London
The Case for
Investing in London’s
Affordable Housing
Christine ME Whitehead
LSE
27 June 2011
London
Objective of the Study
– To clarify the case for investment in affordable
housing in London
– To show why government funding is core to
success
London
Three Main Criteria
1. Housing need to achieve a decent home for
every household
2. The wider benefits of affordable housing to
health and wellbeing, the economy and the
public purse
3. Numbers that can be provided
London
Housing Need
•More households than dwellings and this balance is
set to worsen
•Far less space per person then in the rest of the
country
•40% of all overcrowded households
•25% of all homeless households
•75% of all households living in temporary
accommodation
•Rents much higher but incomes at lower end of the
scale similar to the rest of the country
London
Wider Benefits 1: Costs of Poor Housing
•Strong relationship between poor housing and
– Health costs
– Education costs
– Reduced employability/productivity
– Crime and anti-social behaviour
•The lack of affordable housing a major concern to the
business community and therefore economic activity
•Costs of poor housing concentrated in London because
of numbers – especially in temporary accommodation and unit costs of alleviation
Wider Benefits 2: Use of Resources
• Land used more intensively and infrastructure
usually already in place
• Homes used more intensively – only 10% of new
homes allocated above minimum occupancy
standard as compared to 40% elsewhere
• Affordable housing mix includes a higher proportion
of intermediate (shallow subsidy) homes
• Affordable housing in London levers in more private
housing especially since the financial crisis
• Construction multiplier benefits the whole country
Numbers (1)
•To maximise numbers from a given quantity of grants
would mean building tiny flats in low demand areas
•London is the opposite – high demand and high cost and
needs larger units
•But the case for subsidy should be based on value for
money and on capacity to deliver and to lever in
additional housing - not simply on subsidy per unit
•This is especially true as the alternative cost of income
related subsidy in the private rented sector is much
higher in London than elsewhere
Numbers (2)
• London is currently providing 30% of new social housing across
the country
• Although rents can be raised to provide greater borrowing
power there are major limits
– The existing pipeline and slow turnover
– Low wages
– The effect on the benefits bill
– The negative impact on work incentives
– The increased risks of borrowing
– The impact of the welfare cap especially on larger
households
• Makes sense to concentrate subsidy where added value is
highest not where rents already close to market
Conclusions
•Without London’s contribution the national pledge of
150,000 affordable homes in this Parliament cannot be met
•The case for investment based on housing need is
overwhelming
•Affordable housing investment is used more intensively and
has the greatest effect on alleviating the social costs of poor
housing
•Affordable housing in London supports the growth agenda,
provides more employment and helps the labour market
•Subsidy is a necessary part of delivering affordable housing
and London has the greatest need for that housing