Nationwide: Richard Blakeway

06.11.09

If there is one housing topic that represents the perennial elephant in the room, it is how to fund the affordable housing pipeline.

Affordable housing is expensive and, although it can represent good value in the long term, funding from the Homes and Communities Agency (HCA) is likely to be stretched, given that the next public spending round is expected to be tight.

Yet there will still be an overwhelming need for housing in the capital, which has triple the number of households in temporary housing than the rest of the country combined.

On Tuesday, London mayor Boris Johnson held the first significant housing summit at the City’s Livery Hall to bring institutional investors and developers together with the public sector to examine the options for the development of affordable housing.

There are reasons to be optimistic. London is an attractive place in which to invest and produces higher yields than other cities, so if ideas such as an institutionally backed private-rented sector and tax incremental financing (TIF) were to become reality, the capital would most likely succeed.

Institutional investors also see residential property as an attractive and secure long-term option. Proposals were this week outlined for an institutional fund to lend, in the absence of sufficient bank lending, to first-time buyers through a variation of shared equity.

Meanwhile, the public sector should release surplus land to stimulate development. The mayor is undertaking a comprehensive review of the government’s holdings to bring forward, site by site, non-operational land suitable for housing. There is the capacity to develop more than 32,000 units on land held within the Greater London Authority.

The review will also explore whether it would be possible to use land as equity to reduce developers risk on the condition that they develop a certain number of units that will enable the public purse to share in any profits, which could, in turn, be used to fund more affordable housing.

Furthermore, the London Development Agency is developing proposals for a London-wide housing company, through which boroughs can bring forward land.

Finally, the mayor will encourage boroughs to release land for housing under new contracts that he is seeking to negotiate to allow boroughs greater freedom over housing development.

The mayor is rightly questioned on the progress on his 50,000 affordable housing target. However, now is the time to start thinking about how to provide the next 50,000 — and beyond.

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