The Mayor of London, Sadiq Khan, has warned Government must take urgent action as a new report reveals the amount of grant funding required to deliver the affordable homes Londoners desperately need is £4.9bn a year – seven times more than the capital currently receives.

The Mayor currently receives around £700m affordable housing grant per year from the Government. Sadiq is using all the resources and powers at his disposal to tackle the housing crisis, and last year started a record 14,544 affordable homes, including nearly 4,000 at social rent levels – more than in any year since City Hall took control of housing investment in the capital, and exceeding the target of 14,000 agreed with Government ministers.

However, today’s report highlights that if the Mayor, housing associations, and councils are going to be able to meet Londoners’ housing needs, vastly increased Government investment is urgently needed.

The Mayor’s current Affordable Homes Programme, launched in 2016, runs until March 2022. Working with the G15 group of London’s largest housing associations, councils, and other housing sector experts, City Hall examined how much grant funding is needed to deliver a 10-year programme to follow this, until 2032. Based on the Mayor’s draft London Plan, which identifies need and capacity for 65,000 new homes each year of which 50 per cent should be affordable, this programme aims to deliver 325,000 new affordable homes. Of these, 70 per cent would be social rent (22,750 homes a year), 20 per cent shared ownership (6,500 homes), and 10 per cent intermediate rent (3,250 homes).

Delivering this number of new social rented and other genuinely affordable homes will require significant subsidy. Furthermore, construction costs are estimated to increase by 3.4 per cent each year until 2023 which, alongside inflation and a variable housing market, mean the subsidy needed to deliver the homes London needs is far greater in cash terms than a decade ago.

The Mayor of London, Sadiq Khan, said:

“This analysis shows the vast increase in Government funding required to deliver the affordable homes that Londoners desperately need. City Hall is building record numbers of new council and social homes, but we need far more funding if we are to truly tackle the housing crisis. As a new Prime Minister takes the helm, they must put their money where their mouth is and provide the funding we need to turn this crisis around.”

Paul Hackett, chair of the G15 group of London’s largest housing associations, said:

“Londoners have known for years how severe the capital’s housing crisis has become, but our new joint report with the Mayor shows exactly what is needed to address the problem. Housing associations have shown great flexibility in recent years, responding to lower grant rates since 2011 by building more housing for sale to fund a pipeline of affordable homes.  But London’s large associations now fund up to 85% of the cost of new homes from their own resources.  With the private market slowing, this cross-subsidy model is at breaking point.

“This research shows that to build genuinely affordable homes at the scale required, the Government’s approach to funding needs to fundamentally change.  We need to return to higher grant rates and agree a long-term settlement to give us the tools to keep tackling the housing crisis head-on.”

Before 2008, grant funding consistently covered more than half the cost of a new affordable home. Today’s analysis highlights that, since the Coalition Government, it has fallen to much lower levels – now at around 15 to 20 per cent – and that a return is needed to previous funding levels, with around 48 per cent of the cost of a new home needing to be covered by public subsidy.

Jasmine Whitbread, London First’s Chief Executive, said:

“High housing costs risk draining London of the talent it needs, pricing out the essential workers at the heart of our capital. If London is to build the affordable homes it needs, a step change in government funding is critical. The new Prime Minister must move quickly to put affordable housing in London on a more sustainable footing, or we risk losing the people that give our city its competitive edge.”

Cllr Darren Rodwell, London Councils’ Executive Member for Housing & Planning, said:

“London faces a severe and worsening homelessness crisis because of the chronic lack of affordable homes. This research provides the latest evidence of underinvestment in London’s housing sector. Boroughs are keenly aware of how this underinvestment leads to growing housing pressures in communities and ballooning costs to the public sector – including skyrocketing homelessness rates and 54,000 London households living in temporary accommodation. Boroughs are committed to delivering the homes our communities need, but we’re struggling with 63 per cent reductions to our core funding since 2010.

“With a new Prime Minister set to take office soon, we need the government to get to grips with this issue by providing the resources required for a substantial boost to affordable housebuilding in the capital.”

Jackie Ashmenall, London Citizens leadership team said:

“London Citizens has been working with the Mayor to ensure an increase in genuinely affordable housing across our capital. Through this work we have seen the importance of central government funding. An increase in this funding would help build homes that keep families together, children in local schools, nurses in our hospitals, and relieve the financial pressures of life in a city with a housing crisis.”

Housing Management & Maintenance (HMM). 2019. Mayor of London.
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