Prime Central London (PCL) Property

When I first started visiting London in the 1970’s I thought then and to a certain extent today that it was truly one of the world’s most magical cities. It was a city that was for everyone to enjoy regardless of one’s financial status. Indeed you had the posh districts in the city such as Belgravia, Knightsbridge and Mayfair but it was still relatively open to all.

The other day I was standing on Tower Bridge looking down the Thames River. The new landscape of modern glass and steel structures both commercial and residential, not to mention all the construction cranes signaling more growth, was to say the least overwhelming.

Whilst London was always expected to grow was this what city planners had in mind?  A combination of between Dubai and New York is what it all sort of reminds me of. But the most important fact with the growth is the cost and lack thereof regarding ‘affordable housing’ that also now has led to schemes of ‘affordable rent’.

Affordable Housing London
Affordable Housing in the London Borough of Southwark

One of the most important aspects of London and the rest of Britain with its development boom has been the issue of affordable housing. A requirement for property developers and local councils are the Section 106 agreements for providing the funds to build low cost housing for those in need. In its analysis released in April of this year the advocacy group Shelter reports that:

‘Only 43 listings (0.1% of the market) were identified in London as being affordable for a family. Further analysis of these listings found that even this number is likely to be optimistic, since only nine of the 43 properties would be a genuine option for a family to buy. The remaining 34 properties had incorrect information in their listings, were likely to only be sold for a higher amount than the listed price at auction, or were inappropriate as family homes, including four listings for houseboats.

For the rest of Britain 42,185 homes with at least two-bedrooms could be described as affordable based on the median income in the local area. This comprised of 16.9% of all properties nationwide advertised available and 18.4% of homes having two bedrooms. For families in need of three bedrooms only 16,884 or 6.8% that be determined as affordable. The number of new affordable housing built in London as of April 2015 is at 17,914 with 13,000 with ‘affordable rents’.

Shelter LogoShelter reports that for London there were just 1.1% or 436 homes with two bedrooms that could be considered as affordable and only 64 that had three bedrooms. For single buyers the news is gloomy as well. London only had 56 homes that were affordable and only eight properties with three bedrooms. In the West Midlands less than 10% were considered affordable with comparable results in the East, South East and South West all of which had less than 10% of affordable housing.

In its report Shelter states that today there are 1.4 million with three million people on waiting lists for council housing. A temporary accommodation household is currently around 61,970 an increase of 21% since 2010. This number of people in temporary accommodation includes 90,450 children.

So what constitutes ‘affordable’? Those who are available for social rented housing are charged 40% to 60% of local average rent costs. The previous government reduced its budget for affordable housing by 60% thus allowing local housing associations to charge ‘affordable rent’ to make up the difference. For a three bedroom house the associations might charge 65% of the local market rent. For example, in Central London the 80 % affordable rent would be £2,400 per month for a three bedroom property with an annual salary income of £109,000 required to be considered affordable. The Office of National Statistics reports that the average wage in the UK is £2,200 per month.  The rates obviously vary depending on which area of the city to find a home. In London, The report states,

‘In fact, research from the Future of London policy network in 2013 found that tenants living in affordable rented property are in greater poverty than those living in social rented accommodation.

The UK government’s financial commitment for housing benefits is currently at £24 billion and expected to be at £25 billion in April 2016.

One method for getting on the housing ladder is through shared ownership or ‘staircasing’ where equity is purchased by in part or whole in a property to achieve ownership. This is designed to low income wage earners to help get their foot in the door in home ownership.


Government Response issue of affordable housing and the lack of housing needed for the country has been addressed by the government with its manifesto. This includes the construction of 200,000 new ‘Starter Homes’ for first time buyers with a 20% discount. With the Help to Buy loan plan this would give those saving £12,000 for their first home would receive a £3000 credit from the government.

Additionally, the government plans to build 275,000 affordable homes by 2020 – equivalent to 55,000 per year over five years.

While the problem of affordable housing is not just a London issue the situation for those attempting to live and work in the city has become far more complicated and the costs do not seem to be stopping investors from continuing their property purchases.  For younger workers in London the headaches only continue to mount and relief for the cost of living elusive.

Article by Kevin Murphy:

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