The London Housing Crisis: Boris Johnson’s Proposals and Others’ Suggestions

London Mayor Boris Johnson is not getting much love for his solutions to the housing shortage. And the numbers in mid-2014 didn’t help much.

It’s not that it’s an easy problem, or one where there is universal agreement on the solutions, or even the depth of the problem itself. But suffice it to say that there are many investors looking at the high demand for homes and asking, “Why can’t we build more to take advantage of this depleted market?”

London Councils, which represents 33 local authorities, points out that with an expected nine million residents by 2021, the city needs to increase its housing stock by 526,000 units (according to statistics compiled by the Department for Communities and Local Government). On top of that, a further 283,000 new homes are needed in London to meet the backlog of demand, bringing the total needed to more than 800,000 flats and homes.

The net effect of the current shortage is a rapid rise in both purchase and rental prices. Most economists and social scientists agree that the high cost of housing hampers the economy and has a negative influence on the quality of life. In addition, it could discourage businesses from locating in the city and make it harder for businesses that are already there to hire important workers.

Several proposed strategies to increase London’s housing supply are being discussed or are already at some level of implementation:

London.gov.UK, from the Greater London Authority, extols the need and details Boris Johnson’s plans. The department is investing £3bn in housing, including £1.8bn for affordable housing. Part of this involves the release of publicly owned land for housing construction. In total, the Mayor’s plan seeks to deliver 42,000 homes per year, a task shared between the city, the communes and developers from the public and private sectors.

The First Steps program is Johnson’s effort to help low-income Londoners buy or rent at affordable prices, supposedly lower than renting or buying privately on the open market. The program claims that 21,000 homes have been delivered through the program through 2014. While it is more about finding homes built than increasing supply, it is about eliminating inefficiencies in the marketing process.

Housing Zones, focusing on 20 areas of London where the construction of 50,000 homes will be accelerated through accelerated planning and financing measures. Construction bids for the first projects were received from September 2014.

london first, which represents the city’s largest private employers (and those in need of affordable housing for their employees), is pushing a more ambitious plan than Johnson has offered so far. Equating affordable and available housing with overall economic competitiveness, the organization published “Home Truths,” a list of recommendations that includes the establishment of new suburbs served by Crossrail 2, the proposed rail route in the southeast of England that would run between Surrey and Hertfordshire. With a shorter time frame for development, the publication also urges development on publicly owned land and to allow councils greater borrowing power to build homes themselves.

What is clear is that there is probably no single program that can address such a large and pressing need. The public sector can provide funding and set policies, but the private sector is often the engine behind the house-building machinery.

Some of these projects are large-scale and others are smaller. But because these investor groups help with land assembly—identifying suitable properties, obtaining planning approvals, and setting up infrastructure as needed—they make the development process easier for builders.

Some investors prefer the fund’s approach to fill a much-needed housing portfolio. Others choose to be buy-to-let investors. Some do both. But what’s key is that by working with an independent financial advisor, those with the financial means can help increase housing supply while seeking their own financial bottom line. Mayor Johnson seems to understand these motivations of the private market, as reflected in his housing policies.