UK - The London mayor's 20-year economic framework for the UK capital threatens the emerging social housing market by abolishing construction targets and allowing local authorities to opt out of offering such accommodation, a planning specialist at the University of Westminster has predicted.
The London Plan - mayor Boris Johnson's framework for development in the capital - would allow local authorities to opt out of providing social housing in favour of low-income private-sector residential, with the former repeatedly highlighted as a growth market for institutional investors over the past few years.
Duncan Bowie, a planning specialist at the University of Westminster, claimed that by replacing social housing with 'affordable' housing - which also includes low-income private-sector housing - the mayor had conflated two separate sub-categories.
"There will no longer be a target for social rented housing and consequently there will no longer be a requirement on boroughs or for individual sites to provide social rented housing. 'Affordable' rent is not the same as social rent," he said, pointing to differences in lease length and rent subsidies.
Michael Edwards, a planning specialist at the Bartlett School at University College London, said: "The problem with affordable rents is that they are not affordable - at least not for people paying social housing rents."
Social housing is beginning to emerge as a credible asset class because it comes with significant demand, long leases and long-term, stable returns. Aviva Investors is among the institutional investors to include it in a fund targeting UK local authority pension schemes.
Consultancy Redington had previously urged institutionals to consider exposure to the top tier of social housing associations unable to attract investment from the capital markets.
Last year, the government announcement it would cut funding for social housing projects by £4.4bn and the NAPF at the time suggested this might attract investment from institutional investors.
Joanne Segars, chief executive at the NAPF, said: "Many pension funds are already looking into social housing as an option for long-term investment. "By raising some social housing rents, the government may encourage more pension funds to invest in new affordable housing projects."
In an upcoming paper, Bowie argues that Mayor Johnson's planning document - which came into force in July but which is likely to undergo a significant overhaul as a result of the government's recent National Planning Policy Framework, currently in consultation - significantly underestimates demand for social housing.
Johnson, in his next strategic housing land availability assessment, will need to identify annual capacity for 41,880 homes - 9,670 above the current target. However, the mayor has accepted an annual capacity deficit of only 2,900 units.
With a forecast one million increase in the capital's population over the next few years, the independent Examination in Public Panel on the plan concluded that London's annual housing requirement stands at between 34,900—37,400 units, somewhat above the original estimate of 32,210.
The current mayor has also revised downwards the target ratio of social to private-sector residential from 70:30 to 60:40. Yet the decision to cut his predecessor's target for affordable residential from 50% of all new housing to 13,200 units annually - around 40% - still left him with a "challenging target", said Bowie.
Edwards said it would be difficult to meet even these lower targets without significant subsidies, adding that the mayor would have to face down political pressure from local authorities looking to opt out of providing social housing.
Bowie described as "deficient" the London Plan's modelling that considered the capital a 'compact city' - a trait it shared with preceeding housing strategies.
"This has implications for housing targets in districts in the wider London metropolitan area," he said. "However, in the absence of regional plans, there is no longer a mechanism for ensuring local planning authorities in the Home Counties [outside London] make some provision for London's outflow."
Failure to factor in potential residential sites outside the capital risks pushing density assumptions higher, which could raise questions about the mayor's commitment sustainable residential development, he added.