If Britain were a country that had its priorities straight, London’s mounting homelessness crisis would be among its most pressing social issues. The capital has 60,580 homeless households, which include more than 80,000 children, many of them preschoolers. There has been a staggering rise of about 70% in the number of households in temporary accommodation since 2010.
The conditions these families face are intolerable: many live in hotel rooms with no cooking facilities and barely enough space for a baby to crawl. Others live in converted office blocks that are caked in mould and highly vulnerable to fire. Some have been stuck in these conditions for more than a decade, with some toddlers growing into adolescents as they wait for a half-decent home.
The impact on the health and mental wellbeing of parents and children is appalling. Meanwhile, the cost of housing families in these deeply unsuitable conditions is bankrupting the capital’s local councils. London boroughs spent £450m on homelessness in 2023-24, and will soon run out of money. The only long-term fix to this crisis? The provision of social rented housing, of which the capital desperately needs more.
It is shocking, then, that the opposite is happening. As the Guardian reported last week, the number of new affordable homes being built in London is collapsing. The capital’s largest housing associations – not-for-profit businesses that build and manage social housing – are expected to start building 1,769 affordable homes in London this year, compared with 7,363 in 2022-23. This is a 76% drop. The pressures of the London market mean these issues are at their most extreme in the capital, but the same model and many of the same funding pressures apply across the rest of England. Numbers might not drop as sharply elsewhere, but they are very likely to start falling.
This collapse is no accident. Until 2010, housing associations mixed a bit of private borrowing with a chunk of government cash to fund the construction or purchase of new social homes. While there had been a considerable drop-off from the postwar council housing boom, a reasonable amount of homes were still being built by the end of the New Labour era. In 2009-10, housing associations started building about 10,000 social rented homes in London and more than 15,000 affordable homes overall.
But in 2010, George Osborne cut the government grant by 60%, in a move that would change social housing for ever. The idea was that social landlords could generate profits from their businesses and use these profits to fill the hole left by government cuts.
To do this, they would charge higher rents on the new-build homes (up to 80% of market rates) and cut the day-to-day costs of managing their properties. In London in particular, it also meant building homes for outright sale to try to turn a profit in the capital’s development casino. This model was always flawed. The cutbacks in services to existing residents have had dire consequences, as some former housing association leaders now admit. Meanwhile, higher rents have priced out the poorest from social housing – especially larger families.
But in terms of the overall delivery of homes, the sector held up for a while. Housing associations were able to generate enough money to keep at least some affordable homes coming through the system. But that model is now broken. This is mostly because housing associations have had to increase the spending on their existing homes. London’s high-rise social homes need a lot of work to fix the issues identified after Grenfell. The capital’s largest providers estimate the bill will be £3.6bn by 2036.
As the poor condition of social housing has belatedly become a national scandal, more money has been directed from building new homes to keeping existing ones in a livable condition. Much more will need to be spent on this in the coming years. That means the low-investment, high surplus model of the past 14 years will be rightly left behind.
Alongside these increasing investment costs, the rise in interest rates has made borrowing more expensive – at the same time as inflation has significantly increased the cost of building a new home in London. Thus the profits from market housing have dried up, and Osborne’s low-grant model is finally bust: there is no longer enough money to even build higher-rent affordable homes at scale in the capital.
This hugely impacts London’s future as a city. The capital cannot survive without more affordable housing. Its primary schools are already emptying due to a lack of children, and lower income and public sector workers who are essential to the city’s ability to function are being priced out.
Since 2010, London has seen about 354,000 homes built, most of them apartments for private sale. The profits made by some of the private companies that built them remain eye-watering. But despite all of this wealth being created, we have never been willing to capture some of it to fund the supply of affordable housing. We could have used the planning system to force more of these homes to be made affordable, but we have allowed developers to protect their profit margins instead. Social and affordable housing has been squeezed out of the city’s recent building boom.
The consequences of this huge failure are now biting. If things stay as they are, teachers and nurses will not be able to stay in the city; private tenants will see even more of their income gobbled up by rent; those seeking housing from their local authority will be shipped even farther afield; and the capital’s homeless children will wait even longer for a home. Unless, that is, we change course by returning to a model where social housing is properly funded. The city’s future is bleak if something isn’t done.
Peter Apps is the author of Show Me the Bodies: How We Let Grenfell Happen
