Guest post from Iain Murray, Director of PRS at Criterion Capital
As we head towards a general election politicians of all hue are finally acknowledging the severity of London’s housing crisis. The variety of economic, social and geo-political forces that have colluded to create this crisis are too complex to solve in one fell swoop, but there are incremental changes that can, and should, be applied to alleviate at least part of the problem.
There is a received wisdom that the current housing crisis is at least in part down to a constraint of development land. Yet, as well-developed as London is, there is no real shortage of available land. All 33 London boroughs have pockets of space available that they have not yet had the vision or incentive to convert into development opportunities.
Recent well-publicised initiatives, such as the Government Property Finder and Permitted Development Rights have gone some way to unlocking land and encouraging development in some areas, but there is still a long way to go.
London’s population is set to reach 11 million by 2050 and the current rate of housebuilding in the capital is worryingly out of step with this projected growth. Given that home ownership is increasingly beyond the reach for all but a minority of under 35’s and that London’s new inhabitants are likely to be younger, it stands to reason that there is growing pressure on the build-to-rent sector to deliver a significant volume of new homes.
Heavyweights such as Legal & General have stated that they are committed to investing £1bn into the sector, yet this has yet to convert into new homes ready for people to move into. At Criterion Capital, we have a pipeline of 4,000 units for delivery by late 2016 in areas such as Basildon, Croydon and Sutton and are actively looking for more development opportunity. In short, the demand is there but, as an industry, we just can’t build it out quickly enough.
Despite the weight of capital heading towards the sector, we have still not seen the level of development required to alleviate the housing shortage. We know from experience that the large institutions have an appetite for investment, but there aren’t currently enough development opportunities to build enough product, quickly enough to deliver the required scale.
This is where both central and local government must take a proactive stance in encouraging development in the build-to-rent sector. Unlike the traditional housebuilders, build-to-rent operators cannot be accused of siting on landbanks and manipulating values through a lack of development activity. To succeed, they need product out of the ground and generating income quickly. By any measure, this should sit comfortably with a government that needs to house a growing population in accommodation that is fit-for-purpose, sustainable and responsibly managed.
If this sounds too tall an order, let us remember that London’s government recently oversaw a powerful development corporation with the power to over-rule individual boroughs and unlock huge swathes of land for development quickly to facilitate the London 2012 Olympics. If this could be replicated to ensure the speedy delivery of much required new homes throughout its boroughs, that really would be a lasting legacy.
Director of PRS at Criterion Capital