Any conversation about London’s future built environment needs to contend with the issue of housing delivery.  The longer under-delivery persists, the more that unaffordability impacts inter-generational and general societal fairness; and impacts the availability of labour and competitiveness of the city for employers. Lack of housing choice also impacts vibrancy and ultimately threatens the character of the city that is so attractive in the first place.

The need for more housing is hopefully therefore a point of consensus, but perhaps how we deliver it, and how we make the most of this opportunity to improve quality at the same time as quantity, should be more directly discussed.   

The shift since the 1970’s away from public sector delivery of housing is well-documented. There has been, however, a relatively recent resurgence in local authority building.  In June 2020 we reflected on the various roles local authorities can take to play their part in delivering the housing the city needs.  This update re-examines the current state of the local authority-led housing landscape in London and how this may change going forwards to meet present challenges including Covid recovery and the drive to Net Zero.

Weighty Commitments

Although housing delivery data remains murky at best, records from the last three years shows incremental increases in local authority-led housing completions, rising from circa 10,000 to 12,000 in the capital in the three years to 2020-2021.   Within this we note that a number of London's local authorities have significant direct delivery programmes which have continued apace.  These include for example:

• Southwark’s 11,000 home direct-delivery programme;
• Enfield’s progression of the 10,000 home Meridian Water masterplan in a master-developer role;
• Lambeth’s estate regeneration programme via Homes for Lambeth, its wholly-owned housing delivery company;
• Newham’s wholly-owned housing company Populo Living delivering 1,600 new homes with further pipeline to come, notably the regeneration of The Carpenters estate;
• Ealing’s Broadway Living housing delivery vehicle has progressed its 1,100 home programme; and
• Lewisham Homes currently has 11 projects out to consultation for social housing.

Claims of delivery can be somewhat loosely defined but nevertheless the breadth of programmes and scale of ambition is clear to see.

Housing is also a key focus of the GLA given it was one of the cornerstones of Sadiq Khan’s manifesto, with numerous pledges made including the expansion of the Land Fund, further promotion of Modern Methods of Construction, and an expansion of the GLA’s role across the wider GLA Group’s assets.  Perhaps most telling was the proposal to establish a new City Hall developer to directly deliver social housing.  This is a continuation of the general trend towards more intervention from the public sector in London that we identified back in June.  We watch the Mayor’s next moves with interest.

Partnerships Remain a Cornerstone

Direct delivery, whether on-balance-sheet or via wholly-owned vehicles, is of course only one approach open to authorities keen to play a more direct role in housing delivery.  We’re also seeing particularly renewed interest in Joint Venture structures; in our team alone we are currently advising on Joint Ventures all over the city including at Watford, Wandsworth, Southwark and Thamesmead.  The prospect of sharing risk and reward whilst playing to each party's strengths and financial capacity is a compelling sell.  All the while Development Agreements remain popular for their relative certainty and simplicity, typically where authorities’ requirements and returns (whether land value or assets in lieu) are more fixed and risk is sought to be mitigated.

Unlocking Wider Impacts

Perhaps of most interest at this time of economic uncertainty, authorities are particularly keen to promote these partnerships by way of delivering against wider ESG aims.  Partnerships offer financial returns whilst maintaining degrees of control and influence; in this way they allow authorities to set or even prescribe agendas. 

Social value has for example risen up the agenda, brought into sharp focus by the effects of the pandemic, with greater emphasis on genuinely lasting employment outcomes, initiatives tailored to the specific locale of each project, and access to open space.  Measurement of social value is also maturing, though with a wide range of methods still prevalent there remains the need to be flexible so that partners can align approaches, or devise new bespoke metrics for each project.  As partnerships are typically procured formally, and material weight is given over to these issues, a compelling social value offer is essential for private partners to secure partnership opportunities.

Social value is of course heavily linked to the climate agenda.  All but five of London’s authorities have now formally declared a climate emergency, and those that haven’t have all made pledges to net zero or carbon neutrality.  This is filtering through to how authorities deliver housing including baking future standards into procurement evaluation and ultimately into contracts, particularly where longer delivery timeframes will bump up against stated climate pledges. 

Encouragingly we’re finding that these requirements are pushing on an open door.  Whilst the London Plan now captures relatively ambitious targets, all but the most backward of private sector developer partners have made similar commitments, particularly for commercial uses where the market is driving standards in response to vastly raised occupier expectations.  For residential uses, customer preferences are less well defined but environmental performance is increasingly being seen as a competitive requirement to secure sales, and we are starting to hear of marketing strategies tailored towards environmental agendas (alongside broadband speeds of course) and even, in some cases, some potential value premium being contemplated (although not yet proven).  The energy crisis is only reinforcing Covid and Net Zero-driven sentiment.

It does truly feel like a sea-change.

So what next?

Given the challenging financial climate for authorities we anticipate continued demand for partnering so private sector expertise can be leveraged into projects cost-effectively.  Authorities emboldened by successes may graduate to more complex structures over time, which will favour private partners with a collaborative ethos and a willingness to engage in sometimes challenging procurement processes. 

At the same time authorities are uniquely positioned to lead on quality, social and environmental standards to help meet the city’s current and future challenges.  This market-leading or stewardship role may be just as important as the core objective of delivering increased housing numbers.  Housing’s role in the city of tomorrow needs to be about quality as much as quantity, and for that local authority delivery and partnerships will remain a key part of the jigsaw.