London's severe housing affordability crisis is set to continue, according to critics who argue the Mayor's recently published draft London Plan lacks the ambition needed to tackle the issue. Sam Dumitriu, an expert on urban development, highlighted that despite London's status as the least affordable housing market in Britain, the proposed plan will do little to accelerate the construction of new homes. The Office for National Statistics (ONS) classifies areas where house prices are five times higher than incomes as "severely unaffordable"; in London, prices can be ten times incomes, reaching twenty times in some boroughs.
Successive governments have aimed to significantly increase London's housing output. The current Labour target of 88,000 new homes annually, while less than the Conservative's previous demand of 100,000, still represents a substantial increase on current building rates. London last built over 60,000 homes in a single year in the 1930s. Achieving the 88,000 target would necessitate nearly trebling current construction levels, a challenge that experts believe the draft plan fails to adequately address. Indeed, projections suggest the plan will see London miss its annual target by more than 30,000 homes.
While the overall housing target in the draft plan has seen little change, some policy adjustments have been welcomed, albeit cautiously. Revisions to rules protecting parks and open green spaces could open up some of London's 95 golf courses for development in "exceptional circumstances". These golf courses collectively represent an area equivalent to London's 15th largest borough. Additionally, the Mayor, traditionally a strong defender of the Green Belt, is planning to release some well-connected Green Belt land for development. However, these changes are expected to yield only around 50,000 new homes over the next decade.
Restrictions on Strategic Industrial Locations (SILs) have also been a significant barrier to development, particularly in areas like Old Oak Common, where the new HS2 station is expected to unlock only around 8,000 homes under current policy. Britain Remade estimates that over 100,000 homes could be built if the effective ban on housing on SIL land were lifted. While the draft London Plan proposes some modest relaxation of these restrictions, less than five per cent of London's SIL land is set to be released, rendering the impact insufficient to meet demand.
The economic implications for UK households and businesses are significant. The persistent housing shortage in London contributes to higher rental costs and house prices, putting immense pressure on household budgets and potentially deterring businesses from relocating or expanding in the capital due to recruitment challenges. The Bank of England continues to monitor inflationary pressures, and while housing supply is a long-term factor, its impact on living costs can indirectly influence broader economic conditions. Without a substantial increase in affordable housing, London's economic competitiveness could be hampered, potentially affecting investor confidence and the FTSE 100's performance.