Sadiq Khan consults on plans for new intermediate rental tenure for key workers

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Mayor London proposes rents based on 40 per cent of key workers’ incomes

Sadiq Khan has outlined his proposals for “rent-controlled” intermediate rental homes for key workers.

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The Mayor of London, in a consultation paper, has set out detail about how his new tenure, which he calls Key Worker Living Rent (KLWR), might work.

He is proposing rents and service charges are capped at 40 per cent of average key worker household income after tax. City Hall’s maximum income eligibility threshold of £67,000 per year for intermediate housing will apply to KWLR homes, although the paper stresses this could increase.

Households would only be eligible for KWLR homes funded by the Mayor if they live and/or work in London, do not own a home or have the means to buy one.

The paper said some KWLR homes may need to be allocated to those who aren’t key workers, if boroughs and other housing providers have been unable to let them within the first three months of marketing,

Khan believes there is demand for an intermediate housing product for key workers who are not inclined or able to buy a home.

The paper points out existing intermediate tenures such as shared ownership or London living rent – which is designed to enable renters to save for a deposit -focus on home ownership.

It said: “Some [key workers] may not have money for a deposit or, even with rents at less than market level, be able to afford to save towards one. Increasing numbers of key workers are likely to be in this position, as private rents and house prices have continued to rise, and mortgage interest rates have fluctuated.”

Khan promised to build 6,000 rent-controlled homes as part of his election manifesto earlier this year. The consultation paper said he will work with local authorities, housing associations and house builders to develop these homes.

The paper said the mayor appreciates the cap to rents and service charges might make it difficult for potential investors and developers to calculate the rental income they will secure from homes over time.

He therefore suggests the GLA will review the cap regularly to take into account changes to incomes and said City Hall is interested in views on whether to allow rents and service charges too increase above the income limit over time.

The paper suggests a potential monthly rent and service charge benchmark of £1,099 for a one-bedroom home, £1,236 for a two-bedroom, and £1,373 for both a three and four-bedroom.

Khan said the tenure could save key workers up to £600 per month.

He said: “I welcome views from all Londoners on how we can make this new type of housing a success, for the thousands who need and deserve a more affordable home, as we build a fairer London for everyone.”

Responding to the proposals, right-leaning think tank the Institute for Economic Affairs, said the tenure is not a rent control in the conventional sense - as Khan does not have the power to control private rents – but is rather a new type of public housing.

Kristian Niemietz, editorial director at IEA, said: “While far less bad than conventional rent controls, it is not much of a solution either. London needs a massive private sector-led supply-side boost, a reenactment of the great housing boom of the 1930s - not special government housing projects for politically favoured groups.”

The consultation will run until 3 March.