Piali Das Gupta, London Councils’ Strategy Director – London’s Future, looks at what the new government should do to solve the capital’s housing shortage.

In London these days, most discussions about pressing policy challenges lead back to housing.

From the impact of high housing costs on businesses’ ability to recruit and retain staff through to the effects poor-quality housing has on health and wellbeing, it has never felt more evident that housing is a fundamental building block to economic prosperity and thriving communities.

Without the stability of a permanent, affordable, good-quality home, individuals are far more likely to miss out on education and work opportunities. A lack of decent, affordable housing also undermines opportunities for increasing productivity and growth both locally and nationally.

These challenges are not unique to London. But with London grappling with the most severe housing pressures in the country, the crisis is especially acute in the capital.

The cost of housing is pushing huge numbers of Londoners into financial hardship. Average monthly rents in the capital’s private rental sector stand at around £2,000. The chronic and longstanding shortage of affordable homes is the key factor behind London’s escalating homelessness crisis, with one in 50 Londoners currently homeless and living in temporary accommodation arranged by their local borough. The capital accounts for almost 60% of all homeless households in England.

There is an urgent need to boost housebuilding. Delivering more homes – especially at social and affordable rents – will reduce homelessness and help generate the productivity growth we all want to see.

London boroughs are strongly pro-housing growth and can point to a positive record. There is a pipeline of 283,000 potential new homes already granted planning permission and waiting to be built in London. In 2022-23, more council-led homes were built in London than any time since the 1970s.

However, skyrocketing construction costs and policy uncertainty have dramatically undermined overall delivery rates. Building sites have stalled across the capital, and London will fall short of the London Plan target of 52,000 new homes per year.

While reversing this is no easy task, concerted policy action and close partnership between central and local government can make all the difference. London boroughs are seeking support from ministers on several crucial issues:

Boost housebuilding through funding certainty

Better funding arrangements will enable more housing delivery. Establishing longer-term funding with higher grant levels through the Affordable Homes Programme would bolster boroughs’ ability to bring forward new housing schemes.

Social housing finances are also rapidly approaching a cliff edge. A sustainable social rent policy is clearly needed to end the squeeze on social housing resources, which undermine boroughs’ ability to improve housing standards and invest in new stock.

Additionally, there are unfair restrictions on council house sales receipts, with a significant portion going to the Treasury. Boroughs want to spend every penny raised from council house sales on increasing affordable housing supply in their communities, be it through building or acquiring stock.

Action to prevent homelessness

London Councils’ research earlier this year found boroughs in the capital collectively spend £90m a month – or £3m every day – on temporary accommodation. Investing more in homelessness prevention will help bring down these unsustainable costs.

One of the major factors that puts households in London at risk of homelessness is spiraling rents in the private rental sector. Making the increase in Local Housing Allowance rates a permanent measure would help prevent future significant fluctuations between actual market rents and support for low-income tenants.

Giving councils more resources, particularly through the Homelessness Prevention Grant, will help sustain hard-pressed local services. Boroughs also welcome the prospect of a cross-departmental strategy on homelessness, with local government included as a key partner.

Stabilising council finances

Putting local government on a stable financial footing is essential for maintaining frontline services and expanding housing delivery.

London boroughs are serving 884,000 more residents (an 11% increase) than they were in 2010, but their resources per Londoner have declined by 28% over the same period. The relentless pressure on finances has left town hall finances at breaking point. Councils in London and across the country are keen to do even more in tackling the housing crisis and driving local growth. Giving them adequate resources will pay immense dividends, both for the capital and the country more widely.