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London is facing its worst decline in affordable housing supply in decades as inflation, high interest rates and building security costs strain housing associations’ finances.
“We had warned the previous government of an impending cliff. We are crashing it now,” said Fiona Fletcher-Smith, chairwoman of the G15 Group of Major London Housing Associations, the nonprofit groups that build and run much of the U.K.’s affordable housing.
Official data tracking housing starts, the leading indicator of supply, all show a sharp decline London since last year, which providers say is getting worse.
Affordable housing starts fell 88 per cent in the year to March, from 26,386 to 3,156, according to figures released last month – the lowest since records began in 2015. Various data showed that local authority and housing association starts fell this year Year-to-date declines of 75 percent through June, the sharpest decline since 1990.
The lack of new, affordable housing has led to a rise in homelessness and pressure on local government resources. Overall, London boroughs spent £4 million a day on temporary accommodation for people experiencing homelessness in the year to March, a rise of 68 per cent on the previous year.
The supply of affordable housing – a broad category that includes schemes such as shared ownership and social rental properties provided by local authorities and housing associations at state-controlled rents – has declined across the countrymainly because of high interest rates and rising construction costs.
The shortage of these properties has pushed more people into the private rental sector, where rents have risen at a record pace this year. In London, high housing costs have been blamed for driving people on lower incomes out of the city and further depriving them of employment opportunities.
Scandals over poor conditions in existing social homes have led to stricter standards for providers who do this Withdrawal from new building to finance maintenance.
Will Jeffwitz, policy director at the National Housing Federation, which represents housing associations, said these pressures were “greater in London than elsewhere” because the housing stock is older and operating costs are higher in the capital.
But he said the “main driver” of the crisis in London was cost Building security work on tall buildings after the Grenfell Tower fire.
“London is disproportionately affected by building security costs due to the number of buildings and the cost of renovating them. “These two things 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 faces hundreds of millions in costs to repair hundreds of tall buildings.
Housing associations are struggling to find money to buy affordable homes that private developers have to incorporate into new construction projects, which has slowed those projects.
These issues highlight the government’s conflict between its desire to increase housing supply, particularly in social housing, and its promises to speed up building safety work.
The government has promised more help with building security costs and will announce this in the spring along with a new funding program for affordable housing. It has already increased the current scheme by £500m and offered housing associations a five-year rental payment at 1 per cent above inflation.
According to the G15, government grants cover an average of 12 percent of the cost of building new affordable homes in London, compared to 75 percent in 1990. The 2010-15 Conservative-Liberal Democrat coalition government cut funding by around two-thirds.
“Social landlords’ finances have been badly damaged by four years of rent cuts and years of below-inflation rental deals,” said Andy Hulme, chief executive of housing association Hyde Group.
The Greater London Authority, which is responsible for funding the most affordable housing in the city, said just 582 homes were completed under its housing programs in the six months to September. Those numbers increased from 142 the previous year, but were still 80 percent lower than the average for that part of the year in the previous four years.
Mayor Sadiq Khan warned last month that London was facing “the most difficult time for housing”. . . since the global financial crash of 2008.”
A spokesman for the Mayor of London said: “Turning the tide after 14 years of under-investment will not happen overnight, but the Mayor is committed to working hand in hand with the Government to help deliver a better, fairer London for all to accomplish.” “
The decline in housing starts is expected to lead to a decline in home completions in the coming years, and it will take years for this trend to return to normal.
“The current crisis is not the result of a short-term cause. A crisis of this depth and breadth has been brewing for years,” said Ian McDermott, chief executive of housing association Peabody. “In the short term, I think it’s probably going to get worse.”
