The affordable housing sector in Greater London is facing significant hurdles, as highlighted by the recent GLA Housing Starts and Completions report for April–June 2024. With a staggering 91% drop in total starts for 2023/24 compared to the previous year, the data underscores the mounting challenges in delivering affordable homes across the capital. As we grapple with these issues, it’s clear that conventional approaches are no longer sufficient. In this article, Surveyor, Geena Bains looks at the factors contributing to this crisis and explores innovative solutions that could help unlock stalled projects and meet the ambitious targets set by both the Mayor of London and the new Labour government.
Last week, the Mayor of London released the GLA Housing Starts and Completions for April–June 2024, revealing deeply concerning performance, and underscoring the challenges in delivering affordable housing across Greater London.
Of note, total starts in 2023/24 were down by 91% compared to the previous year. Furthermore starts are currently at just 2% of the quarterly average seen in 2022/23 when the market was more active. Boroughs such as Ealing, Newham, Lewisham and Tower Hamlets which command higher capital values allow for more effective cross subsidy – highlighting the challenge for development in lower value areas. Homes England and the GLA claimed all grant funding was allocated, but it’s clear that allocation doesn’t necessarily equate to delivery.
The S106 acquisitions market has also struggled in recent years, highlighting the complexities of housing delivery. Under the current Affordable Housing Programme (AHP), grant funding is unavailable for S106 units, leaving many RPs unable to competitively bid or even consider these sites. Developers, in turn, are unable to commence construction without an agreement with an RP for the S106 units. This situation is further exacerbated by delays in the planning system, viability disputes, and navigating the political landscape of planning committees.
Set against a challenging economic outlook, and given performance to date it comes as no surprise that the government is considering extending the Affordable Housing Programme 2021–2026 to March 2030.
The new Labour government has set a target of 1.5 million homes by 2029, with the Mayor of London aiming to deliver 116,000 affordable homes by 2026. There is hope that the upcoming spending review and autumn budget will offer more radical solutions to provide additional resources to affordable housing operators. Revamping the National Planning Policy Framework is a start, but it won’t be enough on its own. Attention must be given to Local Authority Housing Revenue Accounts to enable a wider range of solutions to affordable housing delivery.
Newsteer’s Commitment
We’re engaging with patient capital firms exploring ways to acquire S106 units to deliver social impact and enable stalled sites to move forward. While the growth of the For Profit Registered Provider (FPRP) sector has absorbed some of the S106 units out there, this does not make up for the relatively low acquisition activity for new S106s across the traditional RP sector. Market intervention alone won’t solve these challenges—more effective solutions are needed to streamline and support housing delivery, including more subsidy.
Newsteer is also working with pension funds to fund, deliver and acquire new schemes for affordable housing, including discounted market rent units for key workers but competing with mainstream developers delivering private sale units or co-living/PBSA remains challenging.
We are regularly engaged by developer clients to identify funding and delivery strategies to deliver affordable housing through partnerships including development agreements. Part of our work often involves facilitating “soft market testing” to ensure that any affordable housing proposed meets the needs of the acquiring entity (typically a Registered Provider, but could also be a Local Authority or a Social Impact Fund) with factors such as second stair cores, tenure and unit mix and general Building Safety Act requirements being of particular focus at present.
At Newsteer, we are uniquely positioned to guide local authorities and affordable housing operators through the complexities of today’s housing market, offering rapid and effective solutions to the challenges they face. Explore how we can help you achieve your goals by visiting our Living microsite. Discover our innovative strategies, success stories, and how we can partner with you to overcome the hurdles in affordable housing delivery. Visit Newsteer’s Living Microsite today to learn more.
Keen to get discuss your next project with us? Get in contact with Geena Bains or Mark Byles.
Geena Bains is a Surveyor in our Development Consultancy team.