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February 26th, 2014

London’s housing crisis is real, but the Mayor’s housing strategy falls short on solutions


Estimated reading time: 5 minutes

Blog Admin

February 26th, 2014

London’s housing crisis is real, but the Mayor’s housing strategy falls short on solutions


Estimated reading time: 5 minutes

LSE LondonThe Mayor of London’s plans for new homes in the Capital is thousands less than what is required. Moreover, although the Mayor is required to produce a housing strategy, he does not (except in limited instances) have the power to compel boroughs, developers or other market actors to do what it says. Here, experts from LSE London challenge the Draft Housing Strategy for London and give their views on how to move forward.

The Mayor of London’s Draft Housing Strategy calls for 42,000 homes to be built in London every year for the next decade. This is some 10,000 a year more than in the current Plan – and some 20,000 more than is currently being achieved – but still many thousands less than is needed if the expected growth in population and households actually occurs. Even more concerning is that such numbers have only been achieved in London for brief periods in the 1930s (relatively unplanned private construction on the then-urban fringe) and the 1960s (the heyday of council housing). Under the current planning and finance environment neither of these options is available today – so a different, more partnership-based approach is required.

LSE London hosted a roundtable of LSE academics and colleagues from other institutions to input into the Mayor’s consultation and to reflect on how it could be taken forward more effectively. Three issues formed the core of the debate: the implications of housebuilding and demographic figures for London; the strategic issues that need to change to give any chance of success; and more detailed proposals to improve implementation.

Our own views on the figures

First, it is unlikely that household numbers will grow at the forecast rate if the target is not met – since there is an interaction between the housing market and demographic change, households will either not form or will move away, negatively impacting on London’s growth potential and sustainability.

Second, there will be increased crowding and indeed overcrowding, especially among poorer households and those moving to the capital, and an increase in the number of homeless households. London’s average household size is increasing for the first time in decades and we are seeing other signs of pressure quite far up the income scale, such as groups of couples jointly purchasing homes. Overall standards will fall and costs will rise, negatively impacting on both economic growth and the welfare of Londoners.

And finally, even if the 42,000 were achieved, the gap between supply and demand for housing would continue to widen with serious impacts on prices, rents and affordability.

London housing
If the expected growth in population and households actually occurs, London will need many more houses
(Credit: David Holt London)

The strategic issues that must be addressed to enable a step change

Everyone agrees that London desperately needs more housing, and that a step change to 42,000 units per year (ideally more) is desirable. But although the Mayor is required to produce a housing strategy, he does not (except in limited instances) have the power to compel boroughs, developers or other market actors to do what it says. So although the document is called a ‘strategy,’ it seems to lack exactly that—a strategy for bringing about genuinely radical change. To put such a strategy in place requires:

First, that the Mayor’s strategy truly takes account of the wider reach of London’s housing market, which includes the capital’s commuter belt. We propose that for the future welfare of Londoners, and the health of London business – as well as to meet the general duty to co-operate – coordination has to be pursued around realistic figures for the whole region not simply around London and its boroughs.

Second, the draft strategy focuses on large sites because these could produce the most new housing and it is here that the Mayor has particular responsibilities. But these sites are concentrated in a few areas, require very long lead times, considerable additional infrastructure and are often built out slowly because of marketing techniques that call for drip feeding new supply. To have any chance of success, we propose that the strategy must also support the development of small sites, infill, custom-build and the conversion of non-residential units.

And third, one of the reasons for the shortage of a broader range of large development sites in London is the greenbelt. There are 32,500 hectares of greenbelt within the GLA area alone. There are substantial parts that are highly accessible but have low amenity and recreation value. The majority of the group suggested that London would benefit if a limited area of greenbelt land with good access and infrastructure were released for the development of high-quality new communities. However all agreed that this must be done with great care, taking account of community costs and benefits. Moreover, any such releases should be complementary to policies to increase densities both in suburban and inner city areas.

Our views on immediate ways forward

  • One way to kick-start development would be via partnership schemes involving forms of equity stake, planning or profit overage agreements that enable developers to pay for the land and planning obligations as the development produces income.The public sector itself can act as developer, especially of large sites and potential ‘garden’ suburbs. Development Corporations provide a well-documented and effective example of such a model, which has made positive returns over the longer term.  Other contract-based models should also be encouraged.
  • Ways need to be found to improve the build out rate on large sites, including the provision of privately rented units in the early phases; multiple developers; a wider range of dwelling types; or even publicly led development agencies.
  • Some of the suggested approaches to private renting may be counter-productive when they call for single tenure developments.  Covenanted private renting is not a substitute for affordable housing and there is little evidence that developers or even institutional financiers have been put off by mixed tenure approaches.
  • As the Draft Strategy states there is a major shortage of intermediate housing – but there is little in the strategy to fill the gap. The discussion of ‘affordable’ housing includes dwellings targeted at those earning up to £80,000/year—well over twice the average annual earnings in London.  Policies on affordable housing should focus on lower-income employed households, as well as addressing the housing needs of poor households.

Our conclusions

First, there is a real and major crisis impacting on London’s future and radically different approaches are needed to improve conditions.

Second, the Mayor needs to develop a much more obviously strategic approach to identifying barriers and the means of overcoming them within his current powers. This needs to address what can be done immediately to increase investment and land availability of all types – not just big sites; to use these sites more efficiently by increasing densities and providing appropriate infrastructure; and to generate a more equal allocation of the available resources.

Third, there must be structural change into the longer term. What the Housing Strategy document contains is not even enough to stop the current situation worsening. The Mayor must use his influence and considerable public profile to campaign for change in national policy and resources directed to these longer term issues as well as to increase London’s own capacity to change the game.

Note: This article gives the views of the author, and not the position of the British Politics and Policy blog, nor of the London School of Economics. Please read our comments policy before posting.

About the Authors

LSE LondonLSE London was established by the London School of Economics in 1998 as a centre of research excellence on the economic and social issues of the London region, as well as the problems and possibilities of other urban and metropolitan regions. Today the centre has a strong international reputation particularly in the fields of labour markets, social and demographic change, housing, finance and governance, and is the leading academic centre for analyses of city-wide developments in London.

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Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported
This work by British Politics and Policy at LSE is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported.