Is housing delivery faltering in London?

We have seen the number of net additional dwellings added to London’s housing stock fall 13% in 2017/18 and the number of units that started construction in 2018 fall from the 2015 peak. Patrick Gower presents some reasons for the decline.  
2 minutes to read
Categories: Residential Sales UK

Could housing delivery in London falter as new home starts fall almost a third? 

  • The number of net additional dwellings added to London’s housing stock fell 13% in 2017/18
  • The number of units that started construction in 2018 was 23,130, a drop of 32% compared to the 2015 peak

During 2017-18, some 31,723 net additional dwellings were added to Greater London’s housing stock, a 13% decline in new homes compared to the previous year.

The drop was largely due to a significant decline in the number of offices being converted into homes, with office-to-residential conversions falling 52% to just 2,993 units. Much of the most suitable space has already been converted since the Permitted Development Right was introduced in May 2013.

The decline in delivery will pose challenges for Mayor Sadiq Khan, who has set an annual target of delivering 66,000 additional dwellings in the capital, itself some way below the government’s standard method for calculating housing need, which indicates councils should plan for at least 72,407 homes a year.

Just five of London’s 33 boroughs met their targets for housing need during 2017-18 and as many as twenty delivered less than 50%. However, three of the boroughs that met their target actually exceeded the target by more than 40%.

Looking ahead, new build completions dipped 13% in 2017-18 to 26,769, and could be set to fall further. Data from Molior, which includes projects of 20 or more private units, indicates the number of units that started construction in 2018 was 23,130, a drop of 32% compared to the 2015 peak.

Meanwhile, the number of residential units entered for planning permission in projects of 20+ private units has been falling since 2014, from 51,621 to 40,461 in 2018. Meanwhile, the number of units granted permission in large schemes in 2018 increased slightly to 34,834, though remains well below the 2015 peak of 47,818.

The planning environment in the capital remains challenging. Official statistics on planning applications state 88% of major applications were decided within 13 weeks during Q3 2018, though the complexities of negotiating section 106 agreements and discharging planning conditions is a source of delay and uncertainty for developers.

The Mayor’s 35% Affordable Housing threshold, which climbs to 50% for projects on public land, is creating further challenges as land values take time to adjust to the new policy.