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Innovative Solutions for London Housing Crisis

Addressing the impact of the credit crunch and recession on new build housing in London. Proposing interventions to stimulate stalled regeneration, business models, and investment strategies to bridge the gap in the housing market.

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Innovative Solutions for London Housing Crisis

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  1. London Housing Company:A proposal from the LDA

  2. Credit Crunch & Recession: Impact on new build housing

  3. The imperative for intervention: stalled regeneration

  4. The imperative for intervention: London’s offer

  5. The imperative for intervention: household growth

  6. A need for new business models Average deposit of London first time buyers = £32,500 Equivalent for average property = £45,500, plus £10,500 in stamp duty. CML June 2008 Buy-to-let gross advances totalled £2.1 billion in the first quarter, down from £4.0 billion in the fourth quarter and £9.5 billion in the first quarter of last year. CML Aug 2009

  7. Sources of housing investment falling

  8. House price falls reduces incentives to build Source: Communities and Local Government: House Prices Index August 2009

  9. But long term private rental returns can offer a stimulus to build Whilst rental yields have softened during 2009, due to increase in properties being made available, they could form part of stimulating a new private build solution. Source: GLA rent bulletins and unpublished surveys

  10. Long-term expectations are for house price increases in London Source: Experian Business Strategies

  11. Is there a business case? • HCA PRSI initiative indicates institutional investors are interested • Institutional long term investment expectations c.5% • But current residential rental yields average c.4% How can we bridge the gap through new build for private rent? • Deferring public land receipts via equity stakes • Reduce costs of development finance by borrowing at scale • Innovative procurement to reduce construction costs • Maximising the income stream via services & greener homes • Creating development certainty by enabling the planning system • Open book valuation to build trust & speed the process • Minimise voids – provide rental stream security

  12. A London Housing Company LHC Governance Board Pension funds & other institutional investors Development finance securitised against a public land portfolio Public land & schemes and support for development. Assurance on voids Investment Management Public body sponsorship LAs, HCA, LDA & others Open book developer margin Open book rental return (5%+ net yield) Property Management Panel Development Panel Developers & RSLs RSLs & new entrants

  13. An offer from the LDA • Pool LDA land with boroughs to achieve economies of scale • Fund much of the start up costs • Work collaboratively with the HCA • Explore the appropriate measures to assure investors • Extract value from high quality design & services • Construction training & employment

  14. Available Public Sector Land Source: LDA – London Brownfield Sites Review (Public sector land suitable for housing)

  15. Available Public Sector Land Source: LDA – London Brownfield Sites Review (Public sector land suitable for housing)

  16. Available Public Sector Land Source: LDA – London Brownfield Sites Review (Public sector land suitable for housing)

  17. Potential Housing Land Capacity

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