Here’s how to get London building now
New housebuilding in London has ground to a halt. Urgent effort is needed to cut taxes on new housing, make the regulator more efficient and help first time buyers, says John Dickie
As we head towards May’s local elections, London’s acute housing crisis will be one of the most frequent issues raised by voters on the doorstep. Hardly surprising given the cost of housing is perhaps the most pressing social challenge our city faces.
It is also a major economic challenge. Our Growth Commission – which brought together leading figures from business, culture and academia in the capital to set out practical recommendations to accelerate the economy earlier this month – concluded that making housing more affordable would be the single biggest step to improving London’s productivity.
The fundamental need is to get more homes built. We have an ambitious target agreed between the Mayor and the government of 88,000 new homes a year. Last year fewer than 6,000 started construction.
We are lagging our competitor international cities. As of last October, new housing construction per 1,000 residents over the past 12 months stood at 0.58 in London, compared with 2.35 in New York and 5.27 in Paris. The high housing costs Londoners face is making it more difficult for firms to recruit and retain the staff they need to grow their business here.
The good news is that the government is taking action.
Last week ministers backed two new towns in Enfield and Greenwich, which together could deliver almost 40,000 new homes if the government provides the investment to build the transport infrastructure they need to connect them to London’s jobs.
Overdue reforms
Long overdue reforms to Britain’s byzantine planning system will also help lift housebuilding over time. And just last week, the government and the Mayor put in place a temporary package of planning reforms designed to get the market moving quickly and unlock stalled sites across London.
In doing so they listened to business. We surveyed our members on the initial proposals, set out in October, and found that across 67 development sites in London, representing over 86,000 homes, only 17 per cent – less than 15,000 homes – could potentially benefit from the original emergency measures.
The government and Mayor have responded, streamlining the process and changing timelines in a way that will enable significantly more homes to be built across London. A really good example of effective public-private policymaking.
But more needs to be done if we are to hit 88,000 new homes a year. Our Growth Commission identified three main areas where further action is needed.
First, ministers should pause and review the introduction of the previous government’s tax on new homes, the so-called Building Safety Levy. This will put up the costs of new development and cancel out much of the benefit from the temporary planning reforms designed to stimulate housebuilding. We do of course need to fix safety issues affecting our homes – but not at the expense of building new ones.
Second, more work is needed to improve the efficiency of the Building Safety Regulator to ensure it has the resources and processes needed to assess applications swiftly and effectively, while maintaining vital standards.
And finally, amid a difficult macroeconomic environment only made worse by the rising costs and mortgage rates from the war in Iran, the government needs to look at supporting buyers. The need for new homes in London is high, but effective demand is low given the cost buyers face. Targeted, time-limited support, such as a modernised Help to Buy scheme and temporary reductions to Stamp Duty Land Tax – particularly for first-time buyers – could help to get the market moving and pay for itself over time.
London’s housing crisis has been decades in the making. With the market grinding to a halt, getting the capital building requires a concerted effort by Whitehall, City Hall, the boroughs and the private sector. We all need to pull together to deliver the homes that London needs now and in the future.
John Dickie is Chief Executive of BusinessLDN