London’s Social Homes Contribute Almost £6.9 Billion to UK Every Year

ECONOMY & NHS THE BIG BENEFICIARIES, BUT HOUSING SHORTFALL MEANS UK MISSES OUT ON ADDITIONAL £7.7 BILLION

As we head towards polling day, the failure to address London’s housing crisis, exacerbated by political uncertainty and financial instability, is starving Londoners and the UK of at least an additional £7.7 billion annually.

The crisis has left not-for-profit housing associations unable to invest in the new homes London so desperately needs while also investing in existing stock to ensure standards meet the needs of residents and Government. The result: the housing crisis is about to get worse, as construction of new homes in the capital has ground to a halt, according to new research by the G15.

Revealing the real value of London’s homes

The G15, representing London’s largest not-for-profit housing associations, has conducted the first ever research focusing on the whole of London which quantifies the economic and social contributions made by social housing, using Hyde and Sonnet Impact’s respected Value of a Social Tenancy (VoST model – see notes to Editor). These contributions range from rent savings to the value of increased job and education opportunities, crime reduction, and savings to the NHS.

In London, housing associations currently provide 289,000 social rent homes. The findings reveal that each of these homes contributes an average of at least £23,777 in value annually, totalling over £6.86 billion every year. Providing new social tenancies for the 323,800 households on London’s social housing waiting list, would inject at least an additional £7.7 billion a year into London and the UK’s economy.

“We’re a nation obsessed by house prices but few people and even fewer politicians appreciate the real value created by London’s social homes” said Fiona Fletcher-Smith, Chair of the G15.

“Political parties would do well to remember, as they write their manifestos, that London is built on a vibrant mix of people from all walks of life. Providing homes for those that need them most is an asset, not a cost, creating all kinds of social and economic benefits.”

London’s Top Ten Boroughs for Social Housing Value

There are 655,000 social rent homes in London, almost half of which (44%) are provided by housing associations.

While London’s most-famously premium neighbourhoods command the highest house prices, Tower Hamlets, Lambeth and Lewisham top the table when it comes to the value generated by social homes in the borough every year.

Value creation across the board

Lower rents are just the start when it comes to the value created, according to the study.

London’s £7.7billion social housing gap

The capital is increasingly unaffordable for many, with house prices hitting 17x average earnings. This crisis is compounded by a crisis of stock, as well as the shortage of skills needed to maintain and build homes and a broken funding model.

Providing homes for the 323,800 households on London’s social housing waiting list would add at least an additional £7.7billion every year in savings and contribution to Londoners and the UK economy.

But building across the country is grinding to a halt, with housing associations starting work on just 6,990 homes in the second half of 2023, compared with 16,270 the previous year.

And in London, the situation is particularly dire. G15 data shows their members are expected to start work on 1,769 affordable homes in London this year, down from 7,363 last year.

Creating room to grow for London and Londoners

Housing associations are not-for-profit organisations set up to support people in housing need with homes at below-market rent. All the money they make is reinvested into building more affordable homes and delivering services for their residents.

The services provided are increasingly relied upon by residents, and range from domestic violence refuges, homeless hostels through to community centres and training and apprenticeships programmes. All areas that have seem dramatic cuts from local authorities in recent years, putting even greater pressure on the housing associations.

Three-quarters of the £400,000 cost of a new home is covered by housing associations, with borrowing against current and future rental income making up a large slice. However, a relentless churn of Housing Ministers, all making a succession of short-term decisions on how rental income is calculated, have made it increasingly difficult for associations to secure the long-term investment they need to build, while also undertaking expensive refurbishment programmes on existing homes to ensure building safety and achieving net zero requirements by 2050.

The Conservative Government’s imposed 7% rent cap when coupled with inflation and interest rates is the final nail in the coffin, forcing housing associations to drastically cut back on building despite the housing crisis.

“Time has run out for the current government to get its own house in order when it comes to social housing. Whoever forms the next Government, could immediately begin to address the housing crisis by applying consistency to areas like the rent settlement. This simple act would give housing associations the financial certainty we need to keep borrowing and investing in Londoners and the UK.” said Fletcher-Smith

“Despite the valuable contributions that social homes make, successive Conservative Governments’ indecision means there is little room to grow for housing associations, their residents and London.”

“Housing association provide almost half of London’s existing affordable homes and are the engine of potential new homes. A few tweaks by the next Government, at no cost to them, will help us get on with the job of maintaining existing and building new homes, all while helping revitalise and regenerate communities, address stigma and providing a springboard for people into education and employment.”