Last week the think-tank Centre for London released a new report: ‘Strength in Numbers: Funding and Building More Affordable Housing in London’. It examined the role Local Authorities in Greater London can play in fixing the affordable housing crisis in the housing market by working together.

Nudge Factory was pleased to attend the report launch near Trafalgar Square and we have summarised the discussion that took place as part of the event.

The main thrust of the paper suggests boroughs that possess the capital to build but not the land, should join forces and collaborate with those that possess the land for new builds but lack the funds. For example, the densely populated Kensington and Chelsea in Central London pooling resources with the leafy suburb of Bexley that borders on the Garden of England county Kent.

There is a vast disparity in the costings of building new residential dwellings in an Inner London location compared to an Outer London one just a few miles away: in some places the price of building one unit in a central zone would give you the ability to build four in one a little further out. It is for that reason the report argues the provision of affordable housing should be prioritised in Outer London areas with lower land values in order to maximise the value of investment. Although to do this there needs to be greater funding flexibilities and cross-borough collaboration.

The report points to a number of changes that could be made to existing legislation that currently constrains how Local Authorities deploy and mix funding. These include:

  • Right to Buy Receipts: Current rules stipulate that RTB receipts can be only used to fund up to 30% of the capital cost of a new replacement home, making it difficult to replace housing stock lost through RTB as quickly as it is needed. Also, if the receipts have not been used in the three years after being received, then they must be returned with interest either to the Treasury or the Greater London Authority. Centre for London interviewed many Local Authorities for the report and discovered that just one in six properties that are sold via RTB are replaced with a new unit. Without such restrictions RTB receipts would make a notable source of funding for new builds and land purchasing. The report recommends that the Government extend the period for spending RTB receipts to five years from three, increase the percentage allowed to be spent on the build of new units, and permit the spending of receipts outside of borough lines to enable inter-borough collaboration.
  • Commuted Sums: Whilst the subject of commuted sums can be something of a contentious issue in London – the Mayor’s 2016 Supplementary Planning Guidance discourages cash-in-lieu of affordable onsite housing – boroughs that have accepted and actively encouraged the practice have seen the amounts received in recent years increase. Between 2010 and 2015 Inner London boroughs received £800 million in commuted sums, of which only 8 percent has been spent. An issue with these sums is that the legality of investing them outside borough lines is currently unclear, with many Local Authorities interviewed receiving conflicting legal advice. As such, Inner London boroughs are unable to spend these funds within their boundary as they lack land, and cannot do so outside of the borough as the ramifications are not clear. It is for this reason that the report suggests the Government give explicit permissions for commuted sums to be utilised outside of borough boundaries to enable them to be used efficiently and to provide a greater return on investment in areas of lower land value.

The report also states that for the greatest benefits, the Greater London Authority and London Councils should play a role in brokering these collaborative relationships and perhaps even publish a best practice guide. This is something that was put to James Murray – Deputy Mayor for Housing and Development – after his speech at the launch of the report. His response was that it would not be a one size fits all solution, or even a one size fits many, as all boroughs have their own issues. Instead he said that the GLA would approach this on a case by case basis and talk to the individual boroughs to assess their needs, and whether they wanted ongoing continual support or just help in an occasional advisory capacity then that is what they would get.

However, Murray also added that currently the GLA do not have the powers to assist boroughs in meeting the suggestions and aims of the report, and that first the Government would have to make the necessary legislative changes. When asked if there was any hope of the Government taking heed of the report, Murray replied that it isn’t enough to just demand these changes in a report and that a more comprehensive case must made and put to Ministers.

There was also a panel discussion – chaired by Chief Executive of Dolphin Living, Jon Gooding – which added interesting insights and commentary on the report, the aims of which the panellists were all broadly supportive of.

Ken Jones, Director of Housing and Growth at the London Borough of Waltham Forest, said that Local Authorities really need to “get back into the housebuilding game” if the housing crisis is really to be tackled effectively. Reflecting on an area of the report regarding construction costs he said that they were a big issue, suggesting greater London-wide collaboration on modular housing could go a long way in addressing this.

Laura Johnson, Director of Housing at the Royal Borough of Kensington and Chelsea, cited that her borough had a pressing problem in attracting people such as teachers and others on the average and below yearly wage as it would be effectively impossible for them to afford to live in the area. Johnson said that collaboration with an outer London borough (or perhaps even one outside London entirely) would go a long way in alleviating this problem, also adding that they have the funds to build but greatly lack developable land.

Overall, the arguments contained within the report make for compelling reading, however it is not just legislative constraints that pose a problem for collaboration. There are other issues cited as barriers that might be just as difficult to remedy:

  • Housing Allocation and Nominations: If borough A invests a significant amount of funding to build units in borough B, then Borough A will want a notable percentage of the rights to nominate tenants to justify the amount spent. Borough B are unlikely to allow the build of a number of new units on their land if none of the units are available to them to meet their local housing needs, so would also want significant tenant nominating rights. Deals would need to be brokered that served the needs of the boroughs involved, and this would take time.
  • Public Perceptions: Often when there is talk of moving a tenant outside borough or city boundaries there are outcries of ‘social cleansing’ in the media and public domain, presenting opposition before anything has been decided in full. For greater cross-borough collaboration to be effective, then a more open and detailed discussion on how the boroughs would work together to tackle the affordable housing crisis in London would need to take place to foster positivity, wider support and to remove the negative connotations related to the issue.
  • Public Services: If borough A goes ahead and builds new units in borough B and nominates tenants, then it is the borough of origin – borough A – that takes responsibility for issues such as rental supports. However, it would be the host borough – borough B – that provides the public services to the tenants such as healthcare, social care, and education provision. Then would come the question of Council Tax, to which borough would or should the tenants pay this to?

It would appear the practicalities and logistics of inter-borough collaboration are just as problematic as the current legal and policy position.

Given that the lack of affordable housing is one of the biggest and most prominent issues currently facing London – and that is something that is likely to remain unchanged for a quite a while unless greater action is taken – it could be worth, at the very least, considering and consulting further on inter-borough collaboration on the delivery of new affordable units.

If you are interested in a more detailed briefing and to hear more about our Public Affairs Practice, please contact David Park (Partner) at david@nudgefactory.co.uk