City Hall calls for £4.9bn of funding for affordable housing

London mayor Sadiq Khan has warned the government it must take urgent action as a new report reveals the amount of grant funding required to deliver the affordable homes Londoners need is seven times more than the capital currently receives.

The capital currently receives around £700m in affordable housing grant a year from the government.

But London needs £4.9bn a year, the report says, to meet affordable homes numbers once Khan’s current Affordable Homes Programme, launched in 2016, wraps up in March 2022.

Working with the G15 group of London’s largest housing associations, councils, and other housing sector experts, City Hall examined how much grant funding is needed to deliver a 10-year programme to follow this, until 2032.

Based on the mayor’s draft London Plan, which identified a need for 65,000 new homes each year of which 50% should be affordable, this programme aims to deliver 325,000 new affordable homes.

Of these, 70% would be social rent, 20% shared ownership and 10% for intermediate rent.

Khan said: “This analysis shows the vast increase in government funding required to deliver the affordable homes that Londoners desperately need.

“City Hall is building record numbers of new council and social homes, but we need far more funding if we are to truly tackle the housing crisis. As a new prime minister takes the helm, they must put their money where their mouth is and provide the funding we need to turn this crisis around.”

Paul Hackett, chair of the G15 group of London’s largest housing associations, said the joint report showed exactly what is needed to address London’s affordable housing problem.

The report found that before 2008 grant funding consistently covered more than half the cost of a new affordable home but that this analysis highlighted that, since the Coalition Government took power in 2010, it had fallen to much lower levels – now at around 15% to 20%.

Hackett said: “Housing associations have shown great flexibility in recent years, responding to lower grant rates since 2011 by building more housing for sale to fund a pipeline of affordable homes.

“But London’s large associations now fund up to 85% of the cost of new homes from their own resources. With the private market slowing, this cross-subsidy model is at breaking point. We need to return to higher grant rates and agree a long-term settlement to give us the tools to keep tackling the housing crisis head-on.”