Sadiq Khan will not be able to deliver the 200,000 homes a year that London needs to quell the housing crisis, concluded a panel of experts at the London Real Estate Forum (LREF), which opened today (14 June) in Mayfair.
According to Daniel Mahoney, Head of Economic Research Centre for Policy Studies, setting a 50 per cent affordability target rules out the private sector, because there will not be enough value in the land. Increasing the housing stock should be the mayor’s priority, and an increased supply will naturally make homes more affordable.
“The 50% affordability target will dissuade developers from building,” said Mahoney. “The Mayor has not set a target because he says the number of houses being built is less important than affordability, but the two are intrinsically linked.”
Mahoney welcomed the Mayor’s initiative to unlock brownfield land, as 40 per cent of brownfield sites in London are owned by councils. However, London’s greenbelt comprises around 35,000 hectares, seven per cent of which is currently used for golf courses. Mahoney argued that unless more greenbelt land is used for development, there will not be enough land to build the number of homes needed. “Brownfield sites should be the priority, but this will not solve London’s housing crisis,” said Mahoney.
According to Linus Forsberg, Partner at Trinova Real Estate, Khan’s 50% affordability target makes it impossible for developers, who are already struggling to get funding for new projects. “Basel III is making it increasingly difficult for banks to lend to developers,” said Forsberg. “I would be very impressed if Khan managed to build half of the homes that the city needs.”
Andy Bruce, Partner and Head of Real Estate for Linklaters, pointed out that there will not be enough land if the private sector are forced out of the market. “Developers we speak to can’t find sites big enough to deploy their resources,” he said. “How do you release public land when local authorities control it? It’s not just a housing crisis, it’s an infrastructure crisis.”
Dominic Grace, Head of London Residential Development for Savills, agreed that the entire planning system needs to be reviewed. “The planning system is very clunky; it reflects today, not tomorrow,” he said.
The panel concluded that without more housing, London will become increasingly unaffordable, pricing vital human capital out of the city. Grace said that if workers such as hospitality personnel cannot afford to live in London, it will be impossible to offer a midmarket service, denting the competitiveness of the city. “Delivering a midmarket service will be impossible without more affordable housing,” said Grace. “A lot of hotels are already considering how they will deliver their service proposition.”