Affordable housing in London: does it provide a viable solution to the housing crisis?

Annika Kisby and Victoria Liddell Receivership

The London Plan, a spatial development strategy for the Greater London area written

by the Mayor of London, seeks to ensure that living in the UK capital remains both desirable and feasible for Londoners over the next 20 — 25 years. The London housing crisis, which saw property prices in the capital sky-rocket, has forced thousands of young workers to rent far longer than previous generations. This has been driven by a significant growth in demand and a chronic shortage of homes.

In a bid to address the housing crisis, housebuilders have delivered thousands of private homes for sale, however, there is still a shortage of genuinely affordable housing, including social homes, which means thousands of low-income families are forced to rent privately, often in poor conditions, for lack of alternative options.


The London Plan has sought to address this imbalance and provide a greater diversity of homes for those across the income spectrum. The Mayor has stipulated homes within affordable housing must fall under three categories — Social Rent, London Affordable Rent and Intermediate Housing, which comprises London Living Rent and Shared Ownership.


While well-meaning, are these just a highly confusing gimmick to both consumers, planners and developers or are they the key to solving the London housing crisis?


London Affordable Rent and Social Rent

The introduction of London Affordable Rent by the coalition government in 2011 involved the cutting of the grant funding allocated to housing associations to help them build homes for low income earners, allowing them to charge higher rents to make up for the reduction in financing.

The new regime offers less secure tenancies compared to social rented homes, whereby rent levels can rise to as high as 80 percent of local private sector levels. London Affordable Rent

differs significantly from national Affordable Rent and is based on target rent levels that social rents are gradually raised towards. For that reason, London Affordable Rent is ultimately higher than the average social rent in the capital, but in line with the rent that would likely be charged if a new social rent unit was built and set according to the same formula.


In April 2019, the Mayor of London updated the benchmark London Affordable Rents, which set a new standard level of rent across all London boroughs, aiming to make rents across the capital affordable to households on low incomes. Many see London Affordable Rent as a back door to Social Rent.


Effectively, a grant for social rented homes is being used to fund London Affordable Rent, which is more expensive, and as a result, we may see a reduction in the number of social rent units constructed.


London Living Rent

London Living Rent or intermediate rent is designed to help middle-income earners, whose household income is below £60,000. The scheme allows aspiring home owners to pay a discounted rate for their rental property, making it easier for them to build up a deposit for home ownership while paying rent. Provided at a cost above social rent but below market level, it is calculated on the basis of a third of average local household incomes and adjusted for the number of bedrooms in each home. The homes are offered on tenancies of a minimum of three years, during which tenants are encouraged to save and given the option to buy their home on a shared ownership basis during their tenancy.


Many have questioned the need for London Living Rent considering that Affordable Rent performs a similar function by allowing people to pay lower rents and save towards a Shared Ownership product.

London Shared Ownership

Shared Ownership is where you buy part of a home and pay rent on the rest. The Shared Ownership scheme was originally designed to help low-earning key workers, such as nurses, get on the property ladder, however, as a result of soaring house prices this scheme has become out of reach for less-well-off Londoners.


London Shared Ownership has been criticised for being too costly even for middle income households. The subsidised rent paid on a shared-ownership basis goes up in line with inflation, whereas private rents, capped by wage growth, have been increasing at a much slower pace. Very often, the qualifying household income for a share of a flat needs to be much higher than the borough average, making even partial home ownership increasingly unaffordable for many households.


Critics have argued that the scheme has deviated from its original goal of helping less-well-off Londoners, particularly because the earnings threshold to qualify for the scheme has been raised.


Whereas the London Plan has demonstrated a clear commitment to designing an inclusive housing policy for Londoners, the proposed options present a challenge to a range of stakeholders, including housebuilders, who have often struggled to make affordable housing requirements work.


It is yet to be determined whether the framework helps deliver a greater number of homes for the people who really need them, including the homeless and families living in hotels.


Perhaps, narrowing down the focus of the London Plan would help solve some of the issues in the intermediate term, given the finite resources available to the GLA. Focusing on those in dire need through targeted policies and eliminating confusion could be part of the solution, which could clear path for further reforms.