WHO CAN RID US OF THE AFFORDABLE HOUSING MISNOMER? STEP FORWARD LONDON'S NEXT MAYOR
There are many phrases that young Londoners will have to ask their grandparents to make sense of - working class Fulham, port and lemon come to mind. To that list should be added affordable housing.
The capital is falling well behind on the number of homes that need to be built each year to cater for the city’s expanding family and the continued strong demand by businesses for workers.
The Greater London Authority’s Strategic London Housing Market Assessment estimated in 2013 that the London housing market needed almost 49,000 additional homes a year to house the growing population and meet the severe backlog that weak development has allowed to build up .
Last year, only 18,700 were delivered.
Not only are there too few homes they are not the right sort of homes. It is hard to see scaffolding surrounding a new housing development or conversion that does not have a placard with the word ‘luxury’ on it.
Whole stretches of London, such as the south bank of the Thames towards Chiswick, are taken up with homes that have been bought off a website by overseas investors who may or may not rent them out. Take a bike ride on a Saturday night down the towpath of the Thames and count the number of flats that look occupied. No wonder some call it “lights-out London”.
The solution from our current policymakers to this growing crisis is the affordable home. Councils do not have the resources to build their own homes so have to resort to asking private sector developers to allot a certain percentage of the homes they build as affordable housing.
Most have chosen to specify that between 35% and 50% should be affordable but seldom achieve that as developers succeed in negotiating the figure down.
A good example is a new development to replace a community centre in Gospel Oak, north London, which was sold by the London Borough of Camden which has a 50% target of affordable homes. However, developers offer payment in lieu: in this case they paid £4.9m for affordable housing across the borough.
It did manage to secure 10 out of the 72 flats as affordable, or 14%, of the proposed building. An affordable one-bed flat must be no more than 69% of the median rent in Camden measured by the GLA London Rent Map. As that figure is £355 a week that means the cap is £255 a week or almost £1,000 a month or £13,260 a year.
PEGGING THE DEFINITION OF “AFFORDABLE” TO AVERAGE RENTS MEANS PRICES WILL BE DRIVEN UP
This is just one development and Camden is one of the most progressive councils in London — in 2013 one in 20 council houses built nationwide was being built in Camden.
The privatised Royal Mail Group says that only a quarter of new homes on its giant Mount Pleasant sorting office site will be affordable. Earl’s Court exhibition centre is being replaced by a “village” with precisely no affordable homes. The list goes on.
This exposes the two failings with the affordable housing strategy. The first is that too few are being built. The second is that pegging the definition of “affordable” to the average rent means prices will be driven up as the housing shortage drives up free market rent.
So if affordable housing is not the solution, what is? The answer is to go back to the future and specifically to the 1950s and 1960s when the two main parties both saw that the answer to the housing shortage of the time was to build more homes.
Central government is not going to do that; it is more interested in ways of cutting housing benefit to those who manage to find a home. The answer, in London at least, could be the new mayor.
Tory candidate Zac Goldsmith has a target of 50,000 homes a year for London but has not set out how many would be “affordable” or what that would mean. He also wants to release publicly-owned brownfield land which seems a good idea considering how much the Greater London Authority and Transport for London own.
Labour’s Sadiq Khan wants to bring forward more land owned by public bodies like Transport for London for development, and work with boroughs to identify all available brownfield land in public and private ownership that is suitable for development.
They both want to implement other changes but the significant thing is that both want to use the one resource they have – state-owned lands – to build new homes.
Whoever wins City Hall has the opportunity to use that land to build genuinely affordable homes – what used to be known as council estates – to ensure that families who cannot afford 69% of the market rent have somewhere to live.
As the Financial Times warned the other day, home-owning will soon become the preserve of the professionals. London cannot afford to wait any longer to sit on the sidelines while basic homes move further out of reach of ordinary folk.
About the author
Phil has run Clarity Economics, a London-based consultancy, since 2007 and, before that, was Economics Correspondent at The Independent.
Phil won feature writer of the year Work Foundation Work World media awards in 2009, and was commended by the Royal Statistical Society in 2007.
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