If cash isn’t found to build affordable homes in the capital, fed-up commuters will seek work closer to home
The housing shortage in the capital is acute. The average age of the first-time London homebuyer is now 37 and rising, yet people starting their careers need to live in the capital.
New homes are needed. And building them is good economic sense since it creates work and jobs in a supply chain of materials, equipment providers and manufacturers.
More than 11,000 homes should be built in east London, says the plan, with a further 6,000 homes along the river in south-east London, from Southwark to Bexley
But can it happen? Boris Johnson’s new London Plan provides an answer. In the section on housing the plan calls for 32,210 new homes of all kinds every year. And where will these new houses be built? The plan points to east London, specifically a swathe from Islington through Hackney and into the six boroughs east of the River Lea.
More than 11,000 homes should be built there, it says, with a further 6,000 homes along the river in south-east London from Southwark to Bexley.
The reason is obvious – this is where the vacant land is. But this will be of little help to businesses in west London, let alone the south-west, where only a few hundred homes a year are planned.
Within the 32,210 total, 13,200 homes must be “affordable”, either for low rent or shared ownership.
Shared ownership allows people to buy part of a home cheaply while renting the rest from a housing association, gradually increasing the proportion they own as they can afford to.
Keith Exford, chair of G15, a group of housing associations, each of which is a major housebuilder, says: “Demand for shared ownership is very strong because, unless someone has help from the ‘bank of mum and dad’, people are delaying buying until their late thirties.”
But to build these sought-after homes G15 members need both land and something to subsidise the low-cost mortgages involved, and there is a scarcity of both.
The Home Builders Federation, which speaks for the major housebuilders, is unhappy with the mayor’s plan.
“The people in low- and middle-paying jobs that we need to keep London working need to live here and cannot afford to do so, which affects business’ ability to recruit”
Keith Exford, chair of G15
The federation’s head of external affairs, John Slaughter, says: “Our view is that London needs more homes than are provided for in the plan. Indeed, some boroughs already want to build more.
“Our other concern is that the plan tries to concentrate development in east London, but the market may not want that and so it might not be deliverable.”
Lack of mortgages has boosted the private rental sector and businesses could, in theory, meet this high demand by investing in building new homes for rent at market levels.
Exford is sceptical. He explains: “The problem with market rent is that it is dominated by a huge number of private individual landlords and so the yields are not high enough to attract institutions to invest, because the only way you can make money on rented property is to sell it.”
He also has little confidence in the housebuilding industry’s ability to meet London’s demand.
“Everyone thinks of volume housebuilders such as Wimpey and Bovis, but a lot of homes in London are built by small developers who have been hit by the credit crunch,” Exford says.
“They will typically build one or two houses at a time, but if you are talking about building a high-density block of flats needed to meet demand it would take a brave small developer to do that now.”
The homes shortage is bad news for businesses, not just home hunters, because “the people in low- and middle-paying jobs that we need to keep London working need to live here and cannot afford to do so, which affects business’ ability to recruit,” he says.
Cameron Watt, head of neighbourhoods at the National Housing Federation, which represents housing associations of all kinds, says the plan’s demand for 13,200 new affordable homes a year is “quite a stretching one with some huge challenges in there”.
Given that housing associations built 48 per cent of all new homes in London in 2009/10, it should be worrying that they feel “challenged” and that the mayor’s target might well be missed.
The capital’s housing shortage is a live issue for its businesses, not just hard-pressed individuals.