Sadiq Khan’s policies would only make London’s housing crisis worse
When Londoners go to the polls for the mayoral election on 5 May, there’s no doubt that the issue of housing will be at the top of many voters’ minds. Over half of Londoners now mention housing as one of the most important issues facing the capital – an increase of 13 percentage points compared to two years ago, according to Ipsos Mori.
This rise in public anxiety has followed increasing strains on London’s housing system. Since Boris Johnson became mayor, the capital’s population has grown by an average of 120,000 a year, 55 per cent faster than under his predecessor Ken Livingstone. It is estimated that around 50,000 new homes must be built every year to keep up with this population growth – a figure that London has not got close to this generation.
Many blame overseas buyers for the housing crisis. While this is an issue that policy-makers need to address, it is having a comparatively small impact on London’s housing market. Knight Frank estimates that only 7 per cent of new builds in outer London and 20 per cent in inner London are purchased by overseas buyers.
What is clear is that the key issue the next mayor will need to grasp is how to increase the supply of homes.
As outlined in a Centre for Policy Studies pamphlet today, however, many of Sadiq Khan’s proposals – while seemingly well intentioned – are likely to reduce the growth in London’s housing stock, exacerbating the problems of an already under-supplied market.
One of Khan’s centrepiece proposals is to include a 50 per cent affordable homes target in the London Plan. Of course, London does need more affordable homes, but such a stringent target is likely to be ineffective. Livingstone previously attempted to impose the same target and failed miserably, achieving only 36 per cent affordable homes across his mayoralty. Moreover, the target may be counterproductive by reducing the supply of new homes. Every affordable home delivered by a developer represents an opportunity cost, and where affordable housing targets are too demanding, it will act as a disincentive to develop.
Property developers in London are already burdened with the costs of the Community Infrastructure Levy (CIL), a planning charge intended to help fund local infrastructure. Areas with a CIL have increased housing delivery, but this has been done by reducing affordable housing completions by 14.5 per cent. Stringent affordable housing targets along with CIL payments will therefore make some developments unviable. This is a view supported by the Home Builders Federation, which has said: “Imposing unrealistic targets will make developments unviable, so preventing sites coming forward and reducing the supply of housing – including affordable ones – still further.”
Khan has also pledged to campaign for rent caps – even though such a policy would be outside the mayor’s remit. This populist policy attempts to treat the symptom of the problem – in this case high rents – rather than the cause, which is a lack of housing supply. Moreover, recent analysis from the London Assembly suggests that rent caps would exacerbate the cause by stunting the growth of London’s private sector rental housing.
Some of Khan’s non-housing policies may also indirectly suppress housing development. Take transport. The expansion of London’s transport network needs to be used as a catalyst to unlock more housing developments. A case-study from Paris could provide a useful blueprint for such a strategy, where around 70,000 housing units per year are expected to be delivered. However, Khan’s unfunded fare freeze pledge – which Transport for London (TfL) estimates will cost £1.9bn in revenue – sets a worrying precedent. Starving TfL’s budget of funds is bad for the prospects of transport expansion, and could reduce the new supply of homes by delaying the availability of new land for development.
It is also disappointing that both Khan and his opponent Zac Goldsmith appear to have ruled out a review of the greenbelt within London. Of course, the priority for addressing London’s housing crisis should be the development of brownfield sites, but this alone is unlikely to solve the city’s housing shortage. A full 22 per cent of land within London’s boundaries is currently classified as greenbelt, and much of it is far from essential. For example, 722 hectares already have buildings and around 7 per cent of London’s greenbelt is accounted for by golf courses.
The London Forum, London First and the Communities and Local Government Committee have all called for local authorities to review the size and boundaries of their greenbelts. Many of these areas are in desirable locations – around 60 per cent of London’s greenbelt is within 12 minutes’ walk of an existing rail or tube station. Sites near these areas that are of poor environmental or civic value should be identified for development.
The priority for the next mayor will be to increase the supply of housing in London. The new mayor will need to work urgently to free up public sector land – which accounts for 40 per cent of brownfield sites in London – and speed up the sluggish planning system. Moreover, the mayor must not introduce measures that will actively reduce the number of homes being built. Khan’s proposals for stringent affordable housing targets, rent caps and reducing finance available for transport, in particular, are likely to do exactly that.