London's housing crisis is about affordability, not supply
New research from Centre for London shows housing availability in London in 2024 was around the same as it was in 2002, indicating that supply is not the overarching issue.
Housing secretary Steve Reed's exhortation to “build baby build” won’t necessarily solve the city’s housing crisis because supply is not the primary issue, according to new research.
Research from Centre for London says that reducing London’s housing crisis to an issue of supply will result in authorities failing to deal with the biggest problem – affordability.
The last two decades have seen house prices outstrip earnings growth many times over, leading to a vast increase in Londoners either sleeping rough or being placed in temporary accommodation.
Both the previous Conservative government and current Labour government have emphasised mass housebuilding as a solution.
Ministers are still aiming for 1.5m new homes to be built between July 2024 and the next General Election, which must happen by 2029, while the Mayor of London has been set a target of 88,000 new homes a year.
But Centre for London’s research, seen by the Local Democracy Reporting Service (LDRS), shows housing availability in London was actually around the same in 2024 as it was in 2002, indicating that supply may not be the overarching issue.
In 2002, there were roughly 421 homes per 1,000 people in London, and while this ratio fell slightly between 2007 and 2016 following the financial crisis, it has stabilised at a similar figure today, despite London’s population growing by almost a third in that time.
In fact, the number of dwellings in London per household has actually increased during that time, from around one per household to just over 1.1 today.
However, as Rob Anderson, Research Director at the Centre for London, explained, affordability shows a different trend altogether.
House price to income ratio was 70% higher in 2024 than it was in 2002, with the current figure slightly down from highs of up to 100% seen in 2021-22.
“While housing availability in crude terms of homes per person or household has been stable, affordability has collapsed,” Anderson said.
“Part of the reason is that expansion of the housing stock has a limited effect on affordability in the aggregate.”
He said an increase in supply will lead to an equivalent fall in house prices, meaning that “in isolation, improving affordability requires sustained increases in supply”.
For house prices to have risen by 30% less than they did between 2002 and 2024, London would have needed to add almost one million new additional dwellings – doubling the rate of dwelling stock expansion – on top of what was actually built.
“Despite concerted policy effort to expand the supply of housing in London over the last decade, with the net result that housing availability is now the same as it was in the early 2000s, these efforts have had little real impact on affordability,” he concluded.
The last two decades, he said, have seen the tenure mix in London change significantly, with less affordable housing and more private homes – which are far more expensive to access.
Anderson added: “There are as many owner-occupied homes per person today as in 2010, but houses are much more expensive. Home ownership is 270% more expensive than it was in 2002.
“Private rented homes are much more common, but rents have risen significantly as a share of incomes and now take up 42% of average private renter income.
“The data reveals that London has experienced a deepening crisis of housing distribution – driven by demand-side factors and changes in the tenure mix – as much as one of overall housing supply.
“The availability of social and affordable housing has collapsed and – while the relative availability of private housing has increased – the accessibility of private housing has fallen dramatically due to price inflation relative to incomes.
“Despite being particularly important for London – exposed as it is to enormous, complex demand pressures that are heavily influenced by things like macro-economic forces and the tax system – these factors are too often absent from the conversation about the city’s housing problems.
“London’s present housing crisis should be understood as a ‘winner-takes-all’ problem where changes in tenure mix and the distribution of stock are central to the collapse in meeting housing need.”
The solution, he said, requires the acceleration of the private market supply of homes in London, expanding the delivery of social and affordable homes and addressing “demand-side” issues.
This could come in the form of cracking down on foreign investors, implementing rent controls – something the Mayor has supported but the government does not – and providing low-interest loans to housing associations to build social homes.
But City Hall has been criticised for its recent agreement with ministers to slash affordability quotas for developers from 35% to 20% in a bid to boost housebuilding in London.
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