London’s housing market is increasingly unaffordable for those on low to middle incomes. While it has always been more expensive to rent or buy in the capital, the scale of the unaffordability of housing has never been greater. As a result, today’s Londoners or would-be Londoners face a range of consequences including lower levels of home ownership, increased overcrowding, and rising levels of homelessness and rough sleeping. There are also wider consequences including increasing wealth inequality and higher costs to the public purse, not least through a rising housing benefit bill. It is also affecting London’s economic competitiveness, with businesses finding it increasingly difficult to recruit and retain staff in the capital.
Building more homes, particularly affordable homes, will be crucial to tackling the affordability crisis that the capital faces. Yet the evidence shows that housing delivery is falling well short of estimated need – and the provision of affordable housing even more so. Despite a range of products on offer in the capital, the level of intermediate housing to rent and buy to support those on low to middle incomes is extremely modest. Moreover, our analysis reveals that many sub-market home ownership products on offer in the capital are in fact unaffordable and some fail to meet the aim of many households to achieve full home ownership.
The new Mayor of London, Sadiq Khan, has made a promising start, committing to a long-term strategic aim for 50 per cent of new homes to be affordable, introducing lower benchmark rents for the London Affordable Rent product, and introducing a new intermediate product in the form of the new London Living Rent. However, there’s more that can be done at all levels. Central government should, in the short term, seek to increase the capital subsidy to the London Mayor in order to increase affordable housing output. This should be followed in the medium to long term by the devolution of additional powers for the Mayor to set and retain property taxes in the capital so that London can determine its own housing future. There needs to be a clear and universal understanding of what ‘affordable’ means and each and every affordable housing product should be rated against it; those that don’t match up should not be eligible to be considered as affordable housing or supported by subsidy.