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London is heading for the worst downturn in affordable housing supply in decades, as inflation, high interest rates and building safety costs weigh on housing association finances.
“We warned the previous government of the arrival of a precipice. We’re collapsing it now,” said Fiona Fletcher-Smith, chair of the G15 group of major London housing associations, the non-profit groups that build and manage much of the UK’s affordable housing.
Official data tracking construction starts, the main indicator of supply, all show a sharp decline in construction starts. London from last year, which suppliers say is getting worse.
Affordable housing starts fell 88 per cent in the year through March, from 26,386 to 3,156, according to figures released last month – the lowest since records began in 2015 Different data showed that construction starts by local authorities and housing associations fell by 75 percent during the year. to June, the biggest drop since 1990.
The lack of new affordable housing has compounded rising homeless numbers and pressure on local council resources. London boroughs collectively spent £4 million a day on temporary accommodation for homeless people in the year to March, an increase of 68 per cent on the previous year.
The supply of affordable housing – a broad category that includes schemes such as shared ownership as well as social rent housing provided by councils and housing associations at government-controlled rents – has declined. across the countrylargely due to high interest rates and rising construction costs.
The lack of these properties has pushed more people into the private rental sector, where rents have risen at a record rate this year. In London, the high cost of housing has been blamed for pushing low-income people out of the city and pushing them away from job opportunities.
Scandals linked to poor conditions in existing social homes have led to stricter standards for providers, who are removal of a new building to finance maintenance.
Will Jeffwitz, head of policy at the National Housing Federation, which represents housing associations, said these pressures “are worse in London than elsewhere” because of the city’s older housing stock and higher operating costs. capital.
But he said the “main driver” of the crisis in London was the cost of building safety work on high-rise buildings following the Grenfell Tower fire.
“London is massively and disproportionately affected by building safety costs due to the number of buildings and the cost of rehabilitating them. These two combined are probably the biggest factors weighing on the finances of housing associations in London,” Jeffwitz said.
Fletcher-Smith, chief executive of housing association L&Q, said her organization alone was facing costs of hundreds of millions of dollars to repair hundreds of high-rise buildings.
Housing associations are struggling to find the money to buy the affordable homes that private sector builders are required to include in new developments, which has slowed down these projects.
These problems highlight the impasse the government finds itself in between its ambition to boost the supply of housing, particularly social housing, and its promises to speed up building safety work.
The government has promised more help to cover building safety costs, which it will announce in the spring alongside a new funding package for affordable housing. It has already topped up the current package with £500m and offered housing associations a five-year rent settlement at 1 per cent above inflation.
Government grants cover on average 12 percent of the cost of building new affordable housing in London, according to the G15, compared to 75 percent in 1990. The Conservative-Liberal Democrat coalition government of 2010-2015 cut funding for about two thirds. .
“Social landlords’ finances have been seriously damaged by four years of rent reductions and years of below-inflation rent settlements,” said Andy Hulme, chief executive of housing association Hyde Group.
The Greater London Authority, which oversees funding for the city’s most affordable housing, said only 582 homes were started under its housing schemes in the six months to September. These figures are up from 142 the previous year, but still down 80 percent from the average for this part of the year over the previous four years.
Mayor Sadiq Khan warned last month that London was facing “the most challenging time for housebuilding. . . since the global financial crash of 2008.
A spokesperson for the Mayor of London said: “Ending 14 years of underinvestment will not happen overnight, but the Mayor is committed to working hand in hand with the Government to help create a Better and fairer London for all. »
The decline in housing starts is expected to translate into a decline in housing completions in the coming years, which will take years to recover.
“The current crisis is not the consequence of a short-term cause. A crisis of this scale and magnitude has been years in the making,” said Ian McDermott, chief executive of housing association Peabody. “In the short term, I think the situation will probably get worse.”
