The London Mayor has announced plans for a new ‘London Living Rent’. The recognition that private sector rents in the capital are too high is very welcome – and paying a reduced rent, on new Build to Rent properties, will help some people on middle incomes save up for a deposit. But the rent levels are still well above what many Londoners can afford – so the London Living Rent can only be one piece of a larger solution to London’s housing crisis.
The Mayor of London has set out more details about his new ‘London Living Rent’ homes. These are to be part of his plan for developing more genuinely affordable homes in London – which also includes social housing for people on low incomes and shared ownership for first time buyers in a three-way split. The Mayor says that the London Living Rent (LLR) will be “a new type of tenancy for newly-built affordable homes that will help average earners in the capital save for a deposit by offering them a below-market rent.”
Rents in London have risen far beyond salaries, meaning that even those on average income can be spending around half their wages on rent. So recognising the needs of hard pressed renters is a positive step in the right direction.
How will it work?
The details, as far as we have them, are set out here. In brief, it is proposed that LLR will be based on a third of average (median) join incomes in each borough, offered to low and middle-income households, typically earning between £35,000 and £45,000, but in a range of £25,000-£60,000. In some parts of London, rents on a two-bed purpose-built LLR property will drop below £1,000, compared to average private rents of £1,450. There will be some variation within boroughs – to account for variations in house prices between wards, and further adjustments (plus and minus 10%) for a one-bed and three-bed. How ‘affordable’ these rents prove to be will largely depend on exactly whereabouts in London LLR homes are built.
While tenancies for LLR homes provided in partnership with the Mayor are likely to be up to five years, with annual rent increases linked to inflation, LLR homes provided without direct Mayoral involvement will be able to choose their own tenancy terms. Eligibility and priority criteria will be set across London – only London residents who have been renting their home and have a household income below a cap will be eligible. The GLA is considering what the criteria will be and how to prioritise between different groups.
Tenants will be ‘strongly encouraged’ and ‘offered guidance’ to save while living in LLR homes, taking advantage of the discounted rent, in order to ‘put themselves firmly on the route of homeownership’ at the end of their tenancy.
Who will it help?
This is clear recognition that private sector rents in London are too high, even for people on middle-incomes. Our analysis of GLA data on estimated median household income shows that, with a household income of £35,000 (at the lower end of the Mayor’s anticipated mid-range ‘bulge’), people will struggle to find a LLR property that they can afford in large parts of many London boroughs. However, this changes significantly if the 20% rent variation is applied – households earning £35,000 would then be able to afford a LLR home in many parts of London. Much will depend on where – in which boroughs, and which specific wards – these new homes will be built:
There is much we don’t yet know. It doesn’t look like there are any plans to recognise the additional costs faced by families, including childcare, which significantly reduces income available to pay rent.
And it is not clear how the ‘encouragement’ to save will work in practice. If tenants are, in fact, required to save a certain amount, then this could push the total amount (rent + mandatory savings) above a level that is affordable for many. And some tenants, having struggled to meet PRS rents before moving into a LLR property, may be better served using any rent savings to pay off debts. We will continue to talk to the Mayor’s team about these issues.
Paying a reduced rent on new build properties should help some people on middle incomes to save for a deposit. But the London Living Rent can only be one part of a larger solution to London’s housing crisis, one piece of the puzzle. In order to make housing genuinely affordable for people on low incomes we must also be bold and innovative in building more homes for those right across the income spectrum.