London’s new Mayor Sadiq Khan has outlined plans to quadruple the number of affordable new-build homes in the capital.
The key for Sadiq Khan as the London mayor is to tackle the housing crisis by bringing together people from local authorities, housing associations, developers.
He said we need to build 50,000 new-build homes a year just to stop the problem getting worse. On some new developments he wants 50% of homes to be affordable with lower social rents or a new London living rent.
With competition from buy-to-let investors and reduced supply of suitable properties, prospective first time buyers must continue renting and saving for a bigger deposit.
Historically London’s population declined from 8.6 million in 1939 to 6.6 million in the early eighties.
Since then it has increased back to 8.6 million and is expected to rise to 10 million by 2030 and 13 million by the middle of the century.
Improving the current housing system
Khan has said London’s population is growth by 100,000 people each year so we need to build at least 50,000 new homes a year, twice the current rate for first time buyers and home movers.
This is why house prices in the capital have increased to an average of £600,000 and the median rents are now £1,400 per month.
Higher house prices have benefited remortgage buyers living in London them an opportunity to release capital which they can use to improve their home, such as adding an extension or new kitchen.
There may be fewer suitable homes on the market in part due to equity release buyers agreeing a lifetime mortgage to access cash from their home rather than downsizing.
He has criticised former London mayor Boris Johnson for the current housing system where only 13% of new homes are seen as affordable.
The London Fairness Commission has recommended that the new mayor’s definition for affordable rent should mean 30% of household income (the London living rent) and not the current system of 80% of market rent.
It also says the government’s Right-to-Buy scheme in London should be suspended for five years until the supply of social housing is increased with new-build properties.
Mr Khan also wants to improve life for people renting in London by creating a city wide non-profit agency to challenge unfair fees and a registry for bad landlords.
More homes for Londoners
To supply more homes to Londoners the Mayor has said he would make it a condition of planning permission that new build homes must be marketed locally for six months before going on sale to foreign investors.
He said “There is no point in building homes if they are bought by investors in the Middle East and Asia.”
Furthermore, “I don’t want homes being left empty. I don’t want us to be the world’s capital for money laundering. I want to give first dibs to Londoners.”
Developers, such as the Berkeley Group, can allocate 30% of new build homes as affordable but they would require local authorities to lower the land values to offset the lower affordability.
However, Mr Khan wants 50% of new build properties to be affordable homes for first time buyers and home movers.
To help achieve this level of affordable homes, Mr Khan will force developers to publish their viability assessments. These are documents used to negotiate with councils and have previously been secret.
Transparency would show the public the land costs involved, reasons for reduced affordable homes and profits made by developers.
What are your next steps?
Call our LCM mortgage brokers for advice if you are a first time buyer, want to remortgage your existing home for the best mortgage deal, moving home or are a buy-to-let investor.
Start with a free mortgage quote or call us and we can take your details. Learn more by using the property value tracker chart, mortgage costs calculator and equity release mortgage calculator.
For equity release buyers our London City Mortgage advisers can recommend lifetime mortgages allowing you to receive cash from your property to buy a more expensive home or even help children start or expand a business.
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