable housing targets. “Just a few months ago ministers set out ambitious plans for a new generation of social and affordable housing. We urge them to stick to this focus and work with organizations on sensible options to make this a reality, without backing down on their ambitions,” he added.

But others believe that the scale of the crisis requires such measures. A government official said: “This is an extreme problem and we make no apologies for looking at extreme solutions.”