Nearly half of new homes (46%) given planning permission in the capital are not being built, according to new analysis from leading business and financial adviser Grant Thornton UK LLP.
In 2015, 57,496 homes were given planning permission but, three years later - the point at which planning permission typically runs out - only 30,819 were under construction or completed. This equates to a 46% “attrition rate” - the same rate was seen in 2017 and is 13% higher than 2016 (33%).
It is clear that London continues to struggle to meet the demand for housing, completing just 21,467 new homes in 2018 – a fall of almost 5,000 compared to 2017 (26,458), and the lowest number seen since 2014.
The analysis covers new build developments of 10 units or more and excludes homes developed under permitted development rights – conversions from commercial or other use – that are not required to go through the planning system. The GLA estimates that other schemes (those of fewer than 10 units and involving conversions and changes of use) contributed an additional 14,000 completions in London in 2017*.
2018 also saw a significant drop in the number of planning applications, down to 65,673 - a drop of 17% compared to 2017. This is the first time the number of planning applications has fallen since 2014.
While the number of applications dropped, the number of permissions increased dramatically in 2018, to 62,341. This is a 30% increase on 2017 (48,024) and the highest level recorded since 2010. This stark increase could be due to the significant increase in applications seen in 2017, which are now starting to work their way through the housing development pipeline.
Ian Tasker, Director, Government and Infrastructure Advisory, Grant Thornton UK LLP, commented: “London is in the midst of an extreme housing crisis and we are continuing to fall seriously short of the level of housebuilding needed to reach the Mayor’s target of 66,000 new homes a year. Losing one in every two new homes within the planning process for the second year running is staggering and a decrease in the number of planning applications this year is only likely to make this worse.
“It is clear that uncertainty in the market has taken its toll and, while a significant increase in permissions is a welcome sign, without dramatic change and more direct intervention to find out why we are failing to substantially increase this output, we will never fix our broken housing market.”
The number of applications for new affordable homes saw a drop in 2018 - falling from 27,108 to 24,043 - but was still more than double the number recorded in 2010 (11,127).
Worryingly, last year also saw the lowest number of affordable housing completions since 2014, down to just 5,230. A 30% drop on the number completed in 2017 and far short of what the capital needs.
The number of affordable homes given planning permission however saw a much-needed increase, with 22,277 recorded in 2018. This is almost three times the number seen in 2010 and makes up over a third of all permissions granted in 2018.
Inner London zones continue to lead the way, with zones 1 - 3 alone accounting for 66% of all new homes built in the capital in 2018.
Outer boroughs need to do more as zone 6 completed just 675 new homes in 2018 - the lowest number since 2011. While zone 5 doubled the number of completions compared to 2017, from 1,029 to 2,253, it is still falling far short compared to other areas across the capital.
Ian Tasker added:
“The removal of the Housing Revenue Account borrowing cap marked an important, necessary step last year and we are yet to see the impact this will have on the housebuilding market. We hope it will have a positive change over the next few years and start to rebalance the level of affordable housing available on the market – a necessity in London in particular – helped by the Mayor’s target to build 116,000 affordable homes in the next three years.
“Our analysis shows that there continues to be a huge disparity in the level of new homes being delivered across London, with inner London zones continuing to outperform their neighbours. Boroughs in zones 5 and 6 need to dramatically step up the pace and all boroughs across London need to focus on finding available land to build on. To tackle London’s housing crisis, the Greater London Authority needs to hold underperformers to account and, amidst continued uncertainty heightened by ongoing Brexit negotiations, focus on maintaining confidence in the market.”