DATA: Social units accounted for just 21% of the overall on-site starts in London in 2015 – the lowest proportion since EGi has been monitoring the market.
Just over 7,600 social units got under way in 2015 – a reduction of 22% on last year’s total – with 4,000 starts in the outer boroughs, and 3,600 in the inner boroughs. This is in stark contrast to private units in the capital – which increased 16% year-on-year, closing in on 30,000 individual unit starts.
These figures come off the back of Sadiq Khan’s plan to enforce a 35% fixed affordable housing rate in new private-sector schemes, revealed last week by EG. The chart below indicates the recent fall below that particular threshold across London for new-build residential dwellings.
Khan’s 35% affordable flat rate
Viability has been an issue for London developers for some time – with many citing a need to row back their social offering on individual projects to make them deliverable in view of land prices and rising build costs. Developers are now often making a financial contribution to social housing in the form of a Section 106 agreement, rather than delivering social and private units as part of one scheme.
The social share of year-end permissions began falling in 2011. The following year saw social unit starts first tumble below 35% fof the overall total as a knock-on effect of fewer affordable units coming through to permission. And from 2013 onwards, social units have contributed less than 35% of the overall number of units completed during a calendar year – coming in at 31% in 2015.
That proportionate completions figure is likely to fall further in 2016, given the alarming drop-off in overall starts – particularly with the outer boroughs seeing a 1,800 drop-off in unit starts year-on-year, coupled with a 3,200 increase in private starts.
Perhaps most remarkably – and most tellingly for the state of London’s Residential development market – only three boroughs out of 33 saw social unit starts account for at least 35% of the yearly total: Barking & Dagenham, Bexley, and Greenwich.
That, compared to 2010, where 27 individual boroughs managed to hit 35% or more, indicates the ‘turn-around-an-oil-tanker’ scenario which faces Sadiq Khan at present.
I wrote earlier in the year about the difficulty in increasing both residential supply and affordability in London simultaneously – and this recent move to impose a non-negotiable rate of affordable development is perhaps indicative that the latter will be addressed first.
Khan alleged that Boris Johnson had “left the cupboard bare” with regard to affordable housing – and that is reflected in our figures.
Khan’s election promises on “genuine affordability” probably make a threshold necessary, despite the short-to-medium-term implications such a move might have on overall supply. Developers will have to re-work plans to fit in with the 35% imposition as well as the aforementioned market conditions with land and build costs – but if Khan decides that 35% of relatively little is better than what is becoming closer to 20% of quite a lot, then he might be on the right lines.
London Residential Research Report on Social Housing, Section 106 Payments, Student Housing and PRS is out next month.
