By Robert Clear, Researcher in the City of London Research Team
The Greater London Authority estimates that the capital needs 48,841 new homes per year up to 2034/5 to keep up with the demands of a growing population. Around half that number are being built. Of the 48,841 homes required annually, the GLA estimates that 48% need to be market rate, 20% intermediate (homes for sale and rent provided at a cost above social rent, but below market levels) and 32% social or affordable rent.
Not only are too few houses being built, but the pattern of house completion does not reflect the pattern of need. Of the 23,640 house completions in 2013/14:
- 5% (17,600) were market housing, compared to the 48% (23,217) that will be required each year, according to the GLA.
- 9% (3,750) were social rent and 540 were affordable rent, compared to the 32% (15,722) required.
- 2% (2,400) were intermediate, compared to the 20% (9,902) required.
Net conventional housing completions by tenure, London 2004/05 to 2013/14
The heavy bias towards market housing is accompanied by a longstanding reliance on the private sector to deliver the bulk of supply – a reliance that has increased over the past forty years. Throughout the 60s and 70s local authorities were responsible for the greater part of housing construction. This trend, however, changed from the 1980s, and since then the overwhelming majority of London’s housing construction has been carried out by the private sector, with a significant (though minority) share undertaken by housing associations.
Of the 24,363 dwellings were completed in London in 2015:
- 6% (16,464) were built by the private sector.
- 8% (7,759) were built by housing associations.
- 5% (130) were built by local authorities.
The relationship between London’s population and its housing supply has changed significantly over time. Between 1961 and 1991 the capital’s population shrank by over 1.6 million, but during that period the number of homes increased by over half a million. Between 1991 and 1998, supply increased at less than 1 percentage point above population growth, and real house prices were stable, rising at an annual rate of about 1%.
Between 1998 and 2014, however, the rate of housing supply growth fell well below population increases. In this period London’s population grew by 21.1%, but dwelling stock grew by just 12.7%, with house prices increasing by 9% per year. There is also a longstanding trend for the conversion of houses to flats (as well as the conversion of other types of building to residential use), which has driven up London’s population density – the GLA predicts it will increase by 19.5% by 2041.
Percentage change in number of jobs, people and homes in London, 2009–14
In recent years the disparity between the increase in jobs, people and houses has become acute. 698,000 jobs were created in London between 2009 and 2014 - 14% increase, and the population grew by 596,000 (over 7%). But during that time only 120,000 homes were added - a less than 4% increase.
These figures illustrate the scale of the challenge facing policymakers. Business leaders must also engage with this challenge as London’s supply crisis threatens to overburden workers with ever increasing housing costs and erode the capital’s competitive advantages.