Plans for a new “London Living Rent” have been trailed by mayor Sadiq Khan.
The rent would be modelled on a third of average household incomes in each London borough, with the aim of housing low and middle income households with a typical income of £35-45,000 a year. According to City Hall officials, this would mean a rent for a two bed flat of less than £1,000, compared with a current open market private rent of £1,450.
The concept was revealed as Khan was visiting a housing development in the Harlem district of New York, during his recent tour of Montreal, Chicago and New York. He said the tenancy would be for newly-built homes in the capital, and suggested that the rent would be low enough to enable average earners to save for a deposit to buy their own home.
Khan said he will also be stopping rent conversions of housing association stock, in order to protect social rents. The policy of reletting social housing at new, higher rents was encouraged by previous mayor Boris Johnson, and more than 19,000 homes have been relet on fresh terms. Rents are said to have risen by up to £5,500 per year, with the extra payment sometimes simply added to the housing benefit bill.
“We know that fixing London’s housing crisis won’t happen overnight, and we need to do everything we can to help Londoners who are struggling to pay their rents,” said Khan. “That’s why I’m working with housing associations and councils to build new homes for ‘London Living Rent’ – homes that will offer hard-working, low and middle-income families an alternative to renting privately so they can get by and save for a deposit.”
Newly elected mayor of Hackney, Phil Glanville, has said he will make sure his borough is the first to deliver 500 homes for the London Living Rent. “Hackney is already building more social housing than anywhere else in the capital, but it’s also vital that there are more homes which Londoners on middle-incomes can afford to rent and buy.
“The London Living Rent will help people who work hard but are getting priced out of our city, which is why I’m proud that my first act as Mayor is to pledge that Hackney will be the first borough to see 500 homes built at this affordable level. We must make sure that all the people who make London the world’s greatest city, whatever their background, can afford to live here and take advantage of its opportunities.”
The policy has the backing of the capital’s biggest housing associations. David Montague, chief executive of L&Q and the chair of the G15 housing association group, said: “We want to provide new homes in a way which doesn’t involve setting rents beyond the reach of ordinary Londoners. This can be achieved as part of a mainstream grant-funded affordable housing and regeneration programme in which housing associations retain flexibility over rents and asset management. A new agreement could include a move away from rent conversions on existing social rented homes where we agree that these homes are fit for purpose.”
LPA Perspective: We look forward to more detail on the London Living Rent, but two questions will need answering: first, how eligibility for the discounted properties will be worked out; and second, how the discount will be made up, as the properties are built.
What is different, is the principle of linking affordability to actual earnings, as opposed to linking it to other local rents. However, with many Londoners commuting to work, there may be a problem linking a local affordable rent to an average local salary.
Montague made mention of grant funding, while there may otherwise be a way of delivering the product via the affordable housing contribution charged against new developments. Could this be one way to improve the provision of affordable homes, under a new calculation regime?
It appears to be somewhat naive of the mayor to argue that his new sub-market rent will encourage tenants to save. While sounding much like a Conservative mantra, it is missing the point that other researchers are regularly pointing out – that younger renters in the capital are increasingly giving up on the idea of buying a home, even if they do believe they could somehow afford it.
Fixing the rent conversions policy should help housing associations, and will encourage them to start building more new homes. Many had started reconsidering their provision of new social housing, in an environment where they could not be clear on expected rents, and therefore financial returns. James Murray, now the deputy mayor, had long declared himself a critic of the conversion strategy, which was brought in with the aim of helping housing associations make up for a reduction in central government grant support.