Our proposals for new homes in Bermondsey call for a better and wider public debate about housing

Grosvenor Britain & Ireland CEO, Craig McWilliam

29th October 2018

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London’s housing shortage is acute, and many feel the consequences. We're not building enough homes to meet demand. There’s a growing void in which an increasing number of people are priced out. And if that doesn't change, London's success is at risk.
 
The sons and daughters who want to stay where they grew up, won't. The young people who want to pursue jobs and careers close to good quality accommodation, won't. The families who want to lay down roots, won't. The growing band of renters who want to live in London with the security of a credible, long-term landlord, won't be able to. We will all be poorer as a result and we will have failed the city.
 
We have proposals to invest in Bermondsey, inner London. Our plans are for a new neighbourhood with over 1,300 rental homes accessible to the increasingly overlooked majority of Londoners who cannot afford to buy, do not qualify for social housing and want the benefits of a secure, professionally-managed home to rent.
 
There’s strong sentiment on all sides of the housing debate. But it’s a debate that stifles a discussion of the choices and trade-offs we all face. Clearly we need more homes in the capital, of all types and tenures, and building them will be a challenge. Nine out of every ten pounds spent to build homes in London is private. Developers want to invest, but only at a rate of return that justifies the risks they bear. Only one out of every ten pounds spent on housing is public expenditure. Local councils face budget cuts. Land is scarce.
 
At the same time, public trust in the planning process and the intentions of property companies is low. The truth is, at Grosvenor, like many property companies, we have historically failed to tell our story clearly enough and explain how development is valuable both in financial terms and to society.
 
Creating and managing great places is complex. Though important, a focus on the single issue of social rented housing has drowned out an equally pertinent discussion of what a widening number of Londoners face in the housing shortage.
 
Our Bermondsey project’s new homes will be accessible to many in Southwark − health workers at local hospitals as well as the 5,500 education and 2,700 public order and fire service workers who live within 2km of our site.
 
We are also offering 27.5% of housing at discounted rents. The lower returns mean that we will break even over 20 years after the development is complete. We’ve taken a long-term view. In the short term, if our rental income is better than we forecast, we will offer the council more funding for more discounted homes.
 
We could have proposed building homes for sale, rather than for rent. If we did that, we would have made a profit upfront to fund social rented homes at a discount. But the vast majority of remaining homes for market sale would be entirely out of reach for far too many.
 
Without considering the ability to borrow for a mortgage, just 2% of households in Southwark have sufficient savings for a 25% deposit on an average first time buyer home.[1] That's a very stark outcome. Our rental homes will be accessible to many more families and workers than an equivalent for sale development.
 
But here's the rub. To make all of that happen, you have to accept that investing in Build-to-Rent housing is different to investing in housing for sale. Build-to-Rent developments don't generate capital from sales and in comparison to housing for sale developments, don’t produce as great a financial contribution for traditional affordable housing − at below market rents.
 
We have never shied away from those facts. We have been clear from the start that we cannot fund social housing without dramatically shrinking the number of discounted homes that will be accessible to a wider range of local people.
 
Inevitably, we will not convince everyone. We're in the hands of public opinion and the decision makers who reflect it. I believe London needs a broader and more honest conversation about housing. The demands of this great city and its people call for it.

 

[1] This does not include those with support from the Government’s Help to Buy scheme. Average first time buyer purchase price in Southwark in 2017 was £435,000 (Land Registry data).

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