Blog Post

What will it take to solve London’s housing crisis?

Jon Tabbush and Millie Mitchell share a preview of the findings from our upcoming report, Homes fit for Londoners: Solving London’s Housing Crisis.

London has a housing crisis. Our upcoming research has identified three underlying issues that are driving it. Namely that there has been a long-term failure to allow London to grow sustainably, the housing market is structurally unfair, and policy has been held back by short termism.

The consequence? 1 in 4 Londoners are living in poverty after paying for their homes, 2 in 5 live in unsuitable homes that have suffered from damp or mould in the last year, and the equivalent of more than one child in every classroom in London is living in temporary accommodation. These stats only scratch the surface of the scale of the issue – see our first Homes fit for Londoners report for 20 charts to understand London’s homes today.

In an upcoming report, we will put forward a package of recommendations to fix the crisis. First, we need to understand its roots.

London’s housing stock has failed to grow

Not enough homes have been built in London to keep up with the city’s growing population. This is driving up prices and leading to overcrowding – with 11 per cent of homes in London overcrowded, compared to 4 per cent across England.

It’s not just an issue of overall numbers of homes but also a failure to deliver enough of the right kinds of homes. In London, we are currently only building around a sixth of the social homes needed.

There are many factors that have affected the ability of London’s housing stock to grow, including:

  • Public investment into homes has been too low for decades, and a lack of clarity about how public bodies and long-term investors can work together has limited private investment, creating a backlog of need.
  • Strained resources in local authorities have hampered the efficiency and effectiveness of the planning system for delivering new homes and created uncertainty for housing developers.
  • Land for development in London is scarce and expensive, and the planning system has been too restrictive.

London’s housing system is unfair

In many ways, London’s housing system is broken because it is unfair. We tax land and property in arbitrary and regressive ways, with the cost of council tax falling disproportionately on households living in the lowest value homes. And we fail to capture the increase in property values generated by public investment in transport and other public goods.

Meanwhile, private renters – who make up 30 per cent of London’s households – are structurally disadvantaged by our laws, and the state doesn’t do enough to protect them. Worse still, renters on low incomes have seen housing benefits frozen since 2020, whilst the costs of rent have been skyrocketing – just 2.3 per cent of properties listed for rent in London in 2022/23 were affordable on benefits alone.

London’s housing is being held back by short-termism

There is undeniably a need for change, but housing policy has been dominated by short termism and frequent announcements of destabilising reforms.

The short timeframes of funding for homes hampers the ability of housing providers to plan their investment long-term, reducing certainty and increasing costs. This is worsened by regular changes to the planning system, with little strategic continuity.

The recent government reshuffle has seen the 16th housing minister since 2010. Across the board, Britain has had among the most volatile rates of public investment of any developed country – this kind of institutional short-termism is no way to build critical infrastructure which takes years to plan and develop.

Short-term approaches mean we spend around five times as much on housing benefit as we spend on building new affordable homes, without creating any new public assets in the process.

What will it take to solve the crisis?

We believe that all these problems are fixable through public policy – that coordinated, multi-pronged efforts to solve the housing crisis can work.

This has been done before. After the Second World War, national policies saw local authorities and housing associations build over 1.4 million social homes in just ten years. An average of 140,000 a year – more than 50% higher than the best estimates of what we need today.

This is not to say that it will be easy. The three failures that have caused London’s housing crisis are deep-rooted. Fixing it will require a change to the operating system of our housing market, not piecemeal reforms.

First of all, London will simply need to grow. The city’s population has grown faster than its housing stock for decades – we no longer have the choice between densifying the capital and growing outwards. We need both.

We also believe that London’s housing market is broken because it is unfair. We need to capture more of the value created by public investment, to fund new homes and infrastructure. We need to make the private rented sector a secure and regulated tenure for renters. And we need to fix our broken benefits system, so that being penny-wise with the cost of housing benefit doesn’t make us pound-foolish with the financial and personal costs of long stays in temporary accommodation.

But most importantly, we need a long-term vision for housing. The system needs change, but those changes need to be followed by stability. If we want more investment into new housing, we need consistency to build confidence, and expert institutions to plan for and build quality homes for the future. If, as we believe, housing is best seen as part of the nation’s critical infrastructure, we can’t afford short-term fixes.

Facing up to the real costs of solving the crisis means we will have to think differently about what homes can be. We have to believe that every Londoner can have a decent, affordable, and secure place to live.

How we can achieve these three goals will be detailed in our next report, Homes fit for Londoners: Solving London’s Housing Crisis, launching in early December.

Jon Tabbush and Millie Mitchell are Senior Researchers at Centre for London.