Housing associations are cautioning the government about a concerning trend in London, where housebuilding is rapidly slowing down. Over the last 12 months, the construction of affordable homes in the city has witnessed a drastic decline of 75%, prompting heightened concerns within the housing sector.
G15 Calls for Billions to Tackle London's Affordable Housing Decline
In correspondence addressed to the housing secretary, Michael Gove, the G15, representing London's 11 largest housing associations, has expressed dissatisfaction with the adequacy of his policies in addressing the housing crisis. The G15 advocates for a substantial financial injection, amounting to billions of pounds, into an affordable homes building program, asserting that current measures fall short of the necessary steps to boost housing supply.
The letter discloses a startling statistic: G15 members, typically the prominent contributors to affordable housing construction in London, are projected to initiate only 1,769 homes in the capital this year. This marks a substantial 76% decrease compared to the 7,363 homes commenced in the previous fiscal year (2022-23).
Gove's Housing Proposals
In a recent announcement, Michael Gove unveiled a series of proposals aimed at bolstering housing development, particularly in urban areas. A significant reform involves an extensive overhaul of the planning system, streamlining the process for developers to secure permission for building on brownfield sites in cities and towns. These proposals coincided with the release of a government-commissioned review scrutinizing the London plan and proposals from Mayor Sadiq Khan, outlining a development framework for the capital over the next 25 years.
The review expressed frustration with the London plan's impact on delivering homes on brownfield land, suggesting that Gove's proposals could potentially increase the housing supply by 4,000 homes annually. However, Mayor Khan dismissed the review as nothing more than a political manoeuvre. In response, the G15, represented by Chair Fiona Fletcher-Smith, also the chief executive of L&Q Group, welcomed the proposed policies but emphasized their inadequacy in meeting the scale of London's housing needs.
London's Housing Crisis
Recent figures reveal a significant downturn in the number of affordable home starts by G15 associations. The projection for this year indicates a substantial 76% decrease, with only 1,769 homes expected to be initiated, compared to the 7,363 homes commenced in the previous fiscal year (2022-23).
Fletcher-Smith highlighted the looming financial challenges, describing a development "cliff-edge" faced by London's housing associations. Apart from grappling with increased construction material costs, associations are compelled to allocate funds for addressing fire safety issues following incidents like the Grenfell Tower fire. Additionally, they are dealing with ageing housing stock and persistent damp and mould problems.
L&Q's Commitment and Financial Efforts
As a major landlord with 105,000 homes, L&Q has already spent over £450 million fixing fire safety defects since 2017. Moreover, they have earmarked £3 billion over the next decade to bring ageing stock up to the government's decent homes standard. This financial commitment underlines the pressing need for comprehensive solutions to address the complex challenges facing London's housing sector.
Large housing associations, commonly relying on bond markets for financing their construction projects, now grapple with heightened interest costs on loans. For instance, L&Q shoulders an additional £200 million solely for servicing existing loans.
According to Fletcher-Smith, "Once you take all of those costs out, there is just nothing left for development; we would love to build more, we just don’t have the cash. There’s a focus with the current government on homeownership, which really does matter, but we have a massive social housing need.”
The letter, co-signed by the Centre for London think tank, estimates that one in four Londoners lives in poverty when housing costs are factored in.