London Mayor Sadiq Khan has arguably done more than any predecessor in recent memory to put housing at the top of the city’s agenda and has now promised investment in new council house building, having secured £1.67 billion from government coffers to build 10,000 homes by 2022. 

His team’s draft London Plan has as its target to build 65,000 new homes per year over the next 10 years, up from the previous minimum of 42,000. Our own projections suggest that it would take some 90,000 to 100,000 new homes being built each year to improve affordability. 

It is still too early to assess whether estimates of housing need will be revised down as a result of the Referendum, but even if we were to see significant curbs on in-migration, London will continue to have a very significant imbalance of housing supply and demand. And whatever the Brexit impact, we know that much of the unmet need is for homes priced below market rent of sale price (sub-market) and that will not change. 

Current projections are that London will continue to build far fewer homes than it needs, with the greatest shortfall being for affordable homes. 

The GLA, considered the official view of housing supply in London, estimates that a net total of 39,500 new homes were completed in the 12 months to the end of March 2017, some 30 per cent higher than in the previous year. We expect volumes to peak in 2019, before levelling off at around 40,000 new homes a year in 2020, arguably as many as the private sales market and current construction capacity can support. 

This is still well below the 65,000 target, two-thirds of which should be priced at below market rent or sales price. Current delivery falls far, far short of meeting this need. 

Last year, just 6,302 affordable homes were built – around 19 per cent of the total – down from an average of 8,275 a year over the previous decade. The draft London Plan would like to see a 50:50 split between market and affordable homes.

The promise of grant funding to build council housing is very welcome news. Our previous analysis (Spotlight: Investing to solve the housing crisis) also demonstrates the long-term gains in terms of savings to the housing benefits bill that come from investment in social housing.

This initiative is also a clear acknowledgement that solving the housing crisis requires a broad range of solutions and housing tenures. It is also tacit acknowledgement that the private development model – currently responsible for the vast majority of new affordable homes in London – cannot support delivery in the volumes required.

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