A few weeks ago, the mayor of London Sadiq Khan published his draft housing strategy to the Greater London Authority.
The headline aims are impressive: in addition to the more than £3bn to build 90,000 affordable homes in London by 2021 announced back in November 2016, Khan wants to raise a further £250m from land value capture to fund new housing starts, and is calling for the Government to devolve London’s £4.3bn stamp duty revenue to the city.
These are all good objectives, and Khan is right to push for control over stamp duty, something we at the Centre for Cities called for in our 2015 report Beyond Business Rates. Unfortunately, however, the mayor has also continued one of the less helpful policies of his predecessors by ruling out the reform that could most immediately relieve London’s housing crisis – building on the capital’s green belt.
The reality is that London is not building enough new homes. The housing strategy notes that while London should be building at least 50,000 homes a year to keep up with demand until 2035, it is building less than 20,000 a year. As the second least affordable city in the country, London is building fewer homes per person than Barnsley, the second most affordable city in Britain.
This shortage in housing squeezes living standards and fuels poverty in London. As the strategy points out, a third of private renters are spending more than half of their income on rent, while one in fifty Londoners are now homeless. Working across the public, private, and non-profit sectors to improve the housing market, such as through supporting SME builders and improving the skills base, as well as innovative methods such as building 10,000 homes on TfL land, are all needed to stabilise housing costs in the medium term.
But despite the mayor’s ambition and the positive proposals in his plan, these reforms do not go far enough in tackling the emergency in London’s housing market. Although the mayor wants to prioritise development on brownfield land, there is too little to meet London’s housing needs. If London met all of its annual need for housing on brownfield land, all of the land would be used up in less than eight years.
Even this is an overestimate, as three decades of a “brownfield-first” approach to housing has already creamed off all but the least suitable sites for new homes. Those brownfield locations left in London are unusually expensive, complex, or undesirable to develop and are therefore less viable for affordable housing, if they are viable at all.
The short supply of land in London could be solved if we were prepared to build on green belt land with little environmental value close to existing infrastructure. Our report Building Homes Where We Need Them shows that if 60 per cent of green belt land within 2km of a train station in Greater London was developed into suburban housing, London could build an additional 432,000 homes.
Rolling this out to the rest of the capital’s green belt could unlock a further 3m new homes. Across the ten least affordable cities in Britain including Oxford, London and Bristol, building on less than 5 per cent of green belt land in the ten least affordable UK cities would supply 1.4m homes close to train stations. These new homes would be cheaper to develop and more locked into existing infrastructure than those on London’s remaining poor-quality brownfield sites, making it possible to supply more affordable housing.
However, at the moment, almost no housing is built on London’s green belt. From 2014 to 2017, local authorities released 170 hectares of London’s green belt for development – just 0.03 per cent of the capital’s green belt land, which at 514,030 hectares covers an area three times the size of London.
The mayor’s decision to rule out building on the green belt (as his predecessors did) not only blocks hundreds of thousands of potential new homes: it imposes a hidden cost, by making the housing that is being built on brownfield land more scarce and therefore less affordable for Londoners. In other words, London’s high housing costs subsidise the lack of new homes on green belt land.
London’s housing crisis can be traced back to a range of factors, and many of the mayor’s proposals will help tackle them. But by ruling out new homes on the green belt, the mayor is leaving the lowest-hanging and biggest fruit unpicked, and making housing less affordable for Londoners. To solve London’s housing crisis, green belt land will have to be released – the only question is when.
Anthony Breach is an economic analyst at the Centre for Cities, on whose blog this post first appeared.