Coronavirus is dealing a harsh blow to London’s housing market, with the curbs on construction threatening to put already distant targets out of sight.
Private development in the UK capital could fall by more than 50 per cent if the pandemic keeps building sites closed until July, real estate group CBRE has warned. That would mean just 10,000 delivered this year by the private sector, against an average of 22,000 a year for the past five years. Even if work resumes next month, CBRE anticipates that just 15,000 homes will be built by private developers this year.
Housing associations and local authorities, which between them add thousands of homes a year, have also been forced to pause building. Although the government has stopped short of mandating site closures, most contractors and housebuilders have downed tools with social distancing measures making safe work difficult.
The pandemic exacerbates a long-running shortfall in the delivery of new homes in London. Build-to-rent development has been one of the biggest drivers of recent growth in the London housing market. But construction of these homes, which typically sit on large, private developments managed by corporate landlords, is running out of steam.
The number of build-to-rent homes in planning is currently 37,299, 10 per cent less than the 41,322 planned at the same point last year, according to new data from the British Property Federation. Elsewhere in the country, the number of build-to-rent homes in planning has increased by 41 per cent.
The slowdown in London is partly to do with “lots of change in planning policy in the last four years,” said Ian Fletcher, director of real estate policy at the BPF. London mayor Sadiq Khan has increased the target for affordable housing from 35 per cent to 50 per cent of all new homes and cut density restrictions during his term.
But many of Mr Khan’s aspirations are yet to be enshrined in the London Plan, the development rule book in which borough-level targets for new homes are enshrined. The latest update to the plan is still being drafted. Last month the plan, which first went out for consultation in 2017, was returned to Mr Khan by the secretary of state for housing, Robert Jenrick, with some robust criticisms.
“It’s crazy that a city of this stature takes that long to put in place a plan, and that makes life difficult for developers,” said Mr Fletcher. “You can get into debates about how the cake is cut, but ultimately we need a strong housebuilding sector, a strong social housing sector, and a strong build-to-rent sector,” he added.
The current London Plan calls for the construction of 42,389 new homes a year across the city. That target has never been met.
“Completions peaked in 2016 [with 39,560 homes built], then Brexit uncertainty and a decline in planning applications hit,” said Jennet Siebrits, head of residential research at CBRE.
The draft London Plan is substantially more ambitious, calling for 64,935 new homes a year.
“We know from the 2008 financial crash that an economic shock can cause profound and sustained damage to the housing market and the delivery of new homes,” said Tom Copley, London’s deputy mayor for housing and residential development.
“We will develop a recovery plan for the sector that will seek not only to ensure it is well placed to bounce back, but also that its long-term resilience is improved and that we are able to deliver the social rented homes that London so desperately needs,” he added.
But coronavirus is likely to slow down development for the foreseeable future, according to Ms Siebrits. “Land sales, the granting of planning permissions, new applications: it will all just stall. We won’t have that pipeline,” she said.