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Ending London’s Housing Nightmare

Unless Sadiq Khan can discover the courage to take on the profiteers driving London's housing emergency, his victory in today's mayoral election will mean little to the city's renters.

The housing emergency in London is bleak. Private renters in London now pay an average of 35 percent of their income on rent, around two and a half times the equivalent figure for 1980. Rough sleeping in the capital has risen by a massive 32 percent in the last year, the highest of any region and around one in fifty Londoners are trapped in temporary accommodation. Meanwhile, according to one report, the majority of the capital’s private renters, live in homes with at least one safety issue or health risk.

In a story of vast inequality, London is also the second-highest region for second homes, with 29 percent of purchases in the city reportedly for additional properties. Last year an estimated 24 percent of new builds in London were snapped up by overseas buyers, while according to Savills almost half of the UK’s purchases of luxury homes, those valued at £1 million or more, were in the capital. The city is riven by deep spatial divides, too, with overcrowding much higher among renters, and high rates of homelessness juxtaposed with huge concentrations of property wealth at the top.

It’s little surprise, then, that debate over housing has become central to the capital’s mayoral election campaigns, as Tory candidate Susan Hall attacks Sadiq Khan over falling housebuilding and the Greens pledge to ‘buy the supply’, rather than concentrating primarily on higher housebuilding.

Sadiq Khan, the Labour incumbent, has been focussing on pledges for more ‘genuinely affordable’ and council housing. Running for a third term, Khan has promised a programme of 40,000 new council homes by 2030. This target doubles City Hall’s previous goal, but London still needs many more to properly confront the crisis: Shelter’s figures, adjusted for the capital’s population, put the number of new social rented homes needed north of 125,000 by 2030.

Khan’s other key housing pledge, the creation of a public sector developer, is worth considering in some detail. The entity has the potential to provide major benefits for the city by reducing the housing system’s reliance on fluctuations in the development industry and allowing for housebuilding to better account for public value and need. However, for a public developer to work effectively, it will need to operate and make decisions in fundamentally different ways to its private sector counterparts — a vital distinction which seems largely absent from the plans laid out in City Hall’s 2022 review.

Specifically, these plans envisage a publicly owned developer building housing for social landlords. The scale of building made possible in this scenario could be great, but we should be hesitant about public resources being used to benefit the full spectrum of social landlords. In London, the term ‘social landlords’ covers a wide range of providers: some are commercialised Housing Associations with private rental businesses (ten of London’s twelve biggest housing associations are also private landlords); some are for-profit social housing providers; while council housing represents a diminished share of the sector. And since one of the main stated goals of Khan’s public developer’s would be the development of land currently owned by Transport for London, this set-up could see public land developed by the public sector and then handed over to private entities and commercialised bodies.

A focus on using the developer, which would be a city-wide entity, as a vehicle to support council housing projects specifically would make far more sense, and ensure that public land is developed for public housing and public benefit. For similar reasons, widening its focus from primarily developing public land to developing council housing across the city would be of far greater value. This would leave the public developer in a better position to realise its potential by addressing the predominance of the big developers and commercially-driven housing associations in shaping London’s housing system.

Forwards, Not Backwards

The limits of these new commitments are paralleled by a regression noticeable in Sadiq Khan’s housing policies elsewhere. In 2021, Khan unveiled the ‘Right to Buy-back’ scheme, subsidising councils to purchase homes from the private sector and convert them to council housing. The scheme increased council housing stock by 1500 in the first year, and though this number fell short of the scale of action required to rebuild council housing stock (not least because of the funding constraints on the Greater London Authority), the plan represented one of the first efforts in decades to shift the balance from private renting to public housing.

With the Scottish government and other councils following suit, this year’s mayoral election could have been an opportunity to build on this scheme’s first-year success. Though the scheme has been retained, however, the mayor’s plans now support buying 10,000 more homes for councils over a decade, or 1000 a year, which leaves it more limited in scale than Scotland’s acquisitions programme, let alone one equivalent to some of Europe’s capitals. A lessening of ambition appears to have taken place where precisely the opposite is needed.

Last spring, the Mayor also announced a call for councils to be granted powers to charge limitless tax on empty homes, only for the demand to all but disappear in the following period. At the time, City Hall estimated vacant properties in the capital were valued at a total of £20 billion, with an estimate published in City AM last year indicating an even larger figure of £130 billion. London has a lower rate of empty properties than some of its European equivalents, but if enacted, the tax plans could have done a great deal to bring much-needed housing back into use, acting as a stick while funds for public buyouts served as a carrot. The mayor cannot enact this policy change without more powers, but insisting on demanding them, as Khan has done for years over rent controls, would have shown a commitment to the bold housing agenda London needs.

London is both where Britain’s housing emergency is most acute and one of the cities where the appetite for far-reaching change is strongest. Of course, those who benefit from inflated house prices and concentrations of wealth will almost certainly oppose this. But if Sadiq Khan is re-elected for a third term, as the polls suggest, there will be little prospect of meaningfully addressing the crisis unless he and the GLA show political courage — and a willingness to direct the scale and powers of City Hall to much bolder ends. London needs nothing less.