Housing Delivery Challenges in London: A Closer Look

Recent exchanges between the Secretary of State for Levelling Up, Housing and Communities, Michael Gove, and Mayor of London, Sadiq Khan, have highlighted the ongoing issues surrounding housing delivery in London.

Housing Shortfalls in the Capital

The December 2023 Housing Delivery Test (HDT) results revealed that 22 London boroughs failed to meet their housing delivery targets from 2019 to 2022, with 13 falling short by at least 25%. According to Savills’ English Housing Supply Update Q4 2023, London boroughs collectively delivered only 40% of the capital’s required housing need in the year leading to Q4 2023.

Trends Impacting Housing Delivery

Several factors contribute to these shortfalls. Savills’ research indicates a 22% decline in planning applications in London as of Q4 2023 compared to the previous year. Planning permissions also dropped by 34%, and construction starts were down by 29%. These trends reflect broader challenges within the development sector.

Impact of Market Conditions and Policy Inflation

Market conditions, including stabilized but elevated build cost inflation and higher debt costs, have made housing projects less viable. Additionally, local authority resourcing issues have slowed down planning application processes nationwide. "Policy inflation," encompassing national reforms like the proposed Infrastructure Levy tax and Biodiversity Net Gain, alongside regional policies outlined in the London Plan, has further complicated the development process.

The London Plan Review and Recommendations

The effectiveness of the London Plan in facilitating housing delivery was scrutinized in a recent review commissioned by Michael Gove. The review concluded that the complex web of policies within the London Plan often hinders, rather than facilitates, the development of new homes, especially on brownfield sites. To address this, the review recommended a strong policy presumption in favour of residential development on brownfield land, suggesting this be introduced in future iterations of the London Plan. Alternative actions, such as a Written Ministerial Statement or amendments to Planning Practice Guidance, were also proposed.

National Efforts to Strengthen Brownfield Development

The review's recommendations align with a national consultation launched by the Department for Levelling Up, Housing and Communities (DLUHC) in February 2024. This consultation seeks input on how national planning policy can be strengthened to support brownfield development. Additionally, another DLUHC consultation is underway to amend permitted development rights, potentially allowing for upward extensions and demolition/rebuilds of existing buildings as homes.

The Future of Housing Delivery in London

While the development sector may welcome the push for brownfield redevelopment, it remains uncertain whether such policies will streamline planning approvals, given the need to balance national, regional, and local policy requirements. The rigorous testing of these policies during appeals is anticipated.

Following the London Plan Review, Sadiq Khan criticized the process as a political distraction, asserting that London’s housing delivery has reached its highest levels since the 1930s. Whether Khan will implement the review's recommendations in future revisions of the London Plan, or dismiss them entirely, remains to be seen.