London social housing crisis costing UK economy nearly £8 billion, new research says ahead of election

Nearly 324,000 households are stuck on council waiting lists in London
Nearly 324,000 households are stuck on council waiting lists in London

Britain’s incoming government could unlock nearly £8 billion in value for the UK economy by getting everyone off waiting lists for council homes in London, according to new research.

With a host of hurdles in planning and finance holding up new construction, housing associations responsible for building the bulk of Britain’s affordable properties said one “simple” reform would give them more certainty to invest.

The G15, which represents London’s largest not-for-profit housing associations, urged the next government to give its members the ability to set rents for several years, rather than every 12 months.

That would give them greater sway in the financial markets to attract investment for the long term. But political continuity is also needed to ensure housing is taken seriously in Whitehall, the group said, noting that the Conservatives have churned through 16 housing ministers in 14 years.

“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,” G15 chair Fiona Fletcher-Smith said.

“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.”

The G15 says that housing associations currently provide 289,000 homes for social rent in London, out of a total stock of 655,000, which contribute more than £6.86 billion in economic value every year.

But nearly 324,000 households are stuck on council waiting lists. Finding them all permanent homes would inject at least £7.7 billion a year extra into London and the UK’s economy, it said.

Within that figure, the G15’s research identified a gain of £2.34 billion from higher employment and productivity, £1.34 billion from savings to the NHS and improved wellbeing, and £649.3 million saved from reduced crime and policing.

“Building a 10-storey block of flats takes several years, not one. We need to show potential returns to lenders over multiple years,” a source in the sector said.

“These places are not built for profit. We’re not lining any pockets of CEOs,” the source added. “And we’re not looking for significantly higher rents, just the stability to plan, and an end to governments constantly chopping and changing policy and ministers.”

Since 2020, rent rises for social housing have been capped by the government at a maximum of the consumer price index plus 1%, set every September. Chancellor Jeremy Hunt capped the increases at 7 per cent for the 2023-24 financial year, and the 2020 arrangement has been extended to 2025-26.

Labour said it was heading in to the July 4 election promising to work with councils and housing associations to build more affordable homes, along with a “Freedom to Buy” guarantee for first-time buyers, with an overall construction target of 1.5 million new houses in five years.

A Conservative spokesman did not comment on the G15’s demand for multi-year rent settlements, but said: “The only way to sort out rents in London is to build more homes and the Conservatives have delivered 2.5 million more homes since 2010.”

But single-year rent settlements were also highlighted by MPs in May with a warning that the annual caps would not help deal with a severe shortage of homes for social rent, with 90,000 more needed each year.

Housing not-for-profits have been “relatively financially resilient” but still face “massive bills” to meet targets for net zero, fire safety after the Grenfell disaster, and modernisation of older homes, the Levelling Up, Housing and Communities Committee said.