New homes needed across tenures

Build to rent is an essential component of large scale regeneration and public sector involvement is key.

27 May 2014, Words by Susan Emmett

 

London needs more homes of all shapes, sizes and tenures. Affordability pressures and constraints in the mortgage market are driving shifts in the pattern of tenures in London.

Homeownership declined by 5% between 2001 and 2011, while the number of households renting privately has risen by 75% over the same period. The private rented sector now houses a quarter of all London households. This is slightly more than the 24% living in social housing which has declined by 1% between 2001 and 2011. We expect the number the private rented sector to swell to 34% by 2021.

With more households driven into the private rented sector and staying there for longer, we estimate that the need for 50,000 homes a year includes a requirement for 21,000 privately rented homes and 15,500 for a variety of subsidised ‘affordable’ housing.

Pressures on welfare budgets has increased the movement of households from social housing into the private rented sector or other forms of intermediate housing. Stretched affordability among buyers in the lower portion of the mainstream markets means that rental demand exceeds purchaser demand in the mid to lower mainstream markets.

Hence increasing the supply of homes for private rent is critical to meeting demand in the mid to lower mainstream markets (sub £700psf), where there is also the greatest shortfall in the supply of new housing.

However, the burden of meeting London’s housing requirement can not be carried by the private sector alone. Encouraging a greater variety of players to deliver new homes across tenures is crucial. There is a growing consensus among registered providers that building for market rent can help create a more balanced portfolio and offer homes to those unable to buy or access social housing. With grant subsidy levels cut back over the last few years, building for market rent can also help address the lack of viability of affordable housing at large scale.

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Housing delivery

The need to build for a wider range of tenures has been highlighted by the GLA. Its new draft London Housing Strategy identifies a target for 42,000 new homes a year for the next ten years, of which at least 15,000 should be affordable to rent or buy and 5,000 purpose built for long-term market rent.

The trend towards a broader definition of affordable housing to include various degrees of subsidised rent, as well as schemes to support affordable sales, is a reflection of the growing pressure to provide suitable housing to households on a wider range of incomes not just the most vulnerable.

In terms of housing delivery, establishing which types of ‘affordable’ housing qualifies for planning purposes is key when calculating viability of a scheme.

The GLA may need to support currently non-qualifying ‘affordable’ housing to reach its target of 15,000 homes or to encourage trade off between market rental and affordable housing in order to achieve viability.

Housing Zones are areas where planning flexibilities could be exercised, for example.

Public land

Access to public land and redevelopment of worn out housing estates are essential components of regeneration and increasing housing supply, particularly where the viability of schemes offering different tenures is an issue. The GLA owns 664 hectares of land which it says is being actively managed to achieve the best returns. This includes bringing forward land with a requirement to build for rent as well as or instead of affordable tenures.

Over 85% of this portfolio has either been developed or is earmarked for development. This leaves 15%. Although not all of these sites can be brought forward immediately, there could be further 29 hectares available from the London Fire Brigade, 27 hectares owned by the London Legacy Development Corporation and 102 hectares owned by the Metropolitan Police Service.

At borough level, redeveloping council housing estates at greater densities could contribute to regeneration and increasing housing supply. Since being given more control over their housing finance budgets, many local authorities are being much more pro-active about bringing forward land or estate regeneration projects.

 

 
 

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Key Contacts

Susan Emmett

Susan Emmett

Director
Residential Research

Savills Margaret Street

+44 (0) 203 107 5460

 

Chris Buckle

Chris Buckle

Associate Director
Residential Research

Savills Margaret Street

+44 (0) 207 016 3881