Boris Johnson’s Housing Bank Set to Fall 90% Short of TargetBy
Just 270 homes out of 3,000 target due for completion in 2018
Rental restrictions limiting demand for the finance: analyst
A housing bank set up by former Mayor of London Boris Johnson to speed up the development of 3,000 homes in the U.K. capital by 2018 is set to deliver just 9 percent of its target.
Just 270 homes are due to be completed by March of next year via a single project in the Ealing borough, according to data compiled by the mayor’s office. To date, the bank has loaned 10.5 percent of the 200 million pounds ($250 million) of credit set aside to help construct houses and apartments.
The lender was set up to provide low-cost credit to homebuilders who agree to lease the houses and apartments at below-market rates for at least seven years. Rents under the project can be as high as 80 percent of open-market levels. No loans were advanced under Johnson, who set up the highly-publicized lending project in 2015, the data show.
“Although the bank offers cheap finance, the associated restrictions on the homes built mean it is not particularly attractive,” said Neal Hudson, a director at Residential Analysts Ltd. It was likely to work best for owners of the largest sites in London but the restrictions on rents made it less attractive to the developers for now, he said.
Homebuilders in the U.K. capital completed 19,580 homes last year, according to government statistics, compared with a Greater London Authority target of about 42,000 homes a year. Values have surged since 2011 as the lack of supply, low-cost mortgages and buyers from overseas push up prices.
Progress with the housing bank has been slower than originally anticipated because the lending environment has improved, Mayor Sadiq Khan’s office said in an email. Low-cost loans for homebuilding will continue to be made available as part of other programs, according to the email.
Johnson’s office did not immediately reply to a request for comment
— With assistance by Thomas Penny