Housing in London - the current
state of play
Christine Whitehead
London School of Economics
Next steps for housing policy in
London - supply, standards and
affordability
Policy Forum for London
London, 21 October 2015
Progress
The Negatives: the Positives
• Completions stable at around 18,000, way below Plan let alone
requirements and new orders falling (affordable housing timing)
• Densities and overcrowding increasing
• Homelessness rising – 80% higher than in 2010
• House prices and private rents rising (although prices actually fell in
August
• Some government initiatives which may reduce capacity
BUT
• Planning permissions and now starts rising quite rapidly
• Increasing emphasis on unlocking large sites with assistance from
GLA/HCA and DCLG – Housing Zones (although as yet little evidence of
successful build out)
• Increasing interest from Housing Associations and institutional funding in
private rented sector
• Attempts to improve rental offer
• Large number of government incentives
What are the big issues?
• Shorter term problem arising from the financial crisis
and the subsequent near closure of the mortgage and
development funding markets;
• Longer term problem about the slow and inadequate
response of new supply to changing demand;
• The concentration of demand in London - some 25% of
projected increases in households in England to 2031;
• House price volatility and macro economic instability;
• Worsening access to housing of all types;
• Structural changes in tenure;
• Reductions in government support for both supply and
demand.
How big is London’s housing
problem?
• Updated projections
suggests 53,000 homes a
year required
• This still implies falling
headship rates for 25-34s.
• ‘No age group worse off’:
63,000 homes a year.
• Alan Holmans: 23,000
affordable homes a year
• 15 boroughs housing a third
more households over 20
years?
• Given these requirements
London’s housing shortfall
could be around 30,000
homes a year
What has been happening?
• Many fewer younger
households
• Many fewer single
person households
• More ‘other’ households
• More couples – with and
without children
• Looking to the future –
not enough singles to
take the strain so
families couple worse off.
Priorities
•
Is it just new build, new build and new build?
•
But building more will not have much immediate effect on prices;
•
The recession has reduced household formation – so any economic improvement is likely to offset
demographic changes putting further pressure on the market;
•
But also longer term pressures to reduce household formation especially for younger households which
are likely to worsen – so condition likely to be worse for this group in the future;
•
The demand for housing rises not just with demographics but as much because of income growth – so
economic success means higher demand;
•
So there is an inherent tension between success in the London economy and success in providing housing
for Londoners;
•
The easiest and worst way of reducing demand and house prices in current conditions is to have a
recession. This is NOT what anyone wants;
•
So have to accept indicators will get worse BUT not a reason not to try.
Concerns about what and where we going
to build
•
•
•
•
•
•
Plan assumes (has to assume?):
- building within the GLA boundary
- building high and high/super density
- building for the private rented sector
- continuing to build significant proportions of social and affordable housing;
But very different development model from before the crisis and many reasons
(including experience) to expect the process to be much slower than predicted;
And scale and location issues:
- Housing zones
- Garden cities and/or cities within cities?
- Change of use from commercial
Greenbelt/greenfield?
All must be tried, but all have major issues (including the potential for building the
slums of the future)
Still massive political objections to development, especially in outer suburbs where
need to raise densities
A More Fundamental Priority: Housing, Welfare and
Affordability
• Who can afford to live in London?
• Camden evidence that only 14% of those in the private rented
sector (33% of the housing stock) are in receipt of Housing
Benefit – the poor have already left central London unless in
social housing?
• Majority of new claimants working and often on incomes well
above the median - implying very high marginal tax rates for
tenants;
• Pressures from welfare cap, Pay to Stay and Right to Buy;
• Universal Credit may worsen the situation;
• Alternatives to the welfare bill – owner-occupation; a better
form of intermediate housing; grants for social housing?
Conclusions
• If London is to remain a world city the housing problems will not go away
– indeed will probably worsen;
• Those who are prepared to pay more and live in worse conditions will
outbid those who can make other choices;
• Need to do all that is possible to build – but new initiatives take a long
while to get going;
• Current construction model too market dependent
• Can more be done in more traditional ways – especially in the outer
suburbs;
• The current model of demand side subsidies cannot be sustained;
• Need intermediate tenures – including shared equity - to play a larger role;
• Need to improve outward mobility;
• Need to tax established households more effectively;
• Need commitment and stability in both policy and the macro-economy;
• Do we need a crisis package – especially for younger working households?
Our new report
Housing in London: Addressing the Supply
Crisis
Athttp://www.lse.ac.uk/geographyAndEnvironm
ent/research/london/docs/LSE-Report-FinalVersion-Web-Authored.pdf
c.m.e.whitehead@lse.ac.uk