The mayor for all Londoners will need all the luck and help he can get. In Sadiq Khan’s pre-election pledge he recognised that there are too few properties to go around and, as a result, one of his primarily goals as mayor is to deliver 50,000 new London homes annually, 50% of which are classed as ‘affordable’ (under £450,000). However, in reality we are building just half of that. In fact, for the past 30 years or so, the capital’s housing supply has somewhat unsurprisingly been unable to keep pace with its exponential population growth.
Recent industry statistics have revealed that London is growing by approximately 100,000 people every year. In addition, house prices in the capital have increased by 9.7% in the last year alone and London is now on course for housing 11 million citizens by 2050. Although the UK will inevitably face short term instability as a result of voting for Brexit, we must remember that the property market has proved to be incredibility resilient in recent years and the banks have already reassured the market that it is "well prepared" for volatility.
Interestingly, despite only being in office since May, the newly appointed mayor has already admitted that solving the housing crisis which is continuing to grip the city will not be solved overnight and, according to the mayor himself, the situation is hindered by the limited pipelines from his predecessor who left “the cupboard bare”.
Therefore, Mr Khan has asked Transport for London to "fast-track" surplus land, although the details remain undisclosed. Even if he did manage to accelerate the development of the sites identified, this is only expected to yield a mere 10,000 new homes. Although this is a step in the right direction, this is a drop in the ocean when compared to the amount of homes that are desperately required to house the growing population.
It is still uncertain as to whether this will even make a dent in the housing drought and this is why I believe Khan must now focus his efforts on building on brownfield public land while fully utilising his planning powers as mayor.
It’s very easy to just say 'let’s build more houses' but, in Khan’s defence, the two to three year lead time on new homes is likely to bring about an unwelcome delay for those looking for a home in the capital. It has been widely argued that in order to seriously consider housing millions of future Londoners, Khan would need to create new space in the capital which is already highly dense and highly populated. Although tall buildings could help to resolve this, more often than not they are met with strong local opposition and, if he does have a plan, it seems he is keeping it under wraps.
Khan also promised to give Londoners priority access to any new homes built although this would make it particularly difficult to sell to overseas investors, meaning less homes are built. However, the pound’s recent fall which shocked investors was the bigger ever one-day drop, reaching a 30 year low. Despite his pledge, Brexit will encourage overseas investors back in to the market particularly as the exchange rate is essentially affording foreign currency buyers a discount they couldn’t possibly have dreamed of at the beginning of the year. Indeed, if one area of the country is likely to prosper as a result of the vote it is London.
Although affordable housing is at the very heart of Khan’s vision, the progress is likely to be slow and, because he is only in office for four years, it is unclear how much he will be able to accomplish in this limited period of time.
However, it is good to see that he is showing signs of sticking to his manifesto pledge, having recently refused planning permission for a housing development because it was on green belt land. Therefore, although he may not reach the 50,000 a year target, the housing crisis is at the top of his agenda and he certainly seems prepared to take steps to change things for the better.
It isn’t an easy market to call particularly in light of the uncertainty that has accompanied our decision to Brexit but, as Khan recently said, London will continue to be the successful city it is today.
The mayor for all Londoners appears to have both the passion and the drive to make a change, but whether it will make a dent in the ever-growing housing crisis is another matter altogether. It is an ambitious and challenging pursuit.
Robin Johnson was writing for the August edition of Mortgage Introducer.