Building more homes is vital to addressing London’s housing challenge. For years, supply has fallen below need, contributing to a growing affordability crisis, as housing costs have risen faster than incomes.
This has created a particular challenge for low to middle-income Londoners, who are unable to afford market rents or purchase prices.
There are many reasons why supply is failing to meet demand, but here are four trends which must be considered when developing policy responses to London’s housing challenge.
A growing affordability challenge…
Historically, housing in London has been more expensive than the rest of the UK. However, in recent years, the affordability gap has widened. In 2018, house prices in London were 13 times the median gross annual earnings compared to an average of eight times in the rest of England; this has risen from 8.4 in London and 7.1 in England in 2007.
Housing costs contributing to poverty and a strain on living standards…
Before housing costs, the median weekly income in London is the second highest in the UK, but after considering housing costs it falls below the UK average. High housing costs put a strain on many Londoners. In 2015/16 rent for a two-bedroom flat in inner London cost an average of 78 per cent of gross monthly earnings, and more than half of Londoners living in poverty are in a working family (58 per cent).
The Mayor’s delivery targets are ambitious but demonstrate some of the challenges…
To address issues with supply, and the knock-on impact on affordability, the Mayor of London has set a target of building 65,000 new homes a year in the capital over the next ten years. However, just 40,000 new homes were built in 2017 – the highest number in recent decades – and 35,000 in 2018. These levels of house building fall short of what is needed and building these numbers of homes, while also creating and sustaining successful places, will require significant changes, particularly in outer London.
But it’s not just about increasing supply. The delivery of sub-market housing is key…
In 2018/19 affordable housing starts were at 14,544 – their highest level since 2010/11 (14,544). However, this still sits at the lower end of the Mayor’s affordable home target of between 14,500-19,000 starts a year.
Furthermore, almost half of London’s need is for social rent, but only 14 per cent of all home starts so far in this Mayoral term are for social rented homes, demonstrating the challenges of providing the homes Londoners need across all tenures.
As we approach the next mayoral election, housing delivery will once again be in the spotlight. Centre for London will be publishing a manifesto which will identify areas of consensus, clarify matters for debate, and put forward bold proposals for the next mayoral term.