The London property market is in crisis with “nothing like enough new homes being built”, forcing the government to water down targets for affordable housing, the cabinet minister in charge has told Sky News.
Steve Reed, the housing secretary, and Sir Sadiq Khan, the Mayor of London, made a major intervention in the housing market today with a package to reduce red tape introduced post-Grenfell for developers and slash the target for affordable homes from 35% to 20%.
Both men sat down with Sky News for a rare joint interview to justify the decisions, which represent a significant U-turn from the Mayor of London, who has previously made the affordable housing target a central part of his re-election campaigns.
Mr Reed justified the decision to slash the affordable housing target – which will be opposed by Labour MPs and charities – on the grounds of “35% of nothing is nothing”.
New figures show the scale of the housebuilding collapse in London. The government set a target in the first nine months of this year for 66,000 new homes to be started in London, but to date, there have been just 3,200 private starts, according to the analyst Molior London.
The housing secretary was frank that the government needs to get greater incentives for housebuilding.
“We need to make schemes viable for developers so they’ll get spades in the ground and start to build them,” he said.
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Affordable housing target not to blame
However, Sir Sadiq did not appear to accept that the affordable housing target itself was the cause of the collapse in housebuilding – something regularly claimed by property developers.
He said that the cause of the worst collapse in housebuilding since the 2008 financial crisis was elsewhere.
“The price of concrete has gone up by more than 50%. The price of steel has gone up more than 40%,” he said.
“In London, 96% of new builds are flats. We know that when it comes to the flats, you need to borrow. Interest rates have been at record levels.
“What about the impact of Brexit? What about the impact of the two staircases that are required on 96% of these homes? That’s why construction has begun, but not been completed.”
Homes that are sold or rented at below market rates for people who cannot afford to buy or rent.
Eligibility is determined by local incomes and house prices, and there is often specific criteria such as maximum earnings, not owning a property and having local connections to an area.
Social rented: Local authorities or housing associations rent homes at about 50% of local market rents.
Affordable rented: Homes let by housing associations at a rate of up to 80% of the local market rate.
Intermediate rent: Homes let at a rate between social rent and market rent.
Affordable ownership: Schemes allowing eligible households to buy a share of a property, reducing the initial mortgage and deposit required.
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Record numbers of council homes built
Sir Sadiq presented a rosier picture of building in London.
“Let me be quite clear, record numbers of council homes have been built in London since the 1970s, records broken,” he said.
“Record numbers of homes completed in London, never seen since the 1930s. More completions of council homes in 2023-2024 than in any year since records began.”
Before his re-election, Sir Sadiq pointed to a record 25,000 new house building starts. However, many of the projects which he boasted had been started still remain undeveloped.
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A perfect storm
Sky News visited Ealing, where in 2023 Sir Sadiq claimed that house building had been under way. According to data from Molior London, 1,000 homes in that borough that were cited as having been started remain undeveloped.
Sir Sadiq denied he had been dishonest.
“We face a perfect storm though, in terms of interest rates, in terms of construction inflation, in terms of the pandemic, in terms of legacy of the previous government,” he said.
“And that’s why the government and I, a Labour government and a Labour mayor, are working together, are addressing this perfect storm.
“A good example of kick-starting house building, a shot in the arm to address the crisis we’re talking about.”
There is likely to be a backlash at the decision to water down the affordable homes target, given a record 13,000 people were sleeping rough in London in the last year, which was a 10% increase on the year before.
Nearly 90,000 children are living in temporary accommodation. Charities are set to sound the alarm about the change.
MPs told not to make a fuss
Labour MPs told me that Mr Reed and his team have been so concerned about the backlash, he has been warning MPs not to make a fuss in public.
Mr Reed said that the overall benefit would be felt even by the vulnerable.
“The effect of the package we’re announcing today is that we will see more social and affordable homes built, that means we can get people off the streets.
“And remember the numbers doubled under the Conservative government – off the streets, out of the shop doorways, and get a secure roof over their head.
“We can start to tackle the national scandal of temporary accommodation. It’s not temporary at all, it’s actually families stuck in a single room very often, kids sharing a bed, the parents on a sofa for years.
“That’s because this country has not been building, not because of the Mayor of London, but because of inaction of the previous Conservative government.”
