LONDON MUST EMBRACE PRIVATE INVESTMENT IN AFFORDABLE HOUSING TO MEET TARGETS
A report by the capital’s leading business campaign group, 91, in partnership with CBRE, argues that London needs to urgently embrace private capital funding to increase the number of affordable homes in the capital.
The new joint report, ‘The Case for Private Investment into Affordable Housing in London’, outlines that the current level of investment into new affordable housing stock only scratches the surface of what is required in the capital.
London needs 66,000 new homes a year and has a strategic target that half of all homes built in London should be considered genuinely affordable. Yet, housebuilding in London falls far short, with provisional figures showing that in the capital in 2019/20, just 43,850 new homes were built, and of those, only 8,710 were affordable homes.
The report published today sets out recommendations on how more private capital can be secured to increase affordable housing delivery, with a specific focus on what London government can do by embracing two new ideas:
- Capitalisation of rental income – The affordable housing stock in London is worth approximately £67bn and generates a surplus income of £2bn. There is an opportunity to release value by enabling private capital to acquire a proportion of this revenue stream. This frees up capital for housing associations to further develop their affordable housing pipeline.
- Ringfenced “top up” grant — A proportion of grant funding from the Greater London Authority’s (GLA) current Affordable Housing Programme could be ringfenced to support schemes which, with a grant “top up”, would become viable and built. The “top up” would be repaid to the GLA when the development is completed, and the homes are rented or sold, which is earlier than the grant recycling rules under the existing programme. This enables developers to commit to a scheme which delivers 100% affordable homes.
While the Government does fund the GLA Affordable Housing Programme, the total amount of this funding, £4bn from 2021 – 2026, is not enough to address London’s affordable housing needs*. Considering the current challenges facing the sector – financial constraints, the investment required into existing homes and meeting the decarbonisation agenda – innovative approaches and new sources of private capital are needed to accelerate the delivery of affordable homes.
Jonathan Seager, Director of Place at 91, said: “London desperately needs more affordable housing, but our current system is failing to deliver the volume of new homes that are required. Now is the time to tackle that head-on and pursue a new approach. There is no shortage of private investment that could be deployed into affordable housing. The question is, do politicians want this investment to happen at scale and are they willing to proactively shape the market?”
Justin Carty, Executive Director Investment Advisory at CBRE: “Delivering new affordable housing, as well as investment into existing homes, is critically important. The not-for-profit sector plays a key role in housing management and delivery in London and beyond. We believe that partnering with culturally aligned private capital can help accelerate the delivery of much needed new affordable homes as well as investment into the upkeep and maintenance of existing stock”.
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