There is a problem with housing supply in London. Consistent under-delivery has led to home ownership becoming unaffordable across the capital, with the average deposit for a first-time buyer reaching £144,578 in the year to September 2019. This issue is set to continue, as the proposed target for housing in the new London Plan fails to adequately meet the growing need for housing.

The new target of 52,000 homes per year, which was accepted and issued in the ‘Intend to Publish London Plan’ in December 2019, represents a significant shortfall against housing need figures generated for London. The target is 21 per cent lower than the 66,000 homes set out in the 2017 London Strategic Housing Market Assessment (SHMA) and 28 per cent lower than the need of 72,000 homes generated and published through the government’s standard method for assessing local housing need (LHN).

LHN uses household projections as a baseline, adjusting the final need figure based on affordability of a given area. The need figure will continue to increase across London as affordability deteriorates and adopted Local Plans fall out of date. This is clear in our most recently calculated LHN for London, which is almost 5,000 homes per annum higher than the figure published just two years prior.

But the issue doesn’t stop at the planned level of housing, and London continues to face challenges in the actual supply of new homes. The combined delivery for 33 boroughs across London over the past five years equates to an average of 32,935 homes per annum, 37 per cent lower than the newly accepted housing target.

Within this five-year period, the single largest year’s worth of delivery was in the year to March 2017, at a figure just shy of 40,000 net additions to dwelling stock. This figure represents an increase of almost 10,000 homes on the previous year, demonstrating capacity within the capital to boost annual supply. However, it is important to highlight the substantial contribution that Permitted Development Rights (PDR) made to delivery over this period, accounting for just under 6,500 (16 per cent) of additional homes.

The reliance on using PDR to boost housing supply is a problem, and the diminishing availability of commercial space across London has left fewer opportunities for developers to produce good quality schemes. In addition to this, wider socio-economic issues associated with PDR have been highlighted by a number of sources, most notably in the TCPA’s Raynsford Review. The legislation has been linked to a loss of affordable housing, a lack of basic infrastructure, and a loss of economic investment into areas following a reduction of employment space. Despite this, PDR for commercial to residential has been extended indefinitely after an original planned cut-off date of late 2016.

London needs to supply above and beyond the growing need for housing if acute issues of affordability are ever to be addressed across the capital. A plan to ensure the provision of good quality housing is essential, especially in the face of diminishing returns from government deregulation of the planning system through PDR.

We will soon be publishing our London supply forecasts, detailing the scale of new home delivery over the next five years. The next blog in this series will focus on the impact of London’s housing need on areas neighbouring the capital.

Further information

Contact Savills Planning