New housebuilding in London has persistently fallen short of housing targets, worsening the capital’s housing affordability crisis. The role of councils in housebuilding has sharply declined since its heyday in the 1960s and 1970s, but councils are now using innovative approaches to start building homes again.
This report undertakes fresh analysis of councilled models of housebuilding in London (outside joint ventures), assessing the potential for scaling these up, the challenges and complexities facing councils, and the optimal methods of delivery.
London is facing a housing shortfall, and a low supply of new affordable housing.
- The bulk of housing, including affordable housing, is delivered by a fairly small pool of developers.
- Developers’ concerns about risk and lowering sale prices are resulting in slow rates of delivery.
- This is compounded by continuing loss of social housing stock, with only about a third of homes sold through Right to Buy (RTB) being replaced.
In light of this, the time is ripe for councils to build more.
- With London’s housing market cooling, new housing providers need to come forward to ensure the delivery of new affordable housing in London.
• This is to provide more and better affordable, market-rate, and intermediate homes – both for sale and in the private rented sector, where many homes are of poor quality.
• Boroughs play a key role in developing infill sites, and could contribute towards achieving the aims of the draft New London Plan on small sites, densification and placemaking.
Councils have already started to build again because of two key drivers…
- The need to create more housing for all tenures to meet local needs and deliver better places.
- The need to generate a financial return, in the context of austerity and cuts.
… and through different council-led approaches.
- 14 boroughs have direct delivery programmes – i.e. on-balance-sheet development of public land using in-house teams – with 10,900 homes in the pipeline over the next five years.
- 17 boroughs have active wholly-owned development companies – i.e. separate commercial companies owned by councils – with 12,700 homes in the pipeline for the next five years.
Current housing delivery plans under council-led approaches are significant…
- In total, 23,600 homes are to be delivered through council-led approaches in the next five years, representing close to eight per cent of the new London Plan targets for London boroughs over this period.
… but if every borough were involved or did more, it could represent a real step change for new housing delivery in London.
- 22 boroughs have homes in the pipeline through active council-led delivery models, meeting 10 per cent of London Plan targets on average.
- If every borough was able to deliver a minimum of 10 per cent of their target, a total of 37,300 homes could be delivered across the next five years in London.
However, there remain a number of challenges and complexities that prevent councils from increasing their housing delivery to its full potential.
- Access to finance to build more housing is a key challenge, owing to restrictions on use of RTB receipts and constraints on borrowing capacity.
- Intra-council barriers, lack of political support, and legislative and regulatory issues in setting up wholly-owned companies can also hamper delivery.
- Councils face a range of planning and development issues that are also exacerbated by a lack of internal capacity and expertise, as it is challenging for councils to attract and retain staff.
Boroughs are ready to play a bigger role in delivering housing and making the most of their existing assets…
- Councils need to be clear on the balance between generating financial returns to the council and providing affordable housing at lower rents.
- Councils should identify where greater subregional collaboration could help make the most of scarce resources.
- Councillors should encourage more council housing delivery.
- Better data on council housing delivery activity levels is needed. The GLA and the government should play a role in this, but councils also need to communicate more clearly on the numbers of new homes they are delivering.
… but policymakers need to do more to support and encourage councils in order to allow delivery at scale.
- The government should relax the conditions attached to various funding streams and recognise the key role that councils can play in delivering more housing.
- To boost capacity, the GLA should develop the existing Public Practice scheme to give more boroughs access to the development staff that they will need as they start building homes again.
- The Mayor should use his funding powers to support the development of sub-regional consortiums or delivery bodies.
Following the May 2018 borough elections, with the Mayor of London pledging his support, there is a real opportunity for boroughs to get building again.