Nick Millican states the London property market was a solid investment opportunity for so long that property speculators weren’t the only ones who hoped they would win big. Housing associations and councils became developers earning high prices to pay for affordable homes.
They depended on the cross-subsidy model and government grants. The trick was to build a mixed housing development with a few houses slated as private homes. Nick Millican informs that the private homes would be sold at high prices, and the money earned would be used to pay for the affordable homes.
However, critics pointed out that you can only sell land once and that it relies on a strong market. There is a current problem of unsold homes. A 50-home award-winning project in Edmonton was completed, but due to the mortgage crisis, only four of the 27 private homes for sale have been reserved. Nick Millican adds that the Enfield council has warned that the cross-subsidy model is no longer viable as there is less demand for newly built houses, making affordable homes unstable.
The Southwark and Redbridge councils have also stated that the cross-subsidy model is risky and could lead to a collapse in affordable housing. This is not surprising as the cross-subsidy model was deemed ineffective in 2019 but has survived up till now. Nick Millican adds that another way the council gets affordable housing is by squeezing contributions from developers.
This accounts for half of affordable homes built, but this method is getting harder. As the housing market is unstable, developers could argue that projects with affordable homes are not desirable to people looking to purchase a private home. Real estate Nick Millican notes that homelessness is on the rise, and an investment from the government into affordable housing is needed to fix the current crises.