More gaffes please

Author: Catherine Glossop
Date: 01/07/2008
Publication: Roof

The level of unmet housing demand is putting severe pressure on the London economy. The acute problems of affordability in the capital's housing system are reducing flexibility and mobility for workers, placing strain on transport networks, and increasing the cost of doing business.

London's new Mayor has called for a step change in approach and set out his policy ambition ‘...any Londoner should be able to own their own home, regardless of their income'. While this is a commendable policy goal, the Mayor's proposals for achieving this are diverting attention and much needed resources away from what should be the key priority - maximising overall supply. The Mayor needs to turn attention to the role all types of housing tenure can play, and put flesh on the bones of his stated intentions to work more closely with London boroughs. Getting it right on housing will be vital for London's economy, especially as we enter an uncertain economic climate.

One of the cornerstones of the Housing Manifesto launched by Boris Johnson during his election campaign is to extend home ownership for people on low to medium incomes through increasing shared ownership schemes by one third. The Manifesto says this will be achieved through releasing Greater London Authority-owned land and drawing on a significant proportion of the Regional Housing Pot. This, however, may not be the best use of London's resources - particularly if the expansion of shared ownership is funded at the expense of measures which might more substantially increase overall supply.

Still unaffordable

Progress in the development of shared ownership packages has been slow, and uptake limited. As many previous initiatives in the capital have proved, shared ownership schemes often remain unaffordable for many people on low incomes. The ‘FirstSteps' scheme, proposed in Boris's Manifesto, aims to provide housing at 20 per cent below the market rate - this will still be unaffordable to all but the highest qualifying earners (those with a maximum annual income of £60,000).

Boris is ultimately focusing a significant amount of policy attention on schemes that will be to the benefit of a small proportion of Londoners. And, even if these attempts are successful, there is the risk that this assistance will increase house price inflation for those who do not qualify for the scheme.

Ultimately, Boris needs to tackle the myth that home ownership is always best - particularly for people on low incomes who will be put at risk of losing their homes if they fail to keep up with payments. A well thought-out strategy for developing London's private rented sector will improve the flexibility of London's workforce, help absorb the huge numbers of new residents who are expected to make London their home, and provide more choice for households on different income levels and at different points in their lifetime.

Any strategy to expand the sector, however, must also address the associated management and quality issues, and increase the types of houses available for rent beyond the preponderance of one- and two-bedroom flats. The Mayor's recognition of these issues is a good start, but the Manifesto is ambiguous as to how they will be tackled, and there is no mention of working with private sector partners.

The Mayor will need to encourage London Councils to adopt a more proactive stance towards the private rented sector by helping the boroughs to make better use of their strategic planning tools - to encourage higher quality development and ensure the type of housing better meets demand. The recently announced appointment of Sir Simon Milton as the Mayor's senior planning advisor is a positive development that should promote closer working relations, given his local government background.

Institutional investors 

Closer working with the private sector will also be crucial. With current economic conditions further weakening the capacity of small landlords, local authorities may need to engage with institutional investors to attract the level of investment required. During his first months in office, Boris should take the lead by meeting with the major financial institutions in the City and chart a new approach to investment in the rental market - one that will generate better returns for investors and quality homes for London's residents. The Mayor's proposed relaxation of the 50% affordable housing rule should help facilitate this.

Low cost home ownership schemes have their place, but in a tight public spending climate, resources need to be focused on maximising overall supply. The Mayoral administration needs to consider all the tenure options if supply targets are to be met and set out more detailed plans for how he will work with the boroughs, as well as the private sector. An affordable private rental market could play an essential role in meeting London's housing needs, supporting London's economic growth and providing much needed housing market stability.

The Centre for Cities and the Smith Institute are currently looking at ways in which the private rented sector can contribute towards meeting the Government's housing supply targets and help narrow the affordability gap. A monograph on the ‘Future of the Private Rented Sector' was published in June, sponsored  by UNITE Group plc.

A version of this article first appeared in Roof.