Key workers such as nurses, teachers and bus drivers could be given the keys to thousands of new homes to rent at around £600 a month below their market value.
London mayor Sadiq Khan has invited developers and housing associations to bid for funding to build 6,000 new homes in the Capital, where rents would be set at 40 per cent of average key worker household incomes after tax.
City Hall said the rent-capping would save key workers an average of £600 a month on a two-bedroom home.
It is hoped all homes will be under construction by at least 2030, with funding coming from London’s £11.7bn share of the £39bn Social and Affordable Homes Programme announced by the Government in June.
Tom Copley, Deputy Mayor of London for Housing and Residential Development, said: “It will create vital, affordable housing for the workers London needs. We can’t have a city where teachers, nurses and firefighters can’t afford to live here.”
Though rent inflation has slowed in the Capital, London’s rents remain at near historic highs. According to the Office for National Statistics (ONS), the average rent in London is now £2,271.
The i Paper has previously reported that key workers are either being priced out of London or resorting to living in unstable property guardianships because of the cost of rent. City Hall said key workers account for around a third of working Londoners.
Speaking exclusively to The i Paper, Copley said the new housing would be aimed at key workers who may earn too much to qualify for social housing but not enough to be able to afford rent, “where they want or need to be” in the city.
“Key worker living rent is a specific form of housing funded by the Mayor,” Copley said. “It will create vital, affordable housing for the workers London needs. We can’t have a city where teachers, nurses and firefighters can’t afford to live here.”
Khan made a manifesto pledge to introduce new rent-controlled homes when running for re-election in 2024.
However, landlords have argued they undermine the rights of property owners and create a two-tier market for private tenants.
The Scottish Government introduced the Housing (Scottish) Bill to create rent controls in some areas last year but the UK Government did not include the policy within its new Renters’ Rights Bill.
Ben Twomey, chief executive of campaign group Generation Rent, welcomed the news.
He said: “Key workers are the backbone of our communities. They care for us when we are sick, build the homes we live in, keep essential services running and educate our children. Yet many are being priced out of the very city they serve.”
“Controlling the rents of key workers is a positive first step towards a fairer approach for all of London’s renters.”
Labour faced criticism last year when The i Paper revealed plans to cut the amount of affordable housing private developers were required to deliver in London – despite a huge drop in the number being built in recent years.
Asked whether City Hall’s plans to build affordable homes for key workers were at odds with this, Copley said the changes would deliver “more affordable housing in London in the long run.”
He added: “The UK, in particular London, is a real outlier in comparison to Europe and North America in terms of not having any rent stabilisation measures or rent control. It’s very common elsewhere in the world.”
As of 2016, at least 14 of the 36 Organisation for Economic Co-operation and Development (OECD) countries have some form of widespread rent control in effect, including four states in the United States as well as towns and cities in Germany, France and Canada. However, the evidence is mixed when it comes to how effective rent control is at lowering costs while maintaining a supply of homes for rent.
Around 32,000 new homes were completed in London in 2023/24, down 9 per cent from the previous year.
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However, City Hall said more new homes have been delivered per year in London under Sadiq than any previous Mayor of London. They said an average of more than 36,000 homes per year have been delivered since Khan became Mayor in 2016, compared to an average of 26,000 per year under Boris Johnson.
City Hall hopes that funding developers to build rent-controlled key worker housing will boost their figures even further, whilst also providing urgently needed affordable accommodation for Londoners.
Khan said: “I will continue to work closely with Government and partners to do everything I can to accelerate the delivery of affordable homes, as we build a better and fairer London for everyone.”
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