Mayor Sadiq Khan:it's bad news for the capital's desperate would-be buyers as new London Mayor admits solving the housing crisis won't be easy

To speed up affordable land, the new London Mayor has asked Transport for London to fast track surplus affordable land to build 10,000 new homes - but he still looks increasingly unlikely to be able to deliver 50,000 new homes a year for the capital.

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Mayor Sadiq Khan is just over a month into his new job and it is beginning to dawn on him that solving London’s housing problems is not going to be easy. His pre-election pledge to build 50,000 homes a year with 50 per cent of them affordable already seems out of reach.

“I can’t solve it [London’s housing crisis] overnight,” he told Homes & Property. Instead, he could only promise bad news for the capital’s desperate would-be buyers “for the foreseeable future”.

Heaping blame on his predecessor, he conceded that for now, “we are going to be churning out homes that Boris Johnson gave permission for. And they are not affordable.” 

He explains that it takes at least two years to build homes once they are approved. So for two years London’s new homes will have been given the go-ahead in the Boris era — only 13 per cent of which are defined as affordable, up to a budget-busting £450,000. 

Khan says that to speed up affordable land, he has asked Transport for London to fast track those pieces that are surplus. But even if he manages to expedite the development of the 75 TfL sites already identified, this is only expected to yield 10,000 new homes. And  what does he mean by speed up? The previous plan was to deliver these homes over the next 10 years. 

When asked about what he wants to see built, gone is the old definition of affordability. He wants to create diversity of homes in the capital with “first dibs for Londoners”.

He sees this as including “a role for council homes, a role for a new type of rental property called a London living rent [in new builds where the rent will be capped at a third of the average local earnings] and a role for shared ownership”.

This is good news for those at the lower end of the income spectrum wanting to buy or rent. And it may mean that affordable housing will once again be accessible to the very people the schemes were originally designed for — London’s key workers. 

But the details appear to be missing. Key omissions include his definition of affordable housing; how many units  he wants to see built, and who will deliver them. More details will follow in the London Plan — the document where the Mayor spells out his expectation for London’s housing market. But this will take time, and is subject to public consultation as well as consideration by government and scrutiny from the London Assembly. 

When added to the two- to three-year lead time for any new housing, this is likely to constitute another unwelcome delay for Londoners desperate for a home. And as the Mayor’s tenure is only four years, it may be that not one of his proposed affordable houses from the new plan will be built while he is in office.

In the meantime, James Murray, the deputy mayor for housing, said that as a rule of thumb, spending a third of the household’s income on housing was considered “affordable”. 

Applying this metric to the average Londoner’s full-time salary of just over £34,000 a year, implies building developments that include at least some properties that costs less than £930 a month.

This chimes with the Mayor’s comments that he thinks it will be possible to build shared-ownership homes, at least on TfL land, that “people can buy with a deposit of £5,000 and a monthly rent/mortgage of £1,000”. With many residential mortgage rates available for two per cent or less, this sounds like an easy thing to deliver. 

It isn’t. Apart from their mortgage, shared owners are required to pay a 100 per cent of the service charge and only get a modest discount on their market rent, despite also being responsible for all of the flat’s upkeep. As a result, a 25 per cent share in a one-bedroom flat in The Cavallo, E1, for example, has an estimated total monthly cost of £1,513, while a 35 per cent share in a one-bedroom flat in Canonbury Cross, Islington costs an estimated £1,836 per month. Substantial changes will be needed to the shared-ownership model if the Mayor is to pull some new flats into the realms of “real” affordability. 

But pushing down on prices, or capping rents/service charges risks exacerbating another problem — building the flats in the first place. The Mayor’s audit showed that fewer than 5,000 affordable homes were built in London last year. As Khan says, part of problem was the lack of investment in housing by the previous Mayor.

But the other problem is that only a small proportion of the capital’s available land falls under his direct jurisdiction. After this he will need to work with other public and private bodies to get his vision delivered. Profit matters, even for housing associations; if he wants to attract pension fund investment and increase private sector development, profit is likely to matter more. 

Khan’s next steps are  hamstrung by his limited powers, the limited pipeline from his predecessor and the likely limits he wants to put on developers. No wonder he appears to have stopped citing his pre-election pledge to deliver 50,000 new London homes a year.

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