Over the next 5-10 years, it will be worth every investor keeping an eye on what happens in the London market. This is because there are moves a foot to genuinely change the way housing is delivered and, if it’s successful, it could influence what happens across the rest of the country. If it’s not successful, it could also mean other areas benefit from the fall out of the capital’s housing crisis as, according to analysis from the Guardian:-
“292,000 people left the metropolis in the year to the middle of 2016, up 14% on a decade earlier and the highest level since 2006.”
A draft strategy to fix London’s housing crisis
Towards the end of last year, Sadiq Khan, Mayor of London, launched his Draft London Housing Strategy, which set out plans to tackle the capital’s housing crisis. One of his biggest priorities is to effect changes that will provide all Londoners with decent and affordable housing, which if successful could impact on the Private Rented Sector.
While a great many jobs and opportunities have been created in the capital over the last few decades, the housing supply has failed to keep up with demand, meaning there is now a generation of Londoners who can’t afford their rent, let alone imagine ever being able to own their own home in or around the city. As it stands, despite the way that lettings health and safety legislation has tightened up in recent years, some tenants in London are forced to live in overcrowded, unsuitable or unsafe conditions because they can only afford to rent cheap accommodation from unscrupulous landlords.
In the Mayor’s own words: “It now costs more to rent a one-bed flat in London than it does to rent a three-bed home anywhere else in the country…and one in four nurses and young teachers say they expect to leave the city in the next five years because of high housing costs.”
Analysis from New City Hall shows that around 50% of the new homes required to satisfy the demand in London will need to be truly affordable, which is why the Mayor’s approach is geared towards rebalancing the housing supply.
He has already begun to invest the £3.15bn of affordable housing funding he secured from the Government and introduced measures to speed up the planning system in order that his proposed changes can be made more quickly.
What solutions does the London Housing Strategy propose?
The aim of the strategy is to make intensive use of the available land inside the capital, focusing on providing genuinely affordable housing and ensuring all those who are feeling the effect of the housing crisis – from private tenants to those who are sleeping rough – are helped.
The Mayor’s plan sets London’s development strategy until 2029, with a target of 650,000 new homes London-wide – more than doubling the current rate - including over 250,000 to be built in 13 outer suburbs.
The Strategy focuses on five key solutions:
1. Building more homes in London
The Mayor appreciates that in order to build the quantity and type of housing required, in the right places, his help is needed at a number of different levels, including:
• Diversifying the homebuilding industry to encourage a wider number of organisations to take responsibility for building the new homes, by making packages available to support new builders and developers of all sizes and at all levels.
• Supporting the Build to Rent sector, institutional investors that build blocks of flats rather than buy existing homes to rent
• Providing support packages for those who can work on smaller sites and in outer London, where homes can be built more quickly and cheaply, which may be an opportunity for professional, full time landlords looking to build to rent
To support the new housing, the aim is to develop new transport schemes, such as Crossrail 2 and bus services,
to support new homes, which could help to make areas currently not seen as ‘commuter belt’ more accessible
to London money.
In addition, other initiatives landlords should be aware of is a push to develop social housing eg council
homes, so the proposals suggest:-
• Encouraging public sector landowners to release more land for housing
• Protecting the Green Belt by promoting higher-density development on brownfield and smaller sites
• Helping councils who are willing and able to build new council homes, to access the resources they need
And there is an understanding that to deliver homes, the construction skills gap needs improving to promote both
traditional building methods and more modern manufacturing of components in factories.
2. Delivering genuinely affordable homes
Given the way that supposedly ‘affordable’ homes have spiralled out of the reach of some of those on low and middle incomes in recent years, there is some work to do to reassure Londoners that this initiative will deliver properties they really can afford to rent and/or buy. The target is for half of all new homes built in Greater London to be genuinely affordable, according to new clear tests that will be set, so investment will be made in:
• homes around social rent levels for Londoners on low incomes
• London Living Rent homes for those on middle incomes, struggling to save for a deposit
• shared ownership homes for those who can’t afford to buy on the open market
• encouraging innovation in other forms of affordable housing.
If this is successfully delivered, it may have an impact on who will be renting in the private sector in London in the future. As such, knowing what’s planned to be delivered in which areas, when, is worthwhile for landlords operating within Greater London and for those outside, seeing what the impact of these initiatives are on the PRS (Private Rented Sector).
3. Building high-quality homes and creating inclusive neighbourhoods
The priority is that all new and existing homes are safe and sustainable, with good-quality design and construction. Particularly in light of the Grenfell Tower tragedy in 2017, strict quality and safety standards will be encouraged, as will energy-efficiency improvements that help keep occupants warm and help address fuel poverty issues.
There will be initiatives to support new housebuilding design, including:
• The appointment of Mayoral Design Advocates
• A new ‘housing Expo’ to showcase the best designs
• A ‘Public Practice’ social enterprise to boost planning and regeneration expertise within councils.
And, as far as ensuring these new homes truly meet people’s needs, there will also be investment in specialist and supported homes, including for older and disabled Londoners. Proposals will be put together in consultation with local communities across the capital, via a new ‘Community Led Housing Hub for London’.
4. A fairer deal for private renters and leaseholders
These proposals are probably the biggest change that could impact on landlords and, if successful in London, maybe adopted in other areas across the country.
There are around two million private renters in London and, while most landlords provide a good service, almost a quarter of properties currently fail to meet the Decent Homes standard. As such, the Mayor is proposing regulation through property licensing and landlord registration, with a focus on supporting councils in pursuing those who flout the law.
He is already ‘naming and shaming’ bad landlords and agents through the Landlord and Agent Checker and a more comprehensive database where councils can share information more easily to catch and fine or prosecute landlords.
He will also promote a new ‘London Model’, to make renting more stable, secure and affordable for tenants while balancing the interests of landlords. He will address upfront costs and fees and encourage the Government to improve support for those on lower incomes who are struggling to pay their rent.
With £30,000 fines now available to Local Authority’s to fine landlords who don’t abide by the law, this is a stark warning to current and future landlords to make sure properties are correctly licensed and abide by the health and safety laws, such as the new requirement from April 2018 to rent properties which have a minimum of a ‘E’, EPC rating (link to previous article in February)
There is good news though for all flat owners – including landlords. As far as the 500,000-plus leaseholders in London are concerned, the Mayor wants to improve the quality of advice and support available to them - particularly given that most new homes currently being built are leasehold. The Mayor:
• Proposes working with developers to extend the London Charter for service charges and ground rents to the wider leasehold sector
• Supports the recently-published Government consultations on leasehold houses and ground rents
• Will push for fundamental reform of leasehold, which could include replacing with a fairer tenure.
5. Tackling homelessness and helping rough sleepers
An estimated one in fifty Londoners are homeless - that’s not just people on the streets, but also those in temporary accommodation and hostels – and it’s fundamentally due to the chronic shortage of affordable homes and the lack of security of private renting. Proposed measures to tackle the homelessness problem include:
• Investing in places for homeless Londoners to live
• Supporting better coordination between councils
• Providing leadership and coordination through a ‘No Nights Sleeping Rough’ taskforce
• Working with councils, charities, Government and others to boost services and support for rough sleepers
• Improving and expanding London’s network of hostels and refuges.
So, with a wealth of changes about to hit London, which may be extended to the rest of England, it’s well worth ‘watching this space’ to see what happens in London over the next few years and the impact on the Private Rented Sector.
For more information to keep up with the publication of the final version, you can read the Executive Summary Draft here >