Mayor says bold reform and devolution needed to tackle housing crisis

05 September 2017

Sadiq Khan has warned that City Hall and London’s boroughs are fighting to solve the capital’s housing crisis with one arm tied behind their back, and says it is now vital that the Government grants them greater powers and resources to take the action that is required.

Today (5 September) he highlighted research prepared for the forthcoming London Housing Strategy that reveals that the level of Stamp Duty paid on homes in London has soared yet investment in affordable housing has fallen. The two figures last stood equal in 2008/09 at around £1bn each, but since then Stamp Duty receipts have soared to £3.37bn while affordable housing investment in 2015/16 was just £73m.

Although the Mayor's record settlement with Government for affordable housing investment over the next few years will see spending on new homes rise, the Mayor said these figures underlined how greater devolution of London's resources could enable a major step-change in its ability to tackle the housing crisis. Such a move would be in line with the recommendations of the London Finance Commission, originally set up by Boris Johnson, and reconvened by Sadiq, which earlier this year called for devolution of the full suite of property taxes, including council tax, business rates and Stamp Duty to the capital.

Alongside the Stamp Duty analysis, statistics to be published in the upcoming draft London Housing Strategy will set out how: 

  • Since 2010 average private rents in London have risen more than five times as fast as average earnings. Average private rent for a one-bedroom­ home in London is now more than the average for a three-bedroom home in every other English region.
  • In 2016, the gap in house prices between London and the rest of the country reached the widest ever recorded. Between 1990 and 2016, the proportion of households in London headed by someone aged 16-24 who owned their own home fell from 25 per cent to three per cent.
  • More than a quarter of Londoners now live in poverty once housing costs are taken into account. One in 50 Londoners is homeless, and there are 90,000 children housed in temporary accommodation.
  • Forty per cent of nurses and a similar proportion of young teachers in London say they expect to leave within the next five years because of high housing costs. More than half of Londoners say they are stressed by housing costs, rising to three quarters of private tenants.

The Mayor of London, Sadiq Khan, said: “These figures show yet again why the housing crisis is the biggest challenge facing our city today and I’ve been honest with Londoners from the start – we won’t turn things round overnight.  This is going to be a marathon, not a sprint, and we can't do it with one hand tied behind our backs.

"The deal I struck last year with Government for greater investment in affordable housing was welcome and a vital first step towards tackling the housing crisis, but they must give London greater control over our own resources so we can lead a step-change in tackling the shortage of affordable homes in London."

In his draft housing strategy and London Plan the Mayor will set out how he intends to push City Hall’s powers to their limits by directly intervening to get housing schemes moving, investing record sums in affordable housing, and setting clear homebuilding targets for every council in London.

London is unique amongst its global rivals in its reliance on national Government for powers and funding. Only seven per cent of the tax paid by residents and businesses in the capital is redistributed by the Mayor and borough councils. That means London is forced to rely on grants from central Government for 74 per cent of its funding, compared to 31 per cent in New York, 25 per cent in Berlin, 17 per cent in Paris and just eight per cent in Tokyo.

Today the Mayor is making the argument that with more Government support he could go much further in addressing the housing crisis. He argues that:

  • Building on the recommendations of the London Finance Commission, the Government should deliver greater fiscal devolution to help the Mayor support greater investment in new homes and infrastructure. That should include a long term and stable affordable housing financial settlement, large enough to meet London’s need for more genuinely affordable homes.
  • New powers and resources are needed to bring forward more land for new homes more quickly, and to ensure more of the profits from development are used to pay for the infrastructure and affordable housing that are needed to support population growth.
  • The Mayor needs a formal role to drive forward the release of surplus central Government owned land, building on City Hall’s track record of getting its own surplus land, and land owned by TfL, released for housing.
  • A package of reforms must be developed to free up councils and housing associations to build more, including a long-term inflation-linked rent settlement, removal of the Housing Revenue Account borrowing caps, and reform of the rules governing Right to Buy replacements.

Building on devolution of the Adult Education Budget from next year, the Mayor also believes London needs much more control over its skills and apprenticeships system, to help the capital prepare the industry for Brexit and ensure more Londoners are equipped with the skills that construction employers demand.

John Dickie, Director of Strategy and Policy at business group, London First, said: "We must start building 50,000 new homes a year to keep the city working. Giving London's Government greater control over taxes raised here will make it easier to plan, finance and fund investment, helping to unlock the housebuilding that Londoners so desperately need."

Paul Hackett, Chair of g15 and CEO of Optivo, said: “The housing crisis threatens London’s competitiveness as a world city.  As the largest housing associations in the capital, g15 recognise that building long-term partnerships is essential to achieving our ambitious housebuilding goals.  By working together we can achieve much more than we could alone.  We therefore welcome the Mayor’s wide ranging proposals on land and funding. 

"These proposals will help create the conditions for housing providers to increase the pace of housing-building in London. This will enable housing associations to maximise the delivery of homes that are genuinely affordable to ordinary Londoners.  We strongly endorse the Mayor’s call for an inflation linked rent settlement for social landlords.  Rent certainty will help housing associations raise long term funding as we ramp-up our development programmes to help tackle London’s housing crisis.”

Professor Tony Travers, Director of LSE London, said: "Devolution of housing powers would allow the Mayor and Boroughs to deliver more affordable housing and at a faster pace. Devolution would be good for that and many other reasons."

ENDS