London would need ‘emergency’ £5.2bn grant package to survive a no-deal Brexit, Khan warns

It said the continuing difficulty in the sales market “places at risk the delivery of housing association development plans”.

To compensate for the loss of market sale subsidy and “adequately derisk” housing association and council programmes, the Greater London Authority (GLA) has calculated that £5.2bn of “emergency grant investment” would be required.

The letter (below) said this would be used to convert 9,000 market sale homes to social rent, support the development of 30,000 homes which are planned over the next 18 months and “de-risk sales” for shared ownership homes or convert them to social rent.

He said the government must stand ready to bail out housing associations with “an emergency support package of corporate lending if required”.

It comes after the Regulator of Social Housing this week revealed the sector has some 7,000 unsold homes on its books, and a warning from Mr Khan that the cross-subsidy model in London was “broken”.

Last week, Inside Housing revealed that large London association Notting Hill Genesis has 400 unsold homes – mostly shared ownership. L&Q has also warned it will halve its surplus this year – due in part to a “downturn in the sales market”.

In the letter, Mr Khan also warned private builders could require “direct lending or loan and sales guarantees” to keep building if prices fell significantly – a possibility under a range of Brexit scenarios.

He called on the government to release London’s share of the Housing Infrastructure Fund – which has been delayed for two years – to ensure land owners keep releasing sites at the pace required to meet housing need.

Citing the shortage of materials which could result from Brexit, Mr Khan said the government would “almost certainly need to assume control of materials supply chains to keep construction moving” in the event of a no-deal departure.

“It is very difficult to see how housing delivery could continue at scale unless ongoing access to materials can be guaranteed,” Mr Khan wrote. He cited the example of softwood timber – 92% of which is currently imported from the EU.

He also called for action to ensure construction workers from overseas can still enter the UK in the event of a no-deal Brexit.

The letter said: “There is an urgent need for certainty and we urge the government to step up and take responsibility for addressing these serious challenges, which not only have the potential to jeopardise home building in London but your own national target of 300,000 homes per year.”

A Ministry of Housing, Communities and Local Government spokesperson said: “The government remains confident that it will secure a good Brexit deal with the EU. Our ambitious £9 billion affordable homes programme will deliver 250,000 homes by 2022, including 116,000 in London.

“We have also pledged over £58 million to councils to assist their Brexit preparations and providing regular communications to local leaders so they are kept well-informed.”

It is understood MHCLG will respond to the letter formally in due course.