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L&Q reversed shift towards market housing development after talks with mayor
Giant London housing association L&Q reversed a plan to shift development towards more private housing after striking a partnership with Sadiq Khan.
Speaking to Inside Housing, Waqar Ahmed, finance director at L&Q, revealed that before it signed its strategic partnership with the mayor in April last year, it had planned to change the proportion of homes it built for private housing.
Where previously the association had been building 50% of its new homes for affordable tenures and 50% for market tenures, it planned to shift this to 40% affordable and 60% market.
Mr Ahmed said that this was a response to the 1% annual rent cut announced by George Osborne in 2015.
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He added: “But then when we had a strategic conversation with the mayor in London through our partnership with the mayor to build 20,000 homes, of which 60% will now be affordable because that grant has been brought in, and it’s been brought in at a strategic level upfront.
“That upfront strategic investment from the mayor has enabled L&Q to reverse that 60/40 split in favour of market to social, now to 60/40 in favour of social to market.”
Mr Khan’s strategic partnerships were the centre piece of his new approach to dealing with housing associations in the funding programme he introduced last year.
When the initial funds were allocated, City Hall said that 38,500 homes would be delivered under the partnerships, 77% of the total.
One of Mr Khan’s requirements of his strategic partners was that they must provide 60% affordable homes across their portfolios. In exchange, the associations receive more flexibility on when they can draw down grant.
Earlier this month, L&Q posted a record surplus of £348m for 2017/18 in its annual results, driven by the delivery of additional homes and the first full year of land sales by its land business, Gallagher Estates, which delivered a turnover of £243m.
Its move towards affordable could be seen in the results, with the association making 60% of its overall turnover from social housing, up to £521m from £459m in the previous year.
James Murray, London’s deputy mayor for housing, said: “Through our strategic partnership, City Hall and L&Q are showing what a difference we can make with the funding the mayor secured from central government.
“We are pushing up the level of much-needed affordable homes to make sure new developments in the capital benefit more Londoners – and with more funding and powers, we could go much further still.”
At a glance: the different types of rent in London
Picture: Getty
Social rent: The amount of social rent a person pays depends on the location and size of the property, and is set according to a complex formula, but it is typically set at between 50% and 60% of market rent.
Affordable rent: Introduced by the coalition government in 2011, ‘affordable’ rent can be up to 80% of market rent, although many associations have been charging lower than this.
London Affordable Rent: A tenure introduced by Sadiq Khan that is lower than national affordable rent and based on target rent levels towards which social rents are gradually being raised. This makes it higher than average social rents in the capital, but in line with the rent that would likely be charged if a new social rent unit was built and set according to the same formula.
London Living Rent: A rental product aimed at middle-income Londoners introduced by Sadiq Khan, with rents set at one-third of average local earnings.
Target rent: A social rent level calculated by the government, which council and housing associations should use to move their social rents to over time.
