This part of the report is about how policies at all levels of government have influenced housing in London over the last few decades, and the policy levers available. In the next report we will look at what should change.

The types of homes people live in, and the amount that they pay for them, are the result of the interactions between policies and markets. Primarily these are about housing and land policy and the housing market, but they spread much wider – for example, tax policy influences how much people have to spend on housing, and the market for building materials affects how much a home costs.

The policy tools in this list are ones which have been proposed by politicians, campaigners or trade bodies, or which have been used in other cities or countries. Including them in this list does not mean we endorse them or believe they would be effective in London. Indeed, some of the proposals would directly contradict each other. But we think it’s important to think about a range of ideas offered by different groups.

In the next report, we will set out which tools we believe will be most effective for London, its people and its businesses.

Housing targets

Government sets national targets for building new homes, and in London they are set in the London Plan, which is the responsibility of the Mayor. The London Plan sets out targets by borough, broken down by types of home. ¹⁵ In recent years, neither national nor London Plan targets have been met – but targets are still an important tool for accountability. ¹⁶

Central government has recently removed most local targets for housebuilding. ¹⁷ This doesn’t directly affect London since the London Plan targets still hold for London boroughs, but the housing markets in London and the wider south east are highly integrated: if there is less supply in the regions close to London, this is likely to put greater pressure on housing stock within London.

Possible policy tools:

• change how housing targets are set (hyper-locally, locally, regionally, nationally)
• link transport improvements to housing targets ¹⁸
• change how high housing targets are and how specific they are on housing type and location (eg. older people’s housing, affordable housing) ¹⁹
• incentivise local government or local communities to meet targets, through direct grants ²⁰ or through ensuring they benefit from economic growth ²¹
• review the interaction between the National Housing Development Framework, the London Plan and other regional plans ²²
• review the proposed National Development Management Policies in the Levelling Up and Regeneration Bill ²³

The planning system

Housing targets set the number of homes to be delivered in each area, but it is the local planning system which determines what actually gets built. For most new homes, this is the responsibility of the local authority: planning officers make recommendations and local councillors make decisions, though the GLA or national government can sometimes intervene in them. These decisions must take into account national legislation (such as on building safety), London Plan guidance (such as on space standards), and the local authority Local Plan, which sets out the framework for development in the area.

Some people feel that local communities do not have enough control over what gets built in their area. ²⁴ Others feel that the involvement of local politics, the unrepresentative nature of those who get involved in contesting decisions, plus constrained resources in local authorities, means that decision making is slow and unpredictable, making it harder to build. ²⁵

Possible policy tools:

• change the requirements for submitting planning applications and how decisions are made (eg. through zoning/pre-approval/non-council planning authorities) ²⁶
• change when and where people have a right to appeal ²⁴
• allow “street votes” on local developments ²⁸
• add speed incentives to encourage faster or off site/modular building ²⁹
• increase resources for local authority planning departments to speed up decisions or to allow greater scrutiny ³⁰
• reduce or increase regulations, such as space standards and environmental requirements ³¹

Land availability

Homes can be built on sites where there is already some housing (densification or demolition and replacement, usually through building higher), on “brownfield” sites which have previously been used for transport, commercial or industrial purposes, and on “greenfield” sites which have been used for agricultural. The supply of developable greenfield sites in or near London is very low, partly because of the density of the city, and also because of severe restrictions for building on the Green Belt.

Possibly policy tools:

• change land use designations to allow for more home building, including on the Green Belt – perhaps involving Green Belt land swaps ³²
• use more public land (or purchase land for public use) for building homes, or homes of different tenures ³³
• make it easier to densify existing areas of housing ³⁴
• reform compulsory purchase and use class regulation to make it easier to free up land for housing, especially social housing ³⁵

Finance for social and affordable housing

Social and affordable housing in London can be brought about through government grant, through government backed low interest loans, or through developer contributions (discussed below). Most social housing is built for the purpose, but London also has a buy-back scheme, where local authorities re-purchase homes which were sold under right to buy. ³⁶

The Mayor has recently celebrated meeting London’s target for social housebuilding starts – this is welcome news but even if all these homes are completed fairly quickly, we will still have very long waiting lists for social homes. ³⁷

As well as investment in new social housing, some of London’s existing social homes are in a poor state of repair and these numbers are likely to increase as post-war blocks of flats come towards the end of their planned lifecycle. Renovating these homes to meet modern standards, especially for insulation and heating, is likely to be very expensive and it is not clear where this money will come from.

Possible policy tools:

• increase funding availability for social housing through volume and flexibility of capital grants or loans – including for projects which renew existing stock but don’t result in a net gain of new homes ³⁸
• use government or local authority backed guarantees to finance affordable housing
• make funding settlements multi-year, without repeated competitive bidding ³⁹
• leverage private investment for affordable homes – discussed below
• Increase developer requirements to deliver social or affordable housing, including removing the exemption from affordable housing requirements for permitted development conversions ³⁹
• End right to buy, to stem loss of homes from the social sector ⁴¹
• Purchase homes for social housing which were previously in the private rental sector ⁴²

Finance for private house building

The costs of building homes in London can be very high, especially because land is so expensive. Some developers say it is hard to make a profit even with high sale prices because costs are high, planning permission unpredictable, and requirements placed on developers to supply affordable housing and to meet certain standards for space, safety and so on can be challenging – especially as these requirements sometimes change. There is always a risk that falling prices will mean schemes lose money (or that developers will negotiate out of affordable housing contributions to avoid this); with rented properties where rent is set at affordable levels, there is also a risk that policy changes in future will also change the return.

Housing development is often funded through third party investment – the availability and terms of this will depend on the goals of each investor (increasingly including social impact goals), how attractive housing is compared to other assets, and how attractive investing is in London compared to elsewhere.

Possible policy tools:

• use incentives to encourage impact investment in housing (or certain types of housing) ⁴³
• use guarantees to fix policy requirements to introduce more stability for people building or investing in homes ⁴⁴
• use other policy tools to reduce the cost and uncertainty of planning applications or other costs associated with building (covered elsewhere in this document)

Developer contributions

When developers build larger unit numbers of private homes, they are required to deliver some form of public benefit. This can include building affordable or social homes, or facilities such as playgrounds, schools or libraries. In some boroughs with high levels of development, these contributions can represent a significant proportion of all public spending.

The Levelling Up and Regeneration Bill, which is currently being debated in parliament, proposes adding to the current mechanisms for developer contributions with a new Infrastructure Levy. Some people are concerned that the way this is designed means developer contributions will be lower for many schemes, and therefore less affordable housing will be built. ⁴⁵

Possible policy tools:

• reform current and proposed developer contribution schemes to ensure that they continue to deliver affordable homes plus wider social benefits ⁴⁶
• consider mechanisms to guarantee levels of affordable housing: “zoned” affordable policies, negotiation blocks, profit clawback ⁴⁷
• consider land value uplift taxation as an additional or alternative means of raising funding for housing development ⁴⁸

Regulation of the rental sector

The last few years have seen a welcome emphasis on the rights of social and private tenants to a secure and safe home, through tighter build regulations after the Grenfell tragedy, tougher energy efficiency regulation, and (when the legislative process is complete for the Renters Reform bill) bans of section 21 “no fault” evictions. ⁴⁹

These changes have the potential to make life better, especially for the most vulnerable renters, but some people are concerned that loopholes in the law will mean that private landlords can still treat tenants badly. ⁵⁰ Some are also concerned that regulation could ‘crowd out’ institutional investment, resulting in less homes being built overall. Councils and housing associations face high costs in improving the quality of existing homes, and this is likely to mean they have less money left for housebuilding over the next few years.

Possible policy tools:

• tighten existing and planned regulations for social and private rental (including property licensing schemes) ⁵¹
• increase resourcing for local authority enforcement, and for legal support for tenants to seek redress ⁵²
• introduce rent controls or rent stabilisation ⁵³
• increase public funding for safety remediation, including cladding and other issues ⁵⁴

Making homes available

Not all houses and flats in London are lived in. They may be used as holiday lets, owned by (often overseas) investors and left empty all or most of the time, be second homes, or be vacant between tenancies or owners. ⁵⁵ The percentage of vacant properties in London is fairly low ⁵⁶ – underoccupancy is arguably more of a problem, particularly where older individuals or couples live in larger properties. ⁵⁷

Possible policy tools

• restrict the ability of overseas investors to purchase properties, or increase tax on their purchases ⁵⁵
• introduce a vacancy tax, or increase local authority’s ability to increase council tax on empty homes ⁵⁹
• restrict the use of properties as holiday lets or second homes, through regulation or tax ⁶⁰
• incentivise older people living in large homes to move to smaller ones, and ensure the supply of suitable downsize properties ⁶¹

Personal finance for homes

When people buy a home, mortgage terms and interest rates are a significant influence on what they can afford. Stamp duty levels for different purchasers can also incentivise different people to buy at different times.

As rents in London are high, many renters depend upon benefits to pay for their home. But many Londoners find that their benefits are not enough to pay their rent, either because housing benefit is simply too low or because they have hit the benefit cap – this is a key driver of poverty, especially for families with children.

Possible policy tools:

• either loosen or tighten mortgage deposit, loan proportion or affordability requirements ⁶²
• change tax treatment of landlords to increase or reduce the number of buy to let properties ⁶³
• increase or reduce stamp duty, particularly for foreign or buy to let investors ⁶⁴
• replace council tax and stamp duty with a proportional property tax ⁶⁵
• increase benefit levels and/or remove the benefit cap ⁶⁶

Financial incentives for first time buyers

In the last few decades, governments have tried various schemes to help first time buyers to buy a home. They are often specifically for new build homes. While these schemes have certainly helped some individuals, some argue that they distort the market, and that any savings people make through the scheme are cancelled out by the rises in property prices which result. ⁶⁷

Possible policy tools:

• reintroduce the Help to Buy Scheme (or the opposite: permanently remove it) ⁶⁸
• offer state-backed mortgage affordability loans, insurance products or guarantees ⁵⁹
• reform shared ownership to make it easier for shared owners to sell ⁷⁰
• increase cap on lifetime ISA house value limit for withdrawal of savings plus bonus ⁷¹