Retro first, last and always?

For a decade or more the redevelopment of London’s social housing estates has been a flashpoint. Councillors have lost their seats and council leaders have been deposed. Plans have been challenged in court, in council chambers and on the streets.

Boroughs have pushed forward redevelopment schemes, often in partnership with private developers, as a way of meeting housing targets and avoiding the huge repair bills that have accrued for older post-war estates. Campaigners have countered that demolition and rebuilding disrupts communities, can displace residents and replaces social rented homes with unaffordable intermediate and market housing.

Underpinning these debates are deep-seated issues about community and mobility, trust in public authorities, the roles of public and private capital, and what sort of housing London needs to offer its growing population.

Now, another ingredient can be added to this volatile mix: an increasing focus on embodied carbon generated by the energy-intensive production of materials such as steel and concrete suggests that retaining older buildings may be more environmentally as well as socially sustainable.

The issue is not binary. In some cases, particularly over the longer term, demolition and replacement with a building that uses less energy may make more sense than spending substantial sums on retrofit , even when embodied carbon is taken into account.

But thinking about embodied carbon tends to tilt the balance towards retrofit. At COP26 in November architects, property and construction firms signed a pledge to reduce embodied as well as operational emissions. A campaign led by the Architects’ Journal is championing retrofit and reuse.

So, if retrofit makes sense for people and planet, why are demolitions still taking place? Discounting the possibility that London boroughs actively want to inconvenience and displace their citizens (an accusation that has been levelled at some in the past), I believe that housing targets, financial incentives and complexity work together to push councils towards demolition and redevelopment.

Firstly, demolition makes it more straightforward to increase housing numbers in response to London’s persistent housing crisis and tough housing targets: even if Covid slows or reverses population growth, the capital has a backlog of need and a yawning affordability gap. As big “brownfield” sites become scarcer, boroughs and housebuilders are searching for ways to build more within the capital’s already built-up areas – hence sporadic eruptions of tower blocks across the city. Building denser in privately owned streets is part of the answer, but large post-war housing estates offer the advantage of single ownership, even when this has been eroded by right-to-buy.

Many post-war estates currently under threat are also relatively low rise (though not that low density) by today’s standards. Last week, the redevelopment of Central Hill, a widely-celebrated low-rise 1960s estate designed by Lambeth borough architects Rosemary Stjernstedt and Ted Hollamby, took a step forward when Homes for Lambeth (a council-owned development company) announced a shortlist of firms to prepare a masterplan.

Assessing options for Central Hill in 2017, Lambeth estimated that redevelopment could add more than 500 homes to the 456 already on site. Alternative plans prepared by Architects for Social Housing (ASH), who campaign for alternatives to demolition, proposed refurbishing the existing stock and adding 242 new homes through infill and roof extensions – half the number proposed by the borough.

Refurbishing council housing can also be an expensive process, with limited scope for recovering costs. Refurbishment is funded through the ring-fenced Housing Revenue Account, which relies on rents for income. In 2017, Lambeth estimated that refurbishment costs at Central Hill would be £44,000 per socially rented home, compared to a benchmark of £18,000.

Redevelopment has a different business model. It can be undertaken in partnership with a private developer or through an arms-length housing company with more freedom to borrow and the potential to cross-subsidise, enabling social housing to be replaced by building more for market sale or rent. Lambeth aims for its redevelopment of Central Hill to be cost neutral overall, while its assessment of the ASH plan found no potential for cross-subsidy of refurbishment works. The imbalance is worsened by unequal tax treatment: new builds are VAT free while refurbishment is usually charged at the full rate.

And long-term carbon implications of new build compared to refurbishment are rarely quantified or considered. Even where “carbon costs” can be calculated, local authorities do not benefit from any carbon savings achieved. The government’s Social Housing Decarbonisation Fund has been designed to help improve the energy performance of socially rented homes, but even its maximum grant of £16,000 would not close the funding gap that Lambeth estimated for Central Hill.

Lastly, I think there is a complexity challenge. There is a mature market of developers who can enter into joint ventures with local authorities and deliver a programme of “regeneration” (demolition and redevelopment). By taking control of the site, they can manage risks and adjust the pipeline of development to respond to changing market circumstances and viability reviews. A local authority-owned housing company is in broadly the same position.

But a programme of refurbishment and infill is trickier, particularly where substantial structural work is required. As anyone who has had builders at home knows, refurbishment is disruptive, and budgets need flexibility to cope with unexpected costs, which can rise sharply. Managing disruption to tenants, different teams of contractors and the risks of spiralling costs will sit squarely with local authorities, which have seen their planning and development budgets slashed over the past decade.

Decisions on refurbishment and redevelopment are genuinely complex, balancing the needs of existing and possible future residents, and juggling financial priorities and environmental imperatives. However, despite their declarations of “climate emergency” boroughs lack the incentives and many have been stripped of the skills to invest in and add to their existing housing stock, rather than bringing in the bulldozers again and again.

Originally published by OnLondon.

Buy with a little help

Should wider home ownership be a public policy objective? It is one of the big fault lines in housing policy debates. Advocates argue that ownership represents better value than renting, offers people a way to build up capital and creates more stable neighbourhoods. Sceptics say that our obsession with property ownership is diverting investment from more socially useful channels and fuelling a monstrous bubble of unaffordable house prices.

Both arguments are true to an extent. Home ownership has built up capital for generations and supported social mobility, but as prices have shot up more and more people have been locked out. Home ownership rose through the 20th Century, from fewer than 25 per cent of households in 1918 to nearly 70 per cent in 2001, though it has fallen back since then and particularly since the financial crisis of 2008/09. 

In London, ownership fell sharply for 25-34 year olds in the first years of this century. Fifty per cent of that age group were owner-occupiers in 2001, but only 27 per cent were in 2016. The proportion has risen slightly since then (as a result of stalled prices and extended availability of Help to Buy loans), but remains low by historic standards. 

It’s not hard to see why: mortgages may be relatively affordable, but the 2019/20 English Housing Survey, published this week, found that the median deposit for London’s first time buyers was £70,000 – more than twice the median salary. Given that less than half of those renting privately have any savings at all, it is mainly those with family wealth (“the Bank of Mum and Dad”) who can buy a property.

Some buyers have been assisted by the Help-to-Buy Equity Loan scheme (H2B), which was launched in 2013. It allows buyers to borrow a proportion of their deposit from the state and repay it when they sell-up or remortgage. Take up was initially low in London, but has increased since the maximum loan available was raised in 2016.

The scheme has been controversial. By stoking demand while doing to nothing to boost housing supply, it has been accused of pushing up prices. Restricting the scheme to new-builds has fuelled overpriced, poor quality schemes aimed primarily at the H2B market. These is also a risk that both government and house-buyers are left with losses in a period of stagnating prices. And now, the government has started winding the scheme down, restricting it to first-time buyers, and planning to shut it down completely by 2023. They have not said what, if anything, will replace it.

What is to be done? Many would advocate a huge increase in social housing provision and an end to the obsession with the “property ladder”. We certainly need more social housing. But as someone who bought a home when they were relatively cheap, I am uneasy with “Generation X-plaining” to younger people that they should be happy renting and miss out on the security and opportunities that can come with home ownership. And London’s recovery from coronavirus will not be helped if people who want to buy have to move out of the city (or choose wealthier parents). 

Of course, we don’t know what will happen to UK house prices as we recover from the Covid crisis. As the Stamp Duty holiday ends and the recession bites, the market may slow or even go into reverse. London already has the lowest rate of house price growth in England. Market moderation is welcome, but London would need a precipitous and damaging crash in prices (which would freeze the supply of new homes for sale) to bring them in line with wages and savings. Even the government’s favoured solution – discounted “first homes” – would require deposits beyond the means of many Londoners.

There is a powerful moral case for supporting first-time buyers, particularly those without family wealth, and the core of the H2B approach – a state-sponsored loan that is repaid as and when property prices rise – seems sound. But the scheme needs fixing. Firstly, it should not be restricted to new build, thereby tying young people into an expensive and mixed-quality market. Its primary purpose should be levelling the playing field, not “stimulating the market”. And the scheme should be able to run for longer than five years, particularly given the choppy conditions of the property market right now.

Would this simply fuel the speculative fires of the UK housing market? Maybe. But punishing young people from poorer backgrounds for the exuberance of property speculation seems absurd and unfair. So we should accompany support for first time buyers, with reform of the tax breaks that make home ownership so attractive as an investment – for example, the UK’s outdated and regressive property taxes, and even the exemption of family homes from capital gains and inheritance taxes. There is no reason, beyond electoral calculation, that homes and homes alone should allow untaxed capital accumulation. 

Restricting house-buying to wealthy families is a problem. Runaway house price inflation has also been a problem. Both problems have been most acute in London in recent years, and they need to be tackled together if the city is to offer opportunity to present and future citizens alike as it recovers from the pandemic. 

First published by OnLondon.

Housing in a time of coronavirus

[First published by Centre for London, 6 April 2020]
 
In 2006, the City of Sao Paulo adopted the Cidade Limpia(“clean city”) statute, banning the billboard advertising that lined the city’s highways. Citizens and visitors alike saw a new city, a city of stark concrete structures and even starker social divisions. The favelas, slums and squatted buildings that had been shrouded by advertising were made unavoidably visible.
 
Coronavirus may be having a similar impact for London. The city has been in the front line of infection. On 20 March, the capital had just under half of all reported cases in England, though that proportion had fallen to around a third two weeks later. Even to enthusiastic advocates of dense urban living, what once looked like creative proximity and intermingling now looks risky verging on toxic.
 
But density has different aspects and different impacts. If the density of connections, and of social and economic life – in crowded offices, pubs and tube trains – helped the virus to race round London in the middle of March, it is the density of living space that has made the government’s lockdown rules tough for many Londoners since then. The disease has shone a spotlight on the increasingly unequal distribution of space in the city.
 
One way to look at this is the ratio of people to homes.  According to the Greater London Authority’s Housing in London 2019 data compendium, this has been falling for the last 30 years across England, reflecting later marriage and more people living alone at the end of their lives. London bucks the trend: the number of people per dwelling has increased from around 2.3 to 2.5 since the early 1990s. London does have some larger families, but a larger element of this growth can be seen as ‘supressed household formation’ – people continuing to live with their parents, or in shared houses and flats, when they would rather be on their own or with a partner.
 
Measures of overcrowding using the ‘bedroom standard’ (essentially a room for each couple or adult, with some sharing for children) tell a similar story: overcrowding has increased over the past twenty years, but this increase has been most concentrated in private rented accommodation (where 12 per cent of households were overcrowded in 2017/18 against five per cent in 1995/96), and in social rented housing where levels rose from 11 to 15 per cent. The opposite trend is visible for home-owners: over the same period, the proportion of owner-occupied households with two or more spare bedrooms has risen from 33 to 42 per cent.
 
Many commentators – including me, I suspect – have talked of how younger Londoners are happy to trade space for proximity to the city centre, of how pubs and parks, cafes and restaurants are the living rooms for a new generation. Why yearn for a private garden, when you have Hampstead Heath or London Fields on your doorstep? This ‘trade-off’ theory of urban living is probably true, or it probably was until self-isolation locked young Londoners in homes where every possible nook is being used as a bedroom – let alone the 58,000 households (two thirds of the English total) in cramped temporary accommodation.
 
London has great public spaces, the convivial tableaux of park, pub and street food market, but if the crisis has shone a light on London’s crowding problems, it may also make people rethink their trade-offs, and perhaps value private space more. The legacy growth in home working may fuel demand for homes with more spare rooms. Building taller and denser around outer London town centres may look like a more civilised way to accommodate growth than squeezing more and more renters into terraced houses designed for families. We should maybe start to worry less about the air space that buildings occupy, and more about the internal spaces they offer.
 
Coming out of the pandemic, the once triumphant paradigm of dense city living may find itself on the back foot. We may even see a drift from the city to smaller towns and villages. City living will have to remind the world of its benefits – as powerful now as ever – of the cultural and social life it can foster, of the environmental advantages and economic opportunities that it offers. But it will also need to show that it can be resilient to the next shock, that it can offer decent accommodation with space for seclusion as well as sociability to all its citizens.

Time for some conscious uncoupling of London\’s Green Belt

[First published in Estates Gazette, 1 November 2019)]

Tackling the housing crisis was top of Sadiq Khan’s policy agenda in 2016. So, with the next mayoral election six months away, the publication of the planning inspectors’ report into the mayor’s draft London Plan – the blueprint for London’s growth – is a big moment.

There is some good news for City Hall in the report, published last week. The inspectors back the mayor’s plan as a whole, his assessment of housing need and also his affordable housing policies – including the threshold approach to fast-track permission, which they say is “appearing to bear fruit”.

But the report does challenge the mayor’s assessment of housing capacity, and in particular his expectation that small sites could supply 25,000 of the 65,000 homes planned each year. As the inspectors acknowledge, this would require a 250% increase in building on small sites in outer London boroughs – the very locations where dense development can provoke the most furious rows among neighbours, politicians and community groups. “Whilst the policy approach is aspirational,” the inspectors conclude, “its delivery is not realistic.”

They recommend halving the small sites target to 12,000 homes a year, giving an overall housing target of 52,000 a year. Given that London is projected to need 66,000 homes a year, of which 55,000 are simply to keep up with population growth (the rest being to deal with the backlog of need), this would leave London with a worsening housing shortage. The gap looks even wider if you use the government’s new calculations of need, which come up with an annual figure of 72,000 homes.

This may all seem a bit moot when London is only building around 30,000 homes a year, but balancing need and capacity is a foundation stone of town planning. The inspectors reject the Sisyphean suggestion – made by former secretary of state James Brokenshire what seems like a political aeon ago – that the plan should be immediately reviewed. Instead, they recommend that the mayor should lead a strategic review of London’s green belt, in the light of the projected shortfall of land for housing (and industrial uses).

This presents the mayor with a dilemma. His commitment to tackling London’s housing crisis is matched only by his commitment to preserving London’s green belt. And you can see why. Green belt reviews are popular among planners and policy wonks, but toxic for the general public; recent polling shows that opposition to building on or reviewing the green belt is as strong as ever.

All of which may suggest that it would be a “bold” politician (in the Yes Minister sense of the word) who agreed to lead a green belt review in what may be a multiple election year. Positions are entrenched, and debates about the green belt can be as fervent – and as futile – as debates about Brexit. But there is an opportunity here too: the mayor could bring light where there is currently just heat, and show that elected mayors can take the lead where governments freeze like marginal-seated rabbits in the headlights.

A review, in partnership with councils and communities, would be an opportunity to discuss the green belt’s role as a constraint on sprawl, for public recreation and as habitat, and to consider how different land uses meet these aims – rather than defending the green belt as sacrosanct in principle while allowing it to be nibbled away and leap-frogged in practice.

It could explore different options for change, from allowing building in railway station catchment areas to planning and building urban extensions, as exemplars of “good growth” rather than incoherent and exclusive car-based suburbs. It could consider how to substitute for any green space lost, and how to enhance the quality and accessibility of what remains.

The inspectors’ report suggests that, having grown by 30% in three decades, London is starting to strain against its boundaries. It feels like the moment for an open and rational debate about how the next 30 years’ growth can be environmentally responsible and socially inclusive. The next mayor of London – whoever that is – should lead this debate.

What would a ‘Singapore-style’ Brexit mean for London?

[Originally published in CityMetric, 9 October 2019)

A few months ago, a senior EU official told a friend of mine that their most feared outcome from Brexit negotiations would be the UK diverging from EU standards to become a low-tax, low-regulation “northern Singapore” on the continent’s doorstep. 

Reports over recent weeks suggest that this is precisely what the government’s attempted renegotiation of the EU Withdrawal Agreement is seeking to achieve – more room for divergence from Brussels on standards and regulation. Whatever the desirability or feasibility of such a shift, what might it mean for London?

Singapore is an occasionally liberating reminder that there are other ways of running cities. The island city-state off the coast of Malaysia is the magic mirror of urban policy, in which both right and left can see what they wish to see. The right sees low personal and corporate taxes (public spending is half the level it is in the UK), business-friendly regulation, self-reliance promoted through compulsory savings for retirement and health insurance, draconian law and order policies including capital and corporal punishment, and active promotion of family values – for example through giving married couples with children priority allocations of flats.

The left looks to another side of Singapore. It sees active regulation for environmental protection and reduction in congestion, through restrictions on car ownership and use (albeit administered through a regressive system of high-priced permits and road tolling). It also sees the Housing Development Board (HDB), the government agency whose flats house 80 per cent of Singapore’s citizens. Most are sold at 20 to 50 per cent of the price for an equivalent open market flat, though some are available at low rents of five to 20 per cent of household income. A complex formula is used to ensure a representative ethnic cross-section in every development – part of an explicit commitment to engineering a cohesive nation state from Singapore’s various ethnic groups.

The HDB makes a loss every year (around £1.8bn in 2017-18), but the rationale for its work is aspirational rather than welfarist. In the words of Singapore’s founding leader Lee Kuan Yew: “That loss is to give the man an asset which he will value, which will grow in price as the country develops, as his surroundings become better.”

Both sides may also look at Singapore’s education system in admiration. The city spends less on education than the UK (as a proportion of GDP), but Singapore consistently ranks at the top of the PISA international education league tables. The system emphasises teacher-led education and is accused of prioritising rote learning over creativity, but it is also based on paying excellent salaries for the best teachers, and rigorous testing of educational reforms.

It is simplistic to think that one can simply replicate the conditions and practices of a tropical city-state in south east Asia in a northern European city. Culture, history and geography all underline differences. But the focus on housing and education does respond to two of the biggest challenges of maintaining social cohesion and economic welfare in an open global city economy.

As London’s economy has opened up, the city has already seen a surge in both house prices and workforce qualification levels. Londoners are competing for housing and jobs with people from across the UK and beyond. House prices have jumped from seven to 13 times median salaries since 2002, putting them out of reach of more and more Londoners on modest incomes and without access to capital, and dramatically widening wealth inequality.

Similarly, London is highly qualified: 53 per cent of London’s workers are qualified to degree level (compared to 31 per cent in the rest of the UK). But the population as a whole doesn’t compare so well: London scores less well than many other global cities – and less well than other English regions – when compared on the basis of international tests such as PISA and PIAAC. Without the wealth or skills to compete, it is hard for Londoners or other British citizens to make their way in the capital.

Singapore’s oddity is that it includes both low-tax, low-regulation elements that commend it to global capital; and active intervention in transport, housing and education policy to protect the environment, ensure social cohesion, and to enable the local population to benefit from the opportunities that global city trading can offer. Whether or not the UK chooses the former, London urgently needs to consider the latter if all citizens are to feel they have a stake in their city and an opportunity to share in its prosperity.

Better rent (May 2019)

[Published on Centre for London blog, 23 May 2019]
In our world of clone towns, megabrands and oligopolies, we understandably venerate the small business, the sole trader or micro chain. Renting somewhere to live may be an exception. If smaller doesn’t mean better, could larger landlords help pacify London’s wild west rental market?

Private renting is heavily dominated by smaller operators: a 2016 UK-wide survey found that more than 50 per cent of rented homes were owned by landlords with three properties or fewer. Most small landlords are not professionals: they may have put spare cash into rental property to generate retirement income, or have retained homes as they have moved up ‘the housing ladder’, or in some cases may be owning and letting out property in one place, while themselves being renters in another.

Not all small landlords are rogues, but many have a bad reputation for good reason. Landlords and letting agents are blamed for shoddy conditions and delayed repairs, for inflated charges and deposits withheld without good reason, for taking advantage of ‘no fault’ evictions to change tenants and boost rents every year. In a landlord’s market, many of these practices are consequence-free – there’s no corporate reputation to defend, and unhappy tenants have limited recourse apart from moving on; there’s always someone ready to take their place.

Against this backdrop, the arrival in London of professional ‘Build to Rent’ landlords, who build flats, and let them directly to private renters, should be good news. Build to Rent landlords are professionals. They have corporate reputations to consider, and actively market their properties on the basis of the quality of accommodation and of the service that they can provide (albeit at a price).
Recent estimates suggested that around 50,000 Build to Rent apartments have been built or given planning permission since 2009. Their developers are an interesting mix: they include joint ventures, housing associations, traditional commercial developers, and institutional investors looking for long-term financial returns.

The Build to Rent sector only accounts for around five per cent of the one million private sector rentals in London, but the numbers are steadily growing. (Calculated from Housing in London 2018 tables.)

The sector may even be starting to have an impact on rental levels. Rental growth has slowed in recent years. Government data cited in the most recent edition of Centre for London’s quarterly The London Intelligence showed that rents are now static, having shot up from the end of 2010 to early 2017. Figures compiled from a Dataloft survey of new lettings tell a subtly different story. These figures show rents continuing to grow, with larger properties showing the fastest growth and one-bed flats showing the slowest.

Rival explanations for the deceleration of rent increases include suggestions that lower international migration levels are having an impact on demand, as well as arguments that recent completions are leading to a moment of over-supply – particularly of flats – before the market slowdown puts the dampers on new development.

But could the growth in Build to Rent have helped too? Many Build to Rent landlords offer three-year tenancies, with index-linked rent increases, as standard. Even if rents catch up with the market as a whole at the end of three years, these new tenancies could be helping to damp down growth right now. They may also explain the difference between continuing growth in rents for new lettings, and a more subdued picture overall.

This market moderation comes – whether by coincidence or not – just as the issue of rent control is rising back up the agenda. While government backed off proposals for minimum three year tenancies last year, it has proposed abolishing ‘no fault’ evictions. This may partly be in response to Mayor of London Sadiq Khan suggesting that rent control could be a key plank of his re-election campaign – though this would still require government support through legislation.

Build to Rent landlords say that heavy handed rent control will simply kill off their business model. They already struggle to make schemes stack up, they say, competing for land against developers building for sale, who can afford to pay 30 per cent more for land.  Removing their ability to charge what the market can afford in rent will push scheme viability even deeper underwater.

But ‘rent control’ can take a number of forms, from formal setting of private rents, to simply index-linking rises during the course of longer tenancies. If more and more Build to Rent property is offered on the basis of three-year tenancies with index-linked rent rises, the sector may be able to offer a self-regulation solution. This may not tackle all the issues of affordability in London’s rental market, but could forestall the need for legislation, sidestep parliamentary battles, and sustain sense in London’s rental market without stifling a sector that is just finding its feet.

To diversify housing, let boroughs build (June 2018)

[Originally published on Centre for London blog, 25 June 2018]
Build out rates – the speed with which building takes place after planning permission has been granted ­­– are one of the great mysteries of housing policy.

We talk of how many houses different boroughs can deliver, and compare it to London Plan targets, but once a borough has granted planning permission, its power is actually very limited. Planners can plan, but it’s hard to make builders build.

Under successive mayors (and in spite of falling budgets) London planners have pushed more and more permissions through the system, making it hard to lay blame at their door, but delivery has remained stubbornly slow.

Is this the result of developers sitting on sites as their values rise, of unimplementable permissions, of infrastructure or contamination problems, or of shortages of capital, bricks or bricklayers?

The Letwin Review into build out rates, commissioned by the government last autumn, has been seeking to answer some of these questions. Its analysis, published today, looked at sites with permission for more than 1,000 homes, finding that the median rate of build out is 6.5 per cent per year, with a median completion period of 15 years. Worryingly, the Review’s existing analysis for London suggests an even slower rate of 3.2 per cent per year (though this may partly result from London sites simply being larger).

As in his interim report, Sir Oliver Letwin argues that developers do not simply sit on land, hoping for values to rise before they sell it on, but they limit the rate at which they build to avoid ‘flooding the market’ and pushing prices downwards. Shortages of skills, materials and finance all play a part too, but it is this ‘absorption rate’ issue that is at the heart of slow housebuilding.

The Review will publish its policy recommendations around the time of the Budget, but Sir Oliver writes that diversifying tenure, housing type and architectural style will be central to these; build-to-rent does not compete with housing for sale, and apartments do not compete with townhouses, so these housing types can be delivered alongside each other without pushing prices down.

One big outstanding question is whether this can be achieved through the large housebuilders alone.
Diversifying the types of housing delivered should go hand in hand with diversifying the development industry: commercial developers, housing associations and community organisations all play a part, but London’s boroughs are also getting back in the game.

Local authorities could make a real difference, stepping up delivery of social and affordable housing, mixed with market housing. The schemes built to date, and many more in the pipeline, focus on sites that the market has passed over – often smaller sites owned by local authorities. Most local authorities in London either have a delivery programme in place, or are planning one, but government restrictions on borrowing continue to tie their hands.

Direct delivery by councils and council-owned companies is not a magic bullet solution to London’s complex and persistent housing and affordability challenges, but it should form part of the arsenal. If we are going to accelerate delivery, we need to let boroughs build.

Cool markets and hot debates – Housing in London

[Originally publiched in OnLondon, 23 Feb 2018]

The number of houses and flats in London grew by nearly 40,000 in the year ending March 2017 – faster than it has since the mayoralty was established in 2000 and only just short of the former Mayor’s annual housing target. Some of the growth was down to controversial conversions of offices to homes (“permitted development”), but 30,000 new homes were built too, which is an achievement to be celebrated.  

But what if this is as good as it gets? It seems almost churlish to make the point, but there is a pile up of indicators suggesting that new home building in London is about to slow down sharply. The first alarm bell is rung by falling house prices and transaction levels, as highlighted in Centre for London’s The London Intelligence bulletin at the end of January. 

House prices across London have fallen at their fastest rate since 2009, and the fall in prices and transaction levels has been particularly sharp in relation to flats in the centre of the city. A recent survey by Molior Consulting confirms this top-of-the-market slow down: less than half of the luxury flats that were started last year were sold (off-plan or on completion). 

Molior’s figures refer to flats selling at around £3 million and these may seem pretty remote from the concerns of most Londoners – luxury flat developers are pretty low on the league table of much-loved London professions. But all the moving parts are connected. As housing grant has reduced, more and more affordable housing in London is delivered through developer obligations. While the number of affordable housing starts supported by mayoral funding has been rising, as the £3.15 billion funding package agreed with the government in 2016 feeds into the system, developer contributions still account for 50 per cent or more of the total. If the flow of luxury flats slows, so will the flow of affordable housing.

And there are other factors suggesting that supply is slowing. NHBC – the National Housing Building Council – issues warranties for around 80 per cent of new build homes in the UK. These tend to be issued just before construction work starts and therefore give a good indication of future supply. The number of warranties issued in London fell from 26,000 in 2015, most of which will have been built in the bumper 2016/17 year, to 17,500 in 2016, and stayed at that level in 2017.  

While the market cools, the politics of housebuilding in London are heating up. Haringey’s proposed joint venture with Lendlease is only the most prominent of a number of controversial partnerships for housing estate redevelopment. Campaigning in Haringey has unseated council leader Claire Kober and probably sealed the fate of the Haringey Development Vehicle itself. Other councils and developers will at the very least be more cautious about joint ventures – which typically take years to plan and even longer to implement – and nothing will happen before local elections in May.

Finally, Sadiq Khan’s draft new London Plan presents a tough policy environment. The Mayor has tightened affordable housing targets, proposed residents’ ballots for estate redevelopment schemes, restricted use of industrial land and shifted the burden of development on to the Outer London boroughs, where new development is most controversial politically. Many Londoners would support most if not all of these policy positions, but the assumption that developers will live with them in return for a stake in London’s super soaraway property market may be outdated. There is already talk of some of London’s biggest housebuilders shifting their focus to Birmingham, Manchester and other places where the market seems more buoyant.

In short, the prospects of accelerating housing delivery to meet the new London Plan target of 66,000 homes a year are looking slimmer by the day. But perhaps a sharp slowdown of housebuilding would not be such bad news after all. “Never let a crisis go to waste,” in words variously attributed to Winston Churchill and Rahm Emanuel. For some years now, London’s housing market has hobbled along like a Heath Robinson contraption, with housing shortages driving land price inflation, social housing becoming an exercise in gamesmanship rather than provision of public goods, and housing targets always soaring ahead of supply like the stakhanovite fantasias of soviet planning.

Perhaps, if this model starts to look broken, we can look for alternatives. All sorts of magic bullets – housing estate redevelopment, Green Belt liberalisation, public sector land – have been aimed at and missed London’s housing targets to date, so we should be wary of singular solutions of blinding simplicity. But we could start to think about possibilities – about packages of measures that could fix London’s dysfunctional housing market.

This may indeed mean thinking about the Green Belt and estate redevelopment – ways of finding the land needed for new homes – but we also need fresh approaches to how homes are built and paid for. If slow sales are deterring traditional housebuilders, how can we rethink the institutional framework, funding structures and building methods?

Could housing benefit payments support borrowing to build, rather than being funnelled to private landlords? Could local authorities borrow more, directly or through central government bond issues, or work with pension funds and other long-term investors to find sites and build homes for rent, providing a stable income stream for both parties? Could off site construction be used at scale to supply local authorities and developers across the capital with low cost homes for vacant sites?
Tackling London’s housing crisis may mean going after some sacred cows: more focus on rent rather than sale; a positive approach to public investment and less worrying about how borrowing is treated in public accounts; more aggressive approaches to land hoarding; more direct public sector involvement; perhaps even a development corporation that can push through planning and construction across the capital.

Some of these options may be controversial – though a consensus for a radical package of reforms is growing among London’s politicians and housing experts – but watching as the market sputters to a halt seems even less attractive. To adapt Sherlock Holmes, “When we have eliminated the impossible, what remains, no matter how unpalatable, must be the housing delivery plan.”

But is there the political appetite and will to match the urgency of the challenge and the scale of the opportunity? Mayor Khan has already announced that he needs a five-fold increase in government funding for affordable housing, and roundly condemned the autumn 2017 budget for its failure to commit investment at this level. For its part, the government is cash-strapped, Brexit-blinkered, and unlikely to see much political capital in helping out a Labour mayor or London itself. The challenge – to Whitehall and City Hall – is to rise above the politics of the housing crisis, to take shared responsibility and shared credit for the bold steps needed to fix London’s broken housing market.

Block-ed

Redeveloping council estates has become a popular way for boroughs to build more houses in London, where land is at a premium, but it is a high-wire act, conducted over a shark tank, with volleys of custard pies being hurled from the sidelines.

Build at too low densities and the numbers won\’t add up; go too high and you create a lumpy enclave out of keeping with its surroundings. Spend too much buying out existing residents and you kill the business case; spend too little and you will have to resort to compulsory purchase. Build too much market housing and you\’re accused of driving poor people from their homes; build too little and you won\’t make enough to cross-subsidise more affordable housing. Offer too little to developers and they won\’t take on the risk; offer too much and you look like an easy touch.

One of London\’s largest such schemes began to wobble on Friday, when the Secretary of State turned down Southwark\’s Council\’s application for a compulsory purchase order to enable the demolition and redevelopment of the Aylesbury Estate, planned to increase total housing numbers from 2,700 to 4,000.  The scheme has been intensely controversial, with accusations of \’social cleansing\’, occupations and forcible evictions providing a stormy backdrop to the slow-grinding legalities of planning and public enquiries.

It is hard to avoid boggling at the politics of a Conservative minister seemingly siding with anti-gentrification protestors against a major development scheme promoted by a Labour council. Is this a sign of the May government\’s commitment to helping the poorest in society? Is this dismissal of the public-private partnerships that have dominated public projects for so many years another sign of the \’end of liberalism\’?

You can imagine Conservative spin doctors savouring some of these interpretations, but the politics of this decision are probably fortuitous rather than intentional. The process of confirming (or not) compulsory purchase orders is a quasi-judicial one, made on the basis of an inspector\’s report and carefully worded official advice, not for political positioning.

And, when you look a bit deeper, the decision is a very conservative one.  It was not the rights of council tenants that were the central consideration, but eight remaining leaseholders, owners of property bought under right-to-buy legislation.  The compensation offered to them was judged to be inadequate, and their human rights likely to be breached if their homes were requisitioned. It was actually the very conservative defence of private property rights, and the Conservative policy of selling off council housing, that has knocked the project off course.

The drugs don\’t work

Originally posted in Guardian Housing Network, 15 May 2015

Housing was a far bigger issue in the 2015 general election manifestos than in 2010, and generated some of the campaign’s most controversial policy proposals. This reflects a growing public sense of crisis, and the combination of rising prices and slow construction that is particularly toxic in London, where the average house cost 11 times average earnings in 2014 (compared to seven times nationwide).

It is no surprise then that polling by Ipsos Mori shows that 28% of Londoners see housing as a top issue facing Britain today, compared with 13% nationwide. Housing is also not such a big issue for Conservative voters, and London is an increasingly Labour city, so will it remain high on the to-do list – and how will policies affect London?

The Conservative manifesto pledged to build 200,000 discounted starter homes for first-time buyers, to establish help-to-buy Isa savings accounts and to give housing association tenants the right to buy their homes. But London’s house and land prices are so high these policies will have least impact on the housing crisis in the city where it is most acute.

Help-to-buy take up has been much lower in London to date, and the new help-to-buy Isa has a maximum savings limit of £12,000, which will make only a small dent in affordability when London first-time buyer deposits are as high as £50,000.

The extension of right to buy could cost London the most, while benefitting it least. The National Housing Federation estimates that only 15% of London housing association tenants would be able to afford to buy their property, compared with 35% in northern England. But these discounted sales will be cross-subsidised by sales of the most expensive council houses, which will raise most cash in London (though high replacement costs will reduce the amount raised).

Whether boosting demand will boost supply is much debated, but the manifesto made some proposals about supply too. Measures to encourage use of brownfield and public sector land will be important in London, though much brownfield land in London is already allocated. Building on the green belt seems to be prohibited, while new garden cities will only be built where these are “locally led” (which probably rules them out in much of south-east England).

The impact of these measures may be limited in London, and parliamentary time dominated by other issues, but the coming state of constitutional flux offers an opportunity. Thanks to fixed-term parliaments, we know which party will be in government in early 2020. But we are a lot foggier about what they will be governing: a United Kingdom standing apart from its European neighbours; a loose federation of resurgent nation states; or an uneasy and asymmetric patchwork of provinces?

If all this is on the table, then housing in London must be. If the national prescription doesn’t work in London, then the next mayor should make the case for something that does; not for special treatment, but for more powers, resources and flexibility – to build more, better and faster.

London boroughs are starting to build again, and should be less restricted in borrowing against future revenue streams (including rent). The mayor should be able to establish more housing zones and development corporations to build homes using public land.

There is also a case to be made for pooling developers’ affordable housing payments across London to support a London-wide programme for affordable housing. The next mayor may also want to encourage higher densities in outer London, or push to look again at London’s green belt, and ask where releasing land (perhaps under public sector control) might provide more housing and more enjoyable green space.

Many of these solutions are highly interventionist and some would be controversial but it is hard to build the housing needed in a city like London without putting some noses out of joint. Mayors can do that. The political complexion of the incumbent should not make a difference; whatever the capital’s voting patterns, its housing crisis cannot be allowed to strangle growth.

Candidates for mayor in 2016 will vie to demonstrate that they understand the urgency of the crisis, and are committed to action. Housing could be the big issue in the next mayoral campaign; it is in everyone’s interest for the winner to be given the powers and resources to deliver on their promises.