Strength in Numbers: Funding and Building More Affordable Housing in London

This report looks at two of the main barriers preventing boroughs from building; the cost of land and the availability of funding. We highlight the potential for cross-borough collaboration on meeting affordable housing targets and call on the GLA and Government to support these partnerships.

London is facing an affordable housing crisis. House building has consistently fallen below London Plan targets and less than a quarter of homes built in 2014/15 were affordable.

Private developers and housing associations have led affordable house building in recent years. London boroughs are building more and have further ambitions to increase delivery, but are hampered by the high cost of land in the capital and restrictions on funding.

Building Affordable Homes in Inner and Outer London

The report argues that local authorities should be encouraged to build to meet local needs, therefore it examines how different types of funding for affordable housing could be better utilised.

However, the difference in land value between in Inner and Outer London means that some boroughs lack land which they can afford to develop, while others have land available but lack public funding. The research found:

  • The cost of land accounts for more than half of the cost of building a standard flat in a central London location, as opposed to around a quarter of the cheapest suburban equivalent.
  • The funding gap required to build affordable homes can be five times higher in central London locations than in the suburbs.

Making the case for borough partnerships

Our research found that partnerships between Central boroughs that have available funding and Outer London boroughs that have land at reasonable prices could deliver up to five times more affordable homes than if that money was invested in the Central boroughs.

There is clearly appetite for joint working; boroughs are already pooling their resources in departments such as adult social care and anti‑fraud.

But the success of any cross-borough collaboration on housing would require bespoke agreements – to make sure that it benefit the residents of all boroughs involved, supporting the creation of mixed communities. These deals should, for example, ensure the fair allocation of affordable housing, enrich existing communities and provide inter-borough arrangements for public service delivery.

Carrot and Stick: Encouraging Borough Partnerships

To optimise public funding available for affordable housing, the report recommends:

  1. The government should review housing revenue account borrowing capacity so that it is based on local authorities’ ability to service the debt.
  2. The government should provide a stable operating environment for council housing finances, including no further major welfare reform, a return to inflation-indexed social rent increases, and a review of the high-value council homes levy.
  3. The government should extend the period within which local authorities are able to spend RTB receipts, and increase the proportion of the cost of a replacement home that can be funded, and permit the spending of RTB receipts outside of borough boundaries.
  4. The government should give local authorities explicit permission to spend commuted sums on affordable housing outside of borough boundaries.
  5. The government should devolve housing benefit to the GLA level, and allow the Mayor to offer guarantees that housing benefit will rise in line with inflation to finance affordable house building.

To foster cross-borough collaboration in delivering affordable housing:

  1. The GLA should help broker formal borough partnerships in housing delivery, and use its policies, powers and resources to facilitate and encourage collaboration.
  2. The GLA should incentivise collaborative affordable housing delivery through more flexible or enhanced levels of grant for consortia of local authorities, together with housing associations and private developers.
  3. The Mayor and London boroughs should develop a more strategic London-wide approach to building new affordable housing, embedded in the London Plan.