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London is entering its worst affordable housing slump in decades, as rising prices, high interest rates and the cost of building safety nets cost housing associations.
“We were warning the previous government about the upcoming cliff. We're collapsing now,” said Fiona Fletcher-Smith, chair of the G15 group of London's largest housing associations, the not-for-profit groups that build and run most of the UK's affordable housing.
Official data tracking housing starts, a leading indicator of supply, all show sharp declines in London starting last year, providers warned that it would become difficult.
Affordable housing starts fell 88 percent in the year to March, from 26,386 to 3,156, according to figures released last month – the lowest since records began in 2015. Separate data showed starts by local authorities and housing associations fell by 75 per cent year-on-year. to June, the biggest fall since 1990.
The lack of new affordable homes has added to the rise in homelessness and pressure on local council resources. London boroughs collectively spent £4 million a day on temporary accommodation for people facing homelessness in the year to March, a 68 per cent increase on the previous year.
The supply of affordable housing – a broad category that includes schemes such as shared ownership and social rental properties offered by councils and housing associations at government-regulated rents – has fallen. across the countrymainly due to high interest rates and rising construction costs.
The shortage of these properties has pushed many people into the private rental sector, where rents have risen at a record pace this year. In London, high house prices are blamed for pushing low-income people out of the city and job opportunities.
Scandals surrounding poor conditions in existing community homes lead to tougher standards for providers, who are not back to the new building to finance conservation.
Is Jeffwitz, head of policy at the National Housing Federation, which represents housing associations, said that these pressures are “worse in London than other places” because of old houses and high operating costs in the capital.
But he said the “main driver” of London's problem was price construction safety work in high-rise buildings after the Grenfell Tower fire.
“London is adversely affected by building safety costs due to the number of buildings and maintenance costs. “Those two things combined are probably the biggest distractions for housing associations in London,” Jeffwitz said.
Fletcher-Smith, chief executive of housing association L&Q, said his association alone was facing hundreds of millions in repair costs for hundreds of high-rise buildings.
Housing associations are struggling to finance the affordable homes that private sector builders must include in new developments, which has slowed these projects.
These issues underline the government's commitment between its ambitions to increase the supply of housing, especially public housing, and its promises to accelerate construction safety.
The government has promised more help with building security costs, which it will announce in the spring alongside a new affordable housing funding scheme. It has already increased the current program by £500mn, and gave housing associations five years to pay rent at 1 percent above inflation.
Government grants cover 12 per cent of the cost of building new affordable homes in London on average, according to the G15, compared to 75 per cent in 1990. .
“Welfare landlords' finances have been hit hard by four years of rent cuts and years of housing rents below market rates,” said Andy Hulme, chief executive of housing association Hyde Group.
The Greater London Authority, which oversees the city's most affordable housing funding, said only 582 homes were started on its housing schemes in the six months to September. These numbers were up from 142 the year before, but down 80 percent from the average for this part of the year over the past four years.
Mayor Sadiq Khan warned last month that London was facing “the toughest period for housing . . . since the global financial meltdown of 2008”.
A spokesman for the Mayor of London said: “Turning around 14 years of underinvestment will not happen overnight but the Mayor is committed to working with the government to help create a better London, fairer for everyone.” “
Falling starts are expected to lead to a decline in home completions in the coming years, which will take years to reverse.
“The current problem is not caused by a short-term cause. “A problem of this depth and breadth has been years in the making,” said Ian McDermott, chief executive of Peabody housing association. “In the short term, I think it's going to get worse.”