The cranes that crowd London’s skyline are deceptive. While the capital is building at a ferocious speed, it needs more houses than ever before. A lot more houses.
Estimates of how many should be built each year to meet demand range from 50,000 to 80,000. Last year, only half that were built, even though London’s population is projected to grow from its current 8.6m inhabitants to 10m by 2030.
A severe lack of supply has pushed prices up so far in the capital that the affordability crisis is starting to spread, like a contagion, to the outer commuter belt: house prices in Slough jumped 19pc in the year to February 2016. It seems a lot of people disagree with poet John Betjeman’s dismal “Come friendly bombs” viewpoint.
London’s housing problems have been bubbling up for years. But now, with just 11 days to go until the capital’s 8.6m residents decide who should replace Boris Johnson as Mayor of London, they have become a priority.
The main candidates – Labour’s Sadiq Khan and the Conservatives’ Zac Goldsmith – agree what needs to be done: 50,000 more houses have to be built every year. But there’s a snag: making it happen. Guy Grainger, the chief executive of commercial estate agents JLL, believes hitting the target will be “really hard”.
A survey of London house-builders carried out by property consultancy McBains Cooper found that the biggest restriction, cited by 30pc of respondents, to building in the capital is land availability. But that’s not the only problem.
Mr Grainger says: “There aren’t currently enough builders out there to build 50,000 homes. It’s a real question of how we can get there.” In the McBains Cooper survey, 28pc of respondents said the industry was suffering skills shortages, particularly of carpenters and bricklayers.
While the two main mayoral candidates agree on the basic facts, each has a different focus. For Labour’s Mr Khan, affordability is key; but Conservative Mr Goldsmith wants to focus on medium-density development and for people to have more of a say over what gets built.
Housing is one of the few areas in which the capital’s mayor has a lot of power. Michael Gallimore, a partner specialising in planning at law firm Hogan Lovells, says: “In the planning arena the mayor is the most powerful individual because he has the right to call in schemes above a certain threshold to direct an approval or refusal, so he can influence up to the point of consent.”
Through the London Plan’s policies on issues such as design and space standards, the mayor has “the ability to influence policy-making to a very high degree of detail”. The two main candidates have similar manifestos when it comes to housing. And all of the candidates are vehemently against building on the green belt.
In his campaigning, Mr Goldsmith is focusing on providing housing for those on “average salaries”, proposing an increase in higher-density, low-rise housing, as championed by campaign group Create Streets, which wants to revive something similar to London’s Georgian and Edwardian terraces.
Mr Goldsmith also proposes three-year leases as standard, giving more power to tenants, and replacing every council house sold through Right to Buy with two new ones. In the past five years, only one has been built for every 10 sold.
Mr Grainger says: “The logic and theory of that is correct; it’s just how do you create a turnaround of such great proportions?” Mr Khan has pledged that half of all housing built each year will be affordable, and wants to encourage housing associations to build homes for social rent.
Mr Goldsmith has pointed out that setting this affordability threshold could choke off supply, saying that “50pc of nothing is nothing”, and writing in his manifesto: “I will reject indiscriminate affordability targets that would make it harder to build and ultimately drive up the cost of housing.”
Mr Khan has also pledged to bring in what he calls the “London living rent”, pegged to local wages; a key issue for young Londoners, 60pc of whom will be living in private rented housing by 2025, according to PwC. He also wants to increase the proportion of shared-ownership homes built on publicly-owned land.
Even before last week’s proposed government intervention on the subject, the Labour candidate, currently ahead in the polls, has been promising to crack down on “iceberg” basements, saying he would “amend the London Plan to limit the size of so-called mega-basement extensions, and give neighbours greater protection from the noise, dust and disruption major works on this scale can cause to households and communities”.
The number of homeowners digging down has risen exponentially as it became more expensive to move – due to rises in stamp duty for higher-priced homes – than to extend. There was a 159pc increase in applications to dig down in the borough of Wandsworth, for example, between 2010 and 2015.
Mr Khan has also hit out at developers who sell off-plan flats to international buyers in the first phase, while Mr Goldsmith argues foreign investment should be channelled into longer-term private rental-sector schemes. Under Mr Johnson’s tenure, loose guidelines against selling the first phase of a development to foreign investors were put in place.
But Mr Khan has promised to end the practice, saying he would make it a condition of planning that developers market schemes to Londoners before foreign investors. Mr Khan said that “when global buyers use properties as ‘safety deposit boxes’ with no intention of them being lived in, that’s not good for the capital”. But some doubt that a crackdown would help matters.
There are an estimated 20,000 “buy-to-leave” properties in London, but the vast majority of flats bought by foreign investors are lived in, either by the owner or tenants. Some foreign buyers purchase up to three years before the flat can be lived in; owner-occupiers can find it more difficult to get a mortgage on an off-plan property.
“There is a danger that less would get built without it because, in general, to secure finance on developing a residential new-build, developers usually have to pre-sell up to 30pc of units off-plan,” says Mr Grainger. “If you take away a significant part of the market, that will be harder to achieve. I think it will slow down the number of developments.”
But Mr Gallimore points out: “If you are going to have a policy that says you can only sell to people who have lived and worked in London for three years, the value of that land is going to be affected. Presumably TfL will have an interest in maximising the value of that land which they sell or joint-venture.”
Randeesh Sandhu, the chief executive of Urban Exposure, which provides funding to residential developers, says: “You might impact developers’ ability to sell off-plan, and therefore you might not get it funded. Before you know it, you might end up cutting supply, and worsening the supply-demand imbalance.”
Mr Khan’s emphasis on affordability and an antipathy towards big developers, and Mr Goldsmith’s focus on local support for large residential developments, as well as his environmental background, suggest that this may be the dawn of the nimby (“not in my back yard”) mayor.
Both favour fewer towers. With a less interventionist mayor, “a lot of towers that are on paper at the moment might not end up seeing reality,” says Adam Challis, head of residential research at JLL.
He argues that a combination of a very high proportion of affordable housing to meet Mr Khan’s wishes, as well as a market that is moving against tall buildings, will make many projects commercially unworkable.
Mr Grainger says: “Mr Khan is rightly very strong on affordability, but if this compromises development viability, it will just mean that we get less of everything – both affordable and private housing – built.”
Mr Challis says: “You’ve got a market that looks less certain and tower commitments are anywhere from two to five years – that takes some commitment from the developer.” There is also growing evidence of a backlash against tall buildings: a YouGov survey found that 48pc of Londoners think the 436 new buildings in the planning system at the moment will have a negative impact, and only 34pc think they will be beneficial.
Barbara Weiss, an architect and founder of the Skyline Campaign, which lobbies for fewer towers, says: “I think I’m making headway with the campaign; it has captured the mood of the people. A few years ago, it wouldn’t have been possible, and when I started two years ago, I couldn’t get people interested.”
Both candidates are lukewarm on towers, especially compared with Boris Johnson. Mr Goldsmith believes towers are supportable only if there is strong public support for them.
Duncan Wilson, chief executive of Historic England, says: “We would like them both to do more in acknowledging that the only way is not up.” At a mayoral hustings for the housing charity Land Aid, Mr Khan said: “It’s about context when it comes to tall buildings.”
Mr Goldsmith wrote in The Telegraph: “The current trend of hideous developments built with scant regard to neighbours can’t continue, not if we want to avoid exhausting tolerance for the sheer scale of what needs to be built. There is no excuse for ugliness.”
Mr Goldsmith said he will support local communities taking “a much more proactive role in setting the rules of the game right at the start of the development”.
He added: “As mayor, I will support communities to set clear design guides for major sites in their neighbourhood or local plan.” He has a track record of opposing tall buildings across London and in his constituency, and believes people should have a bigger role in the planning process.
His environmental background – as owner and editor of The Ecologist – and his views over the expansion of Heathrow worry developers, too. The head of one major property company said he thought Mr Khan was far more “up for the challenge”.
Part of the problem is that most people have little say in what is built around them. The YouGov poll also revealed that 58pc don’t know how to have a say on local planning proposals, and 60pc would like a say on tall buildings if they are being constructed in a place of historical significance.
The planning system, especially for tall buildings, is difficult to access. If a tower is going to be built near your workplace, rather than your home, it still affects you, but it’s harder to find out about and object to the plan.
“There is a lot of anger out there in London at the moment, a lot of people feeling that they are being betrayed by these towers being built,” says Ms Weiss. “And so it may be more of a grass-roots political thing than the actual conviction of these candidates that might stop these things being built.”
The Paddington Pole, a 72-floor tower designed by the architect of the Shard, Renzo Piano, was withdrawn under local pressure, and the developers will now seek permission for a shorter, squatter, more acceptable version. “Often towers court controversy with locals, and it’s difficult to get universality of support for tall buildings in localities,” says Mr Challis.
The two candidates’ priorities, on affordability and localism, “set the frame for a more challenging planning ride for towers.” During his time, Mr Johnson has taken over the planning permission from councils, known as “calling in”, for 16 large developments, including a big residential scheme at Southall gas works. He has approved all of them, despite council opposition in many cases.
One that he pushed through – against Islington and Camden councils’ and many residents’ wishes – was Mount Pleasant, a residential scheme near Kings Cross. The mayor branded the residents that opposed the £1bn scheme “bourgeois nimbys”.
Last year, a group led by Create Streets’ Nicholas Boys-Smith, created an alternative plan, with mansion blocks rather than 15-floor towers, and more affordable housing. It was backed by both Mr Goldsmith and Mr Khan, who said: “This is a great example of how big developments should work – working with local communities to design real neighbourhoods that work for the existing community.”
Mr Johnson’s last “call-in” was over the Bishopsgate Goodsyard in Shoreditch. Both Tower Hamlets and Hackney councils rejected the £800m development, which would have towers of 38 and 46 floors.
Mr Johnson’s advisers urged him to reject the plans, saying it would create light problems. Earlier this month, the Mayor delayed the public hearing so the developers could address the concerns.
The original 10pc of affordable housing has been revised up to 15.8pc – still a long way off Mr Khan’s prescription of 50pc. “We need the homes, and we need to acknowledge that market circumstances are different on every site across London,” says Mr Gallimore. “Therefore you cannot be so prescriptive to have fixed policy where you are not prepared to allow some discretion. I don’t think 50pc [affordable housing] is achievable.”
Without Mr Johnson’s gung-ho embrace of developers, no matter how small the proportion of affordable housing, it is likely many towers, and therefore residential developments, will remain unbuilt. “A lot of the schemes in which Boris has intervened have turned on the amount of affordable housing,” says Gallimore
“The boroughs have been pushing prescriptive percentages over affordable housing policies, whereas Boris has been prepared to look at the bigger picture, look at viability assessments, and take the developers’ view that a lot of the schemes are only capable of producing a smaller amount of affordable housing, which isn’t policy-compliant.” Mr Khan says he “intends to set out clear guidelines” on when he would use call-in powers so that councils could avoid it happening.
“For developers to be successful, they are going to have to get better at local engagement,” says Mr Challis. “Ultimately this is a failing of the industry as well as the system – the benefits of development are not well articulated by the industry, and not clearly delivered at a local level.
“Section 106 contributions [which must be paid to the council when a big housing development is built] will include potentially schools, affordable housing. But how many people looking at that site realise the developer has contributed significant sums, in the millions, to improve the local quality of life? Probably very few.”
Separated by a war of words and political allegiances, the two main candidates are united in their opposition to a city of new skyscrapers.
With Mr Johnson in City Hall, many big developers have had something of an easy ride getting such big towers through. Now, the arrival of a potential “nimby” mayor at the Greater London Assembly is worrying the property industry, and those hopeful for the release of a barrage of new homes may yet be disappointed.