Under Keir Starmer’s pro-growth strategy, density bonuses can be used to balance the impact of locally required mandatory affordable housing requirements, alongside more housing production

Christopher Worrall is a housing columnist for LFF. He is on the Executive Committee of the Labour Housing Group, Co-Host of the Priced Out Podcast, and Chair of the Local Government and Housing Member Policy Group of the Fabian Society. 

Housing delivery shortfalls remain a major problem in London. So what can the Labour Party do to tackle the problem?

We should start by taking a look at the Housing Delivery Test (HDT). The HDT is a comparison between how many homes should have been built over the last three years, with how many actually were in a local authority area. Why does it matter? Because Local Planning Authorities are required to prepare an action plan where housing delivery has fallen below the requirement.

The 2022 measures were published in December 2023 without much commentary from the left. The Mayor’s London-wide Strategic Housing Market Assessment (SHMA) identified the need for 66,000 homes per year, which differs from Savills estimate of between 90,000 to 100,000 homes per year.

On latest numbers for 2021-2022, London delivered 40,506 homes including its two development corporations, the London Legacy Development Corporation and the Old Oak and Park Royal Development Corporation. The former dissolving its powers to local authorities from December 2024, while the latter considerably behind its target measurement under the HDT – only meeting 63% of its 3-year rolling target. All this equates to only 61.3% of homes delivered against the SHMA target, or 45% if considering Savills estimates.

While Gove points his finger at the London Mayor for this failure, he is fooling nobody having overseen the largest fall in new starts across England since records began by the House Builders Federation (HBF) in 2006. We have had “several years of anti-growth policy and rhetoric”, according to Stewart Baseley, the Executive Chairman of the HBF. And these issues have been felt far and wide. Most recently with Weston Homes pulling out of its city regeneration scheme in Norwich for over 1,100 homes.

The CEO of Weston Homes, Bob Weston, cited the core contributor to the 8 years in planning leading to the schemes demise was “the Conservative government”, which “seems to have no understanding of the importance of supporting the housebuilding industry”. So, it is clear that the failure to build is a nationwide problem, not one pertaining solely to London. But that has not stopped some critics lambasting recent pitiful quarterly GLA affordable housing starts of 874, being laid at Sadiq’s feet.

Yet what can be done to address the shortfall? Labour needs to look head on towards its own internal issues before it can set out serious policy reform. Matthew Pennycook has rightfully taken aim at Gove, with the latter recently announcing reforms that the MP for Greenwich and Woolwich describes as threadbare. Sadly, all for the wrong reasons. Gove has suggested big city councils must prioritise brownfield development, instructing them to be “less bureaucratic” and “more flexible” in applying policies that halt housebuilding on brownfield land. Meanwhile, the Labour Shadow Housing Minister has claimed that urban authorities rejecting brownfield applications is not what is standing in the way of more such development.

This could not be further from the truth. Planning activity has dropped to its lowest level since 2010, with investors reeling from the land market as a result of difficult market conditions and “planning regulations” causing a huge supply-demand imbalance in London. Pennycook goes onto suggest that most undeveloped brownfield sites in London “already have planning consent”. Ignoring the record low levels of vacancy in the capital, which lays below 1%. The Shadow Minister then goes onto suggest that a new brownfield planning presumption will in fact “inflate urban land prices” and “exacerbate viability challenges”. A claim nobody seems to understand, apart from Matthew Pennycook himself.

Notwithstanding the above, Labour has had its fair share of London MPs attempt to cajole urban authorities into rejecting planning applications on London brownfield sites. For example, Helen Hayes MP opposed a 100% affordable housing scheme as recently as November 2023, citing concern over 7 storeys in Lambeth. Fortunately, the local council approved.

Wandsworth on the other hand, a former Conservative council that has historically delivered 103% of its HDT targets, has a Labour administration that now seeks to completely undermine this record. This comes following the adoption of 50% affordable housing requirement applying to all developments in the borough. The Labour administration is guilty of putting more red tape around the planning process at a time when it should be focused on making schemes more viable. Fortunately enough for Wandsworth, their predecessors’ achievements mean that it may not fall foul as an urban authority that is failing to hit their locally agreed housing targets.

Such policies are prohibitive and lead to worse housing affordability. Research from Dr Emily Hamilton into what the United States describe as “inclusionary zoning”, the requirement for private developers to subsidize below-market-rate units, shows that such policies increase market-rate house prices. However, what is becoming more common in the United States is “density bonus” policies, which provide increased development rights to increase massing if affordable percentage targets are hit. A density bonus is an incentive-based tool that permits developers to increase the maximum allowable development on a property in exchange for helping the community achieve public policy goals.

These optional programmes with density bonuses large enough to result in production, can pave a way for policymakers to incentivize affordable housing construction without the risk of introducing a new tax on market-rate development. The overarching issue with applying arbitrary affordable housing percentage requirements is that empirically they can counterintuitively exacerbate affordability problems for those who do not benefit from the affordable units.

Under Keir Starmer’s pro-growth strategy, density bonuses can be used to balance the impact of locally required mandatory affordable housing requirements, alongside more housing production.  The current direction of Wandsworth will not see Labour delivering housing for the many, as those on the far left would seek to claim. Instead, it is a signal to developers that Wandsworth is closed for business as it puts up barriers to entry, deploying policies that will increase the price of market-rate homes.

If we are to see more housing for those on low-incomes, Labour should set out a progressive Low-Income Housing Tax Credit (LIHTC) scheme, as set out in the recent PricedOut manifesto, featuring an interview with a LIHTC expert on its podcast episode “Building more low-income housing”. The policy was mooted in the Homes for Britain: Planning for Growth report launched in Parliament last year, as a bi-partisan solution for the construction of new homes at social rent levels, as well as the rehabilitation of old homes.

In my opinion, we should move away from convoluted targets based on methodologies only planning consultancies can decipher, towards something much simpler. Net additional percentages on existing stock and reporting London-wide on each boroughs vacancy rate. The reason being is that the relationship between supply and demand is clear for all to see on this basis when placed alongside rent growth statistics.

The correlation between new construction levels and rent shifts, i.e. rents falling where supply (in large sums) is going, while rents rising where supply is not going, is undisputable. Meanwhile, NIMBYism, one of the leading causes of low construction levels, is so rife it has now warranted dedicated regular reporting, such as the recently formed NIMBY Watch by Jonn Elledge. Development corporations have been widely backed within the Labour movement, with Former Basildon Leader Gavin Callaghan calling for 20 New Towns each housing 200,000 people. Quite a step from the 6,412 delivered in those pertaining to London over recent 3-year monitoring reports.

Yet there are some green shoots of hope for sensible policy proposals for London, an upcoming report from Britain Remade seeks to set out to “Get London Building”, with the launch of the report on the evening of the 22^nd February 2024 at 1 Great George Street. For housing nerds it will be one to certainly go along to attend.

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