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Senior Seminar

Delivering affordable housing in London 6 March 2013

Affordable Housing in London Jo Wilson, Director, Future of London

Affordability Delivering affordable housing in London • 6 March 2013

• Mean social rents in London higher than rest of England • Private monthly rents high and rising • Affordability of housing for first time buyers in London:

Acute need Delivering affordable housing in London • 6 March 2013

• Average number of people on household waiting lists:

• Overcrowding • Homelessness

Contracting supply‌ Delivering affordable housing in London • 6 March 2013

New affordable housing starts and completions

…and Rising Demand Delivering affordable housing in London • 6 March 2013



























0 2001

Trend based population projections, Greater London (base of 2011 mid year estimate)

• 2011 Census data – 10 million megacity by 2030:

Source: Greater London Authority (2012) ‘GLA Population Projections 2012 Round, Trend Based, Borough SYA’

• Welfare Reform

Solutions? Delivering affordable housing in London • 6 March 2013

• Affordable Rent Model • Local funds e.g. Southwark • HRA reform e.g. Hackney

• Affordable homes in Barking and Dagenham • GLA land assets

A sustainable delivery model Delivering affordable housing in London • 6 March 2013

• Agreeing definitions of ‘affordability’ and ‘need’: Who are we building for? • Boroughs should continue to innovate, but national policy response urgently required • Building on the Affordable Rent Model

Finance Innovation and Affordable Housing Supply: An International Evidence Review Kenneth Gibb March 2013

Introduction • A Joseph Rowntree Foundation evidence review project with Duncan Maclennan and Mark Stephens • The project combined desk-based review, the application of researcher specific knowledge of countries and systems, plus advice from consultants and in-country colleagues • Semantics: - international & national – policy transfer - what does innovation mean? - what does affordable mean? - what about financing? - policies, models or projects

Project Overview

Findings from the Literature • No simple market solutions that will close the gap between private cost and return requirements, remaining affordable, without effective subsidy of some kind. • The national housing system and all of its institutional features and path dependencies, is a critical frame within which approaches to finance innovation take place. • Many models and potential approaches exist or can be conceived but they all have strengths and weaknesses when set against key criteria: - scalability; - dependence on supporting, complementary institutions; - value for money; and - effective targeting

Ten Themes 1. 2. 3. 4. 5. 6. 7. 8. 9.

Appetite for state-backed guarantees Contestable supply & partnership Devolved governance Flexible, blended subsidy Collaborative solidarity Separable management role Simplicity & design features Affordable = shallow subsidy Exploiting or ‘sweating’ existing assets (including revolving funds) 10. Regulatory stance

Conclusions: Re-thinking Policy • The need for a wider long term policy framework • An approach to affordable housing policy within a wider vision of place and a clearer recognition of market failures and the risks to the most needy • National policies must be based on consistent local estimates of need to maximise the best use of scarce resources • In the light of the AHP/S106 debacle, we would support ‘rule consistency’ in housing policy • We must also test policy ideas against rigorous criteria • We caution against the flavour in some quarters for fundamental radical overhaul

Delivering affordable housing in London Wednesday 6 March 2013

The Affordable Rent Model in London The Future of London project Andrew Heywood

Andrew Heywood Housing, Mortgage markets, Regulation, Governance, Europe • • • • •

Housing: finance, policy, low-cost homeownership. Mortgage markets: trends, opportunities, threats. Regulation: policy, practice, lenders, housing providers. Governance: effective decision making, strategy, audit. Europe: housing and mortgage markets, regulation. Andrew Heywood is an independent consultant specialising in the above areas and an associate of leading consultants Campbell Tickell. A visiting fellow of the Smith Institute, Andrew has written and spoken extensively on housing and lending issues. He is Editor of the journal Housing Finance International ( Andrew was formerly Deputy Head of Policy at the Council of Mortgage Lenders. He has been at the centre of housing, housing finance and mortgage market developments for many years and has unrivalled contacts amongst policy makers, housing providers and lenders.

Andrew Heywood Consulting: 01440 730218/07929512057

Affordable Rent model (ARM) The FoL project will focus on: • Who is building ARM in London and why, • How much ARM is being built and where, • The extent to which ARM is viable in the short term and after 2015/16 • Whether ARM is consistent with housing strategy and housing need in London • What part ARM should play after 2015/16

ARM project What we are doing: • Review of existing literature, • Interviews with HAs, LAs, and other stakeholders, • Analysis of the data on ARM in London • Case studies highlighting aspects or effects of ARM development, and; • A final report.

ARM: some emerging questions Conversions (re-lets): • Will RPs achieve the rate of conversions they require and at sufficient uplift? • To what extent are lower than anticipated conversions being subsidised by RCGF or other sources?

ARM: emerging questions Affordability: • Welfare reform is key; particularly the cap but also downsizing and direct payment, • Will the Treasury necessarily save money with HB reform/ARM combination? • To what extent will lower rent levels mean lower numbers? • What about larger homes and the Mayor’s target for family-sized homes (36%)? • Where are these homes being built?

ARM: emerging questions Risk and sustainability: • How much riskier does the higher borrowing and market risk (market-linked rents, LCHO etc.) make ARM? • What about housing benefit risk? • Will RP financial capacity be eroded? • Will HAs continue to undertake ARM rather than LCHO or market renting?

ARM: emerging questions Who will be housed in ARM homes? • It appears not to be working householdsthough is this product more suitable for them? • Will ARM attract interest via choice-based letting systems? • Will HAs be forced to refuse LA nominations on affordability grounds? • Will LA stock become still more residualised?

ARM: emerging questions Other questions: • What additional risks are incurred by cross subsidy from LCHO or market renting? • Will London find ARM more or less difficult than elsewhere? • Overall, will ARM meet GLA targets (16,614 ARM homes 2011-15 plus size and space requirements)

Senior Seminar

Delivering affordable housing in London Discussion:

• How should we define affordability in London? • What should a future affordable housing development model look like?

Delivering Affordable Housing in London