Hitting national housebuilding targets could reduce London rents by £251 every month

Increased supply would put downward pressure on rents, new research suggests

By Kumail Jaffer, Local Democracy Reporter

Meeting national housebuilding targets could reduce rents in London by £251 a month, new research suggests.

The government has committed to building 1.5million homes across the country between July 2024 and the next election, which is expected in 2029. This includes 88,000 homes a year in the capital.

However, ministers have admitted there is only a “slim chance” of reaching the former target, while Sir Sadiq Khan’s London Plan suggests that, under favourable conditions, only 55,800 homes can be constructed annually over the next decade.

But a new paper from the Centre for British Progress (CBP) suggests that, should the government get back on track, rents will be slashed significantly for Londoners, who currently spend over 40 per cent of their pre-tax income on their living space.

The CBP theorise that expanding housing supply will directly lower prices through moving chains, where new build homes free up older, cheaper units for people further down the income ladder.

Between 2000 and 2019, London’s population grew by 1,653,000 – but only enough housing was added for 1,387,000 people. Increased demand for housing has driven up prices.

As such, meeting national housebuilding targets would increase London’s housing stock by 2.3 per cent annually, resulting in a 9.7 per cent drop in rents over five years compared to what renters would pay otherwise.

For a typical two-bedroom flat in inner London, this represents a £251 monthly saving by the fifth year of meeting the target compared to the current levels of building, which have collapsed in the last decade due to high interest rates and construction costs reducing viability for developers.

Rob Blackie, who co-authored the report and is standing to be the Liberal Democrat candidate for the 2028 London Mayoral race, told the Local Democracy Reporting Service (LDRS): “London’s rents are far too high, because our Mayors have failed to build enough homes for the last 25 years.

“The good news is that we can bring down rents by hundreds of pounds a month if we increase housebuilding.

“If elected, cutting rents will be my top priority”.

The authors found that living costs in London are rising so fast that, on current housebuilding trends, a typical income after paying rent will fall by 0.37 per cent a year. Hitting the target would turn that into a rise of 1.15 per cent a year.

David Lawrence, co-author of the report and co-founder of the Centre for British Progress, said: “The Government is right to look for ways to give families breathing space. The biggest one is hiding in plain sight.

“We find that hitting the Government’s building targets would reduce rents in London by £251 a month for ordinary households.

“This is far more than any cost of living announcement in the Budget.
Building more homes would boost growth as workers can be near good jobs. It can also be done for free – by streamlining planning constraints, improving building safety regulations and empowering residents.”

The report also suggests that, even at lower levels of social housing, more new build homes would take pressure off cash-strapped councils to deal with homeless families.

If just 10 per cent of the new homes were social housing, the CBP claim, the number of London households in temporary accommodation could fall by up to 59 per cent, saving councils £435million a year.

How would these savings differ by borough?

By year five, even in the cheapest parts of London, renting a two-bedroom flat would cost £150 a month less.