London developers shun leasehold for Build to Rent

London's property developers are increasingly bypassing leasehold flats, a tenure described as "struggling", in favour of alternative models such as Build to Rent, co-living, and student accommodation. This change is a response to a stagnant market, despite high demand for housing, as leasehold properties remain out of reach for many first-time buyers. Luke Ward, Director for Housing, Economy and Placemaking at Barnet Council, told the London Assembly Housing Committee that developers are now meeting demand through these different approaches.

Shift in Development Models

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Ward explained that where developments of 50 flats might have been leasehold a few years ago, they are now more likely to be Build to Rent, co-living, student accommodation, or affordable housing. He noted that potential buyers are deterred by London's high median house price-to-earnings affordability ratio, which exceeds 10, and by concerns over cladding works and escalating service charges. These factors, he said, make potential buyers reconsider their options.

Harry Scoffin, founder of campaign group Free Leaseholders, commented to the Local Democracy Reporting Service that developers and councils acknowledge the collapse of the leasehold flat market. He stated that instead of building flats where homeowners have control over service charges through shared ownership of the freehold, the market is seeing more Build to Rent properties. Scoffin added that with homeownership being denied and leaseholders facing uncertainty and high charges, families are leaving the capital. He believes that as developers face reduced buyer demand due to rising service charges, Mayor Sadiq Khan has greater reason to act to restore buyer confidence in leasehold-free flats.

Affordable Housing Targets and Waiting Lists

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The challenges in both supply and demand mean London has not been building enough homes, including affordable properties, for years. Up to March, Mayor Sadiq Khan's Affordable Homes Programme 2021-26 had started 14,335 affordable homes, falling short of the revised target of 17,800. Despite a six-month extension granted by the government, it is unlikely the goal will be met. This situation is compounded by new analysis from the Centre for Cities think tank, which suggests the government's Social and Affordable Housing Programme will leave London further behind other areas in addressing housing waiting lists by 2036.

The analysis indicates that by 2036, the number of affordable homes built under the current programme will equate to only 18% of London's priority waiting list. This compares to 46% in rural areas and 26% in established mayoral areas across England. The think tank advocates for the funding to be more concentrated in cities, where housing needs are greatest. Ant Breach, Director of Policy and Research at Centre for Cities, stated that rural areas will make more than twice the progress on their priority waiting lists compared to London, which she argued does not make sense given London's severe housing pressures.

The Leasehold System in London

Nationally, ministers have committed to ending the leasehold system for new developments, though Housing Minister Matthew Pennycook has cautioned this will take time. Currently, over a third of London's housing stock, 36.1%, is leasehold, meaning owners are responsible for service charges. Londoners are more than twice as likely as the rest of the country to be leaseholders. A report by the London Assembly Housing Committee found that the average household in the capital pays £3,912 annually in service charges. City Hall has initiated an inquiry into how these charges impact the housing crisis.