Leading UK law firm Addleshaw Goddard has claimed a target of 40,000 new homes by 2025 in London’s Central Activities Zone (CAZ) is unrealistic without radical public sector intervention.
The law firm claims that to reach these figures the Mayor would need to double the current annual rate of supply.
The aim, set out in guidance issued by the Mayor of London’s office, states that there is capacity to deliver 4,000 homes annually during the next ten years within the CAZ, which covers the capital’s core economic area from Kensington to Aldgate and King’s Cross to Battersea.
The CAZ has seen 8pc of housing completions in the capital since 2004/5. The annual target of 4,000 is double the average 2,000 additional homes per year completed in the CAZ in that time.
The majority of the housing is expected to be provided in the CAZ’s so-called ‘Opportunity Areas’, large-scale brownfield development areas in the City Fringe/Tech City hub around Silicon Roundabout and Hackney and in the Vauxhall/Nine Elms area around Battersea Power Station.
The guidance anticipates the Opportunity Areas will deliver over 4 in 5 of the additional new homes, with 15,000 in the City Fringe/Tech City area and 20,000 in the Nine Elms area.
The plan recommends a focus on housing incorporated into mixed-use developments in the CAZ, reflecting the demand for office space in Central London. The CAZ is one of the few areas that has been exempted from the government’s office to residential permitted development rights, which allow offices to be converted to housing without a need for planning permission. As a result, there is less immediate capacity for residential development in the CAZ compared with other areas.
Development in the CAZ has seen uncertainty in the last twelve months, with worries that residential development in the Nine Elms area may not generate viable returns for investors.
Nearly 20,000 units are either completed or under construction in the area. However almost 30 percent of new properties were still on the market after twelve months, leading to fears that the glut of unsold prime housing could deter investment in future development.
Second home stamp duty has also been highlighted as a disincentive for large scale developers, with institutional investors not being exempted from the new 3 percent stamp duty surcharge on additional home purchases. Construction costs are also putting pressure on viability for developers, with significant recent price rises for materials such as concrete, cement and bricks.
Marnix Elsenaar, partner and head of planning at City law firm Addleshaw Goddard, said:
“It is easy for the Mayor to set targets but without supply side measures they will remain just that: targets. Rising construction costs mean that it will be a challenge simply to maintain current delivery rates”.
“The Mayor and Government need to take action to tackle the alarming skills shortage in the construction industry and do more to make public land available for development.”