UK

Report finds what campaigners have long-suspected – ‘Affordable’ housing products increases rents for low-income Londoners

By the Public Interest Law Centre’s Gentrification Project

October 8, 2024
Labour Hub Editors

Last month, we – Public Interest Law Centre (PILC) – released a report authored by Dr Joe Penny of UCL’s Urban Laboratory.  It found that estate regeneration projects which feature demolition routinely underproduce truly affordable housing for low-income Londoners and increase rents of council and social housing by an average of more than £80 per week.  The residents we support, who are part of campaigns to save their estates from demolition, have long suspected this. This report lays out the evidence.

We commissioned this report  to research cross-subsidy estate regeneration projects where estates are demolished with the promise of funding new ‘affordable’ housing. The report found that these projects routinely overproduce housing that London has little need for – market homes for sale and rent – and either underproduce or more often reduce truly affordable council houses that Londoners desperately need.  

Main findings of the report

The report studies six of the ‘best’ and ‘worst’ regeneration projects across three London Boroughs including the Aylesbury Estate, and the Heygate Estate.

It considered three different models of cross-subsidy estate regeneration: developer-led approach, local-housing company approach, and council-led approach.

Across all three cross-subsidy models in the report:

• The loss of social and council housing and the displacement of low-income working-class tenants are embedded features of regeneration projects that involve demolition
• All underproduce the housing that Londoners need the most (council rent and social rent)
• All overproduce the type of housing London has the least need for (market sale and rent)
• The total number of council and social housing was reduced by all but one of the regeneration projects
• Demolition and redevelopment of council estates increase the rents of council and social housing by more than £80 per week on average
• 23,551 new homes have been or are expected to be delivered by 2035
• 8,629 council rented homes have been or will be demolished across the six cases
• There will be a net loss of 2,151 truly affordable council homes
• Of the homes due to be built, just 6,478 (27%) of these homes are replacement social rented homes
• Almost double the amount of social or council homes will be for private market sale or rent (11,961, 51%).

Cross-subsidy models don’t produce affordable housing

The cross-subsidy approach to estate regeneration has been the dominant model of estate regeneration for the past two decades and looks set to continue under the Labour Government.

This is when council estates are demolished to make way for expensive properties which are put on the market or rented privately. In theory, the new private homes fund the construction of ‘affordable’ homes on the sites.

However, the report has found that the word ‘affordable’ is used with no consideration for what is truly affordable for people who need these housing options the most.

The report benchmarked affordability using the UN-Habitat’s definition: rent that costs no more than 30% of a household’s total monthly income. The report found that for some tenures on redeveloped sites, so-called ‘affordable’ rent could be as high as 76% of a household’s income.

For example, a person impacted by the benefit cap and living in the redeveloped Aylesbury Estate will be expected to spend 55% of their income on rent, despite paying Social Rent. This highlights the gap between true affordability and the so-called ‘affordable’ housing options available.

The report reveals that the unaffordability of ‘affordable’ housing options replacing council-rent homes after estate demolition is worsening the housing crisis for working-class Londoners. This raises the crucial question of which policies are effectively addressing the needs of those on the lowest incomes.

This is not the first time this model has come under scrutiny. Is cross-subsidy dead or resting?  was published as a comment piece in Inside Housing in 2019. It advised that: “Housing leaders lined up this week to warn that the current system of cross-subsidy is no longer working.”  Yet, there has been no notable break from this approach by Labour-run councils or Government. 

Council-rent housing?

Campaigners we support regularly raise the issue of why council-rent housing is disappearing from local-authority or Governmental policy when it comes to affordable housing targets, despite it being the lowest cost and therefore most affordable housing for the majority of Londoners.  It is not mentioned in the National Planning Policy Framework and not mentioned in the majority, if any, of local plans. 

In fact, it is so rare, that it was a nice surprise to see a development by Haringey council which shows a number of the homes they are building are council-rent.   This is what those we support want to see.

This is the ideal moment to challenge the dominance of cross-subsidy models in housing provision, which are driving gentrification in London and spreading across major cities nationwide. Communities are calling for sustained Government investment to preserve housing estates and prevent further displacement.   We hope those committed to addressing the housing crisis will use this evidence to elevate solutions that prioritise working-class communities.

Download the report

The promise of cross-subsidy: Why estate demolition cannot solve London’s housing emergency.

Download the guide to the report

To make the evidence as accessible as possible, PILC have created a guide to the report called What Golden Era: A guide to help challenge estate demolition plans with hard facts.

Watch our short film

What Golden Era? 5 things you need to know about council house building in London – YouTube