In 2014 we asked the University of Westminster to carry out a cost-benefit analysis of our first completed key worker development in Westminster. Their report concluded the benefit to London’s economy for each affordable home provided by One Church Square in Pimlico was ‘more than £19,000 per annum’.
Since then we’ve developed a number of new schemes and we’ve asked the University to revisit its findings and update its work by looking at 141 households that we have accommodated in two new schemes, one in Soho and one at King’s Cross. We also asked the University to consider a question we were frequently asked after the first piece of research, which was ‘why deliver key worker housing in the centre of London when it’s so expensive?’.
So we also asked the team to look at another Dolphin Living scheme, the New Era Estate in Hackney, where we’ve introduced an innovative income based rent scheme – called ‘Personalised Rents’ – to see if there is a better way for boroughs to define ‘affordable rents’ when they negotiate planning agreements (called S106 agreements) to avoid ‘over-subsidising’ some of the tenants – which we believe the current arrangements enable. This would help make more resources available to create more affordable homes.
This new research shows:
- The net benefit to London’s economy, of providing key worker housing is, per household, at least £12,500 per annum
- Although it is marginally cheaper to provide key worker housing in Outer Boroughs, the differential is disappearing. We need to make provision for key workers across all Boroughs of London. Failure to do this will have serious implications for the London economy.
- The approach to fixing rents in S106 agreements typically over-subsidises a percentage of tenants who could afford to pay more. A personalised rent model, which we have applied at the New Era Estate would be more cost effective and allow more key worker housing to be created.
The ‘Squeezed Middle’ problem and resulting skill shortages have been well documented by others, notably CBI, London First, the Peabody Trust, Centre for London and the Resolution Foundation.
We believe there are answers. The London Land Commission is compiling a database of public land that can be developed for homes. The new Mayor Sadiq Khan has instructed Transport for London to make underused land available for development. New policies are being considered to encourage the rented sector and there is an estimated £30bn of institutional money earmarked for rented property.
One big obstacle is the higher land value that development of for-sale homes commands compared to for-rent. If a significant amount of the land that comes forward could be designated for development ONLY for rental products (market and discounted rents) then this would attract investment from long-term investors, who have stated their interest, and who, given access to the land, would build and let the housing at the scale, and to the quality, that London desperately needs.
We do not need more homes for sale. We need more homes for working Londoners.
The Mayor and central government can make this happen if they change thinking around what is really ‘best value’ for London when public land is sold. We think this research helps make the case for that change.