Anyone with even a basic understanding of planning would have found Wednesday’s Today Programme deeply frustrating. I certainly did. Three London boroughs, Lewisham, Hackney and Tower Hamlets, have filed for a judicial review of Sadiq Khan’s changes to London’s affordable housing fast-track rules, a costly political exercise that looks more like point-scoring than principle. By the time the story reached Radio 4 it had been reduced to a single, inaccurate line: the Mayor is cutting affordable housing from 35 per cent to 20 per cent. The BBC let it stand, and never once challenged the claims of Hackney’s Green mayor, Zoe Garbett.
I am complaining, but I am also trying to explain, because my industry is hopeless at talking to anyone but itself. Our conferences, our awards and too much of our trade press face inward, and the public debate gets left to whoever shouts loudest. Poor reporting produces poor public understanding, poor public understanding produces poor policy, and round it goes. So here is the explanation, and an appeal to everyone else in this industry to start making their own. Affordable housing has become a political football, and like most things kicked between left and right, it generates far more heat than light.
Here is where the debate goes wrong. The 35 per cent everyone is shouting about is a threshold for planning certainty: a scheme on private land that offers that much gets fast-tracked and skips a viability assessment. Schemes that offer less have always had a slower route. Last October the Mayor and the government jointly added a second route at 20 per cent, 60 per cent of it social rent, running to 2028. The 35 per cent route is untouched. Nothing has been cut. A lower, temporary option has been added on top. Get that wrong, as almost every report did, and everything that follows rests on a false premise. I am no cheerleader for this Mayor, and I have criticised plenty of his housing decisions, but easing viability in a market this frozen is exactly the right call.
Nobody on Wednesday wanted to say why a second route was needed at all. Building has all but stopped. Construction costs are around 38 per cent higher than before the pandemic, and the base rate is 3.75 per cent against 0.1 per cent in late 2021. The 15 to 20 per cent margin Zoe Garbett held up as inbuilt developer profit is simply the return a lender demands before it will fund anything. Drop below it and the scheme does not get built, and nor do the affordable homes inside it. In February the John Lewis Partnership walked away from build-to-rent and around 1,000 planned homes. That matters, because John Lewis is exactly the kind of long-term, patient investor policymakers say they want, and I should know, having spent three years there. London starts have fallen to 5,547 on Molior’s count, from 33,782 in 2015, against a need of nearly 88,000 a year. Berkeley’s own forward sales have halved, to £1.0bn from £2.1bn, with pre-tax profit off 15 per cent at £451.4m. The market is telling you something the politics refuses to hear.
Loudest of all is the row over profit. Take Berkeley, singled out for making around £500m. Nobody questions the returns demanded by investors in energy, water or infrastructure. Build homes and the same profit is treated as a scandal. Somehow housing has become the only industry where making enough money to keep building is cast as a moral failing. Yet Berkeley is the single biggest funder of affordable housing in London. In the year just reported it put £530m into affordable housing and community infrastructure, more than it made in pre-tax profit, and across the city private developers building through section 106 deliver more affordable homes than councils and their joint ventures combined, roughly 9,200 under way against 6,300. Stop private development and most of London’s affordable housing stops with it. And the profits everyone objects to? Berkeley’s shareholders are mostly UK pension funds, so they flow back to ordinary savers, very probably including yours. The Peckham scheme always cited, the Aylesham Centre, had its appeal dismissed in May on heritage grounds, the inspector clear it would have failed even at 35 per cent affordable. Berkeley is now seeking a judicial review.
So let’s be honest about the trade-off, because it is simpler than the row suggests. Twenty per cent of a scheme that gets built beats 35 per cent of one that never does. Ask for less and you can end up with more, the same logic we rarely admit in tax, where a higher headline rate does not always raise more revenue. Push the affordable requirement past what a scheme can bear and you get a beautifully progressive policy and no homes. The bigger trade-off, the one nobody ever surfaces, is money. The cross-industry Homes for People We Need report, led by Grainger, puts the gap for the social housing this country needs at around £18bn a year, which proves, if proof were needed, that it does not pay for itself. For fifteen years we have used section 106 to make private development pay for affordable housing, because the £39bn grant settlement covers only part of the cost of a home and social rents cannot service the debt to build. This context matters, because too many believe the £39bn solved the crisis at a stroke. It did not.
Behind closed doors, none of this is controversial. I have spent two decades around boardroom tables with developers, housing associations, pension funds and policymakers, and the conversation there bears no resemblance to the one on social media. Take housing associations. They have housed this country since the financial crisis, taking on the tenants and the estates nobody else would, and they have been punished for the privilege. George Osborne’s cut to social rents as Chancellor blew a huge hole in their business plans overnight. A decade of cheap debt, then years of necessary but expensive safety work after Grenfell, piled on more. Nobody should live in an unsafe home. But these are the organisations that have quietly absorbed billions in cost while keeping a roof over millions of people, asking for little and thanked even less, and not a word of it was explained on Wednesday.
The same indifference to economics drives the enthusiasm for rent controls. I will be blunt, because the evidence is not ambiguous and the policy is economically illiterate. Rent caps are sold as protection for tenants, and they end up shrinking the supply those same tenants need. Ireland introduced Rent Pressure Zones and then watched an estimated 42 per cent of landlords leave between 2021 and 2023, Dublin rents rise faster than the cap and investment dry up, to the point the Irish government is now dismantling the policy it built. Scotland capped rents from 2022 to 2024 and got sharp rises between tenancies and a freeze on build-to-rent for its trouble. The strict, locally set caps now floated for London are the version that does the most damage. Good intentions are not the same as good outcomes.
The fixes that would actually work are duller and harder to campaign on, which is why nobody runs on them. London needs a proper blend of tenures. Social housing, let at around half the market rent. Affordable housing, run by regulated providers. Build-to-rent, now a serious institutional tenure across Manchester, Birmingham and London. Student housing. Homes for older people. None of it works in isolation: private housebuilding generates the cross-subsidy, through section 106, and much of the buyer demand that lets the rest come forward, so squeeze it and everything contracts with it. We also need an honest, open-book conversation about how much profit a developer needs to build at all. No business keeps making something it loses money on, as Blockbuster and plenty of high-street names discovered. And we need zoning, the plan-led approach that decides what goes where before applications come in. I have no allegiance to Robert Jenrick, who proposed it before it was shelved, but it was one of the more sensible housing reforms in decades. Labour flirted with the same idea and was not brave enough. Zoning would give everyone certainty and take the cost, delay and litigation out of a system that settles far too much in court.
Then there are the buybacks. Governments have not built homes at scale in this country for sixty years. The Hackney mayor’s idea, that we fund mass buybacks of homes we should never have sold, is politically convenient and pure wishful thinking. Buying an existing home and relabelling its tenure moves one household up the list and takes a home off the market in the same breath. It is the kind of undeliverable promise that sells well on the radio and does nothing for the people stuck on a waiting list. The sums do not work, and the money does not exist.
This challenge will run its course, and the courts can rule on whether the Mayor followed the right process. But it was never really about process. Housing has become the clearest example of a habit Britain cannot break: choosing the comforting political story over the harder economic truth. We are offered simple answers, free homes, capped rents, developer profits seized and handed back. The real ones, trade-offs and hard choices and money, do not fit a radio clip or a manifesto pledge. Until we are honest about that, in housing and far beyond it, we will keep arguing about percentages while the homes go unbuilt, and the people selling easy answers will never be short of buyers.
Andrew Teacher is founder of strategic communications and advisory business Lauder Teacher. He is a serial entrepreneur and host of property podcast Propcast.
