Opinion: Why the public sector needs to do much more of the heavy lifting when it comes to affordable housing

 
Charles Holland
Sadiq Khan Presents London Labour's Campaign Adverts Ahead Mayoral Vote
Source: Getty

Sadiq Khan has recently announced £1.7bn worth of funding deals with councils and housing associations to start building an extra 50,000 affordable homes to rent and buy over the next four years.

This represents three times the 18,000 homes secured by the final call for bills by the previous Mayor of London in 2014, and it is undeniably good news, in principle, for young Londoners wanting to get a foot on the housing ladder, and the housing supply in general.

The initial feedback is that housing associations, in particular, are very positive about the funding programme as it gives them flexibility, not only to ‘build to sell’, but to ‘build to rent’, which is of increasing importance. The allocated funding will see 17,000 social rented and 32,000 Living Rent and Shared Ownership products built.

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The Mayor clearly has positive intentions, but are they realistic? In 2016, Khan set developers a 35 per cent affordable housing target, a highly ambitious move considering that, previously, only 13 per cent of schemes were considered to be in the ‘affordable’ bracket. I think it’s very unlikely all schemes will meet this target, as a result of a number of unforeseen costs and factors beyond their control.

The two biggest obstacles are the release of land for development and a very under resourced planning system. Further site specific costs include those associated with remediation to allow buildings/land to be developed for residential use. These can spiral, especially for petrol stations and industrial land where chemical processes have taken place, which may have resulted in contamination.

In 2016, Khan set developers a 35 per cent affordable housing target, a highly ambitious move considering that, previously, only 13 per cent of schemes were considered to be in the ‘affordable’ bracket.

Infrastructure upgrades such as Crossrail or road improvements have a positive regeneration effect, but they often come at a cost to developers. King’s Cross, Earl’s Court and Battersea Power Station are all examples of developments that are providing significant subsidies to improve transport infrastructure, which has a knock on effect on the amount of affordable housing built.

If the public sector could streamline the process for the release of public land, it would help matters a lot. Current procurement systems put many off given the substantial time and costs involved. The public sector also needs to look at its holdings and seek to rationalise them – there are many town halls in the capital, for example, that are underutilised and are ripe for development.

The public sector needs to do much more of the heavy lifting in terms of land supply, and local councils and the GLA need to adopt a degree of pragmatism on their affordable housing percentages/tenure designations.

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Overall, a banding system for affordable housing rather than the somewhat blunt 35 per cent policy might make a lot more sense. It is important to remember that landowners are not forced sellers and they are motivated by profit.

Should affordable housing requirement erode residential land values, we could see many of these sites turned into offices and retail space instead. More affordable housing is definitely achievable, but the Mayor needs to look at the bigger picture when setting targets.

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