PRIVATE INVESTORS TO HELP DELIVER MORE FAMILY HOMES
(2 February 2007)

Mayor of London Ken Livingstone today called for more homes with three or more bedrooms to be built in the capital and for improvements to the way that private new rented housing is managed on some new developments. He was commenting on an independent report published today called 'Who buys new market homes in London?' which was commissioned by the Greater London Authority to gain a better understanding of the market for new build private homes.

It found that private investment whether for selling on or for letting on the open market was not detrimental to housing delivery in London. In fact it helps deliver more housing by reducing the risk for developers as well as increasing the supply of affordable homes on larger schemes, a requirement under planning law.

Investors account for 67% of all new-build private housing, with 45% being “buy to let”. However the report identified some concerns around the long-term effect on new housing developments of this high level of ‘buy to let’ investment.

The report also identified that 91% of all new private homes built in the last year were one or two bedroom homes at a time when more family sized homes with three or more bedrooms are desperately needed. However, the report argues that the high proportion of smaller new homes being built is driven as much by the demand from first time buyers as it is by the investment market.

The Mayor said: "We want to encourage investment to provide more homes to rent in all new housing developments, both private rented and social rented homes. This will meet the needs of the many Londoners who simply cannot afford, or do not wish, to own their homes but want to live in well managed housing."

"However, while we value the contribution made by private investors in driving up the supply of new and affordable homes in the capital, if large housing developments are to be sustainable we must increase the supply of larger homes to meet the needs of families and ensure that new rented housing is properly managed."

Some of the most common concerns about investment activity; that it is crowding out first time buyers; that it results in an unsustainably large proportion of private renting in local areas; and that it results in many new homes being left empty were not supported by the findings of the report. The report argues that the new-build market is too small a part of overall sales of homes in any year to affect the overall market or the balance of tenures. It also found no real evidence of homes on new developments in London being left empty, suggesting that new private homes are being let and that they are meeting demand.

Concerns remain, however, over reported poor management of investor owned homes on some developments; the effects on the sustainability of very large housing developments should a high proportion of homes be privately rented; and over the possible effect on the investor market of falling house prices in the future.

Following analysis of the report the Greater London Authority is considering further investigation into the following areas to inform the Mayor’s housing strategy:

• assessing the net impact of private investors on house prices for first time buyers
• effective housing management on new developments
• encouraging greater investment by Build to Let, company and investment funds
  
• bedroom size mix on new developments

The report was commissioned by the GLA, with support from the London Development Agency. The research was undertaken by London Development Research and is available at: www.london.gov.uk/gla/publications/housing.jsp