Much as last week’s Budget became centred on housing policy, so too has Sadiq Khan’s tenure as Mayor of London. The capital faces an uphill struggle to build the homes it needs to meet demand, and Mr Khan has had to come up with some radical ideas to succeed.
But just how daring are they? The run-up to his long-awaited draft London Plan, which sets out his strategy for planning and housebuilding across the capital, was making developers nervous. Last month he suggested that 65pc of new homes should be affordable, potentially crunching housebuilders’ margins and making sites financially unviable.
This turned out to be an empty threat, to the relief of London housebuilders. When it was unveiled today, it set fixed thresholds for affordable housing: 50pc on public land and in certain areas, and 35pc for private developers. This “creates certainty,” said Jon Di Stefano, chief executive of Telford Homes, while Mount Anvil boss Killian Hurley said he had “from the outset been a vocal supporter” of the policy.
That developers are throwing their weight behind this substantially higher level of affordable homes signals how City Hall is wielding its power. Developers will simply not get planning permission if they don’t provide enough affordable housing, and Mr Khan has not been reluctant to reject proposals.
Demand to build more densely on the outskirts near transport hubs will lead to more skyscrapers in suburban areas
But it could have unintended consequences by devaluing the price of land, says Brendan Sarsfield, chief executive of housing association Peabody. “Will the people who own land bring it to market, or will they wait for the next Tory mayor to come in and change the policy? It may lead to land being withheld. We need a strong compulsory purchase order system to make sure people cannot play games when we desperately need land for development.”
One of the biggest changes heralded by the document was a huge increase in the annual target for homebuilding, from 29,000 to 66,000 a year by 2029. This seems like a potentially insurmountable task, particularly as Savills has forecast housing supply will fall sharply from next year as the volatile London development market has scared off investors.
A report earlier this year by accountants Grant Thornton found that one in three homes given planning permission were not built. “We are not going to be delivering 66,000 homes in a hurry,” said Mr Di Stefano. “That is not him saying ‘I expect to deliver that many a year, but rather this is what we need to build to meet the demand in London’. We have a real challenge to keep it going…It doesn’t matter what the number is, but it gives us confidence to get on with job and build more.”
We are not going to be delivering 66,000 homes in a hurryJon Di Stefano, chief executive of Telford Homes
Despite this huge change to the new homes target, the plan as a whole was quite conservative, with little changing to rules over protected views and safeguarding the green belt. Adam Cradick, a senior director at CBRE, said that “a more flexible approach to the green belt would have been welcomed, as relying on increased density alone in order to deliver these targets will be a challenge.”
Previous housing targets have not been met, so what makes this plan different? Much like the Budget, there were subtle but important changes in planning guidance, such as an emphasis on “build-to-rent” developments pursued by Mr Khan’s deputy mayor, James Murray; these are key because they speed up delivery and cater to the ever-growing “generation rent”.
The plan has also promoted building on small sites, although this well-meaning proposal could be stymied with more applications hitting already struggling planning departments. The plan also suggests that there needs to be sufficient supply of land and buildings in different parts of the capital to meet current and future demand for industrial properties, such as places to hold wholesale markets or locate distribution hubs.
Where density could be increased in the outskirts of London
It will have a tangible impact on the fabric of London: a demand to build more densely on the outskirts near transport hubs will lead to more skyscrapers in suburban areas, potentially changing their character. “This ‘rabbit out of the hat’ trick [of building 60,000 homes a year] can only be achieved by significant densification,” said Ian Anderson, a partner at Cushman & Wakefield. “A number of the outer London authorities will need to see sharp increases in house building and will need to move their mindset from a suburban idealism to one which is more urban in focus.”
This shift to outer zones is already reflected in market changes, but this will be a “very difficult balancing act”, argues Adam Challis, head of residential research at JLL. These communities may feel that local public services are being undermined by developments that are foisted upon them. “The problem is the Mayor doesn’t control that budget… If you don’t have the community’s support, and that becomes a greater groundswell of anti-development rhetoric in those outer zones, then Mr Khan’s ambitions won’t be achieved.”