London Living Rent
London Living Rent (LLR) will offer Londoners on average incomes a more affordable rent, enabling them to save for a deposit. It is a new type of affordable housing being introduced as part of Homes for Londoners, which brings together all of the Mayor's work to tackle the housing crisis.
The Mayor is introducing LLR as an intermediate affordable housing product with low rents that vary by ward across London. As a Rent to Buy product, this will help, through sub-market rents on time-limited tenancies, households on average income levels to save for a deposit to buy their own home.
This guidance is published alongside the GLA’s 2016-21 affordable homes programme funding guidance and the draft Affordable Housing and Viability Supplementary Planning Guidance.
The Mayor published initial proposals for LLR in September 2016, and the final details have been informed by discussions with a range of providers, London boroughs, national government and other stakeholders.
LLR is an intermediate affordable housing product, with rents based on one third of average local household incomes and targeted at middle-income households in London’s private rented sector who are looking to build up savings for future shared ownership or outright purchase. Eligibility is restricted to households that are currently renting, with a maximum income of £60,000* and who are not currently able to purchase a home (including through shared ownership) in the local area (see ‘Allocations and priority’ below for more details on how LLR homes are allocated). When funded through the GLA’s programme, LLR is expected to actively support tenants into home ownership within ten years.
*This figure has been chosen as it represents the income (rounded to the nearest thousand pounds) required to afford a two-bedroom LLR property in the most expensive ward in London, Queen’s Gate in Kensington and Chelsea
The GLA has published maximum rents by number of bedrooms for new LLR homes (inclusive of service charges) in every ward in London, and will update these figures on an annual basis. Providers are welcome to set rents below these levels if they wish.
The rent levels are derived from average local incomes and ward-level house prices using a multi-stage process, set out in Appendix 1. Broadly, the rent for a two-bedroom property is based on one-third of the local median household income, and across London as a whole comes to £968 a month, or 67% of the median monthly market rent in London as reported by the Valuation Office Agency for 2015/16.
Rents for LLR homes vary according to their number of bedrooms. Using the two-bedroom rents for each ward as a benchmark, the rent for a one-bedroom home is 10% lower, for a three-bedroom home 10% higher and for a four-bedroom home 20% higher. As a final affordability safeguard, the rent for any individual unit must be at least 20% below its assessed market rent.
LLR homes delivered in partnership with the GLA will be available to households on Assured Shorthold Tenancies, with the rent allowed to increase by up to the rate of CPI inflation each year. The GLA encourages providers to help as many households as possible over the lifetime of each LLR home, but in order to ensure stability does not expect tenants to be required to move for at least three years from the start of their tenancy. Providers delivering LLR homes without direct GLA involvement are able to choose appropriate tenancy terms.
Providers funded by the GLA are required to advertise their LLR properties on the GLA’s London-wide portal (www.sharetobuy.com).
Where there is more than one eligible applicant, providers should determine priority through use of a local intermediate waiting list (if one exists), by using a priority group or groups identified by the local borough, or as a last resort by first-come, first-served.
Providers will be expected to satisfy themselves that households can afford to both pay the rent (without recourse to Housing Benefit) and accumulate savings, using standard affordability tests.
LLR homes delivered in partnership with the GLA should enable tenants to put themselves firmly on the route to home ownership. Providers are expected to take into account prospective tenants’ ability to save as part of their affordability assessment and to actively support tenants into home ownership within ten years. In most cases tenants should be offered the right to buy their current home on shared ownership terms at any time during the tenancy, and if no tenant has taken up that right within ten years in most cases the provider would be expected to sell it to another eligible purchaser on a shared ownership basis.
Build to Rent providers intending to retain long-term ownership of a whole block are not required to sell LLR properties as shared ownership. Where the property is not grant-funded by the GLA the provider may choose to retain the properties for a longer-period of time (where this is the case it should be made explicit to the prospective tenant that there is no right to shared ownership). Where the tenant does not have the right to purchase the homes in which they live on a shared ownership basis the landlord, if they are also building shared ownership themselves, or through group companies, will be expected to provide advice and assistance in relation to other shared ownership homes, should the tenant wish to purchase one.
As set out in the draft Affordable Housing and Viability SPG, the GLA will usually expect the affordable housing ‘offer’ on Build to Rent developments to comprise discounted market rent, managed by the Build to Rent provider and delivered without grant. The Mayor would prefer the discounted market rent to be at LLR levels throughout, but the SPG also provides details on other options. Rents could bet set at the LLR level at the start of each tenancy, or the discount to market rents could be fixed at a rate that makes the rent equivalent to the LLR rate for the initial letting, with this discount then being applied to the current market rate for the development at the start of each new letting. In either case rent rises should be limited to the CPI growth rate within tenancies.
Several councils are also interested in delivering LLR on new or ongoing schemes, whether through the Housing Revenue Account or through separate companies. The GLA will work with interested boroughs to identify any obstacles to council-led LLR delivery.
- Annualised median gross household income for London is calculated from Households Below Average Income (HBAI) data. Using the latest available data (currently the 2014/15 dataset), this gives a figure of £35,618.
- To estimate median household income for individual local authorities, this London-wide figure is re-scaled at borough level using data from the Annual Survey of Hours and Earnings (ASHE), specifically the average of the last three years of annual gross pay. For example, the median gross annual pay for all employees in London average over the three years 2013 to 2015 was £28,112, while in Lambeth it was £28,679, around 2% higher. Applying to this increment to the London-wide household income figure results in an estimated median household income figure for Lambeth of £36,336.
- These estimated local median household income figures are divided by three and then again by twelve to give borough-level monthly rent benchmarks for two-bedroom LLR homes. In Lambeth this figure is £1,009.
- To reflect neighbourhood-level market conditions, these monthly two-bedroom benchmarks are varied at ward level by a maximum of 20% above or below, in line with the median price for flats sold in the ward over the last three years. For example, in Lambeth the highest ward-level figure is in the Oval ward at £1,211, while the lowest is in Knight’s Hill at £807.
- The ward benchmarks derived above are for two-bedroom homes, and the rent for units of different sizes varies from these benchmarks by 10% per bedroom. For example, in the Knight’s Hill ward of Lambeth the maximum rent is £807 a month for a two-bedroom LLR home but is £726 (90% of £807) for a one-bedroom home, £888 for a three-bedroom home (110%), £968 for a four-bedroom home (120%) and so on.
- Finally, to ensure that LLR homes are always considered affordable in planning terms, the rent for every home must at least 20% below the assessed market rent for that unit.