Advertisement
UK markets closed
  • FTSE 100

    8,420.26
    -18.39 (-0.22%)
     
  • FTSE 250

    20,749.90
    -72.94 (-0.35%)
     
  • AIM

    794.02
    +1.52 (+0.19%)
     
  • GBP/EUR

    1.1678
    +0.0023 (+0.20%)
     
  • GBP/USD

    1.2706
    +0.0035 (+0.28%)
     
  • Bitcoin GBP

    53,078.58
    +0.18 (+0.00%)
     
  • CMC Crypto 200

    1,369.85
    -3.99 (-0.29%)
     
  • S&P 500

    5,303.27
    +6.17 (+0.12%)
     
  • DOW

    40,003.59
    +134.21 (+0.34%)
     
  • CRUDE OIL

    80.00
    +0.77 (+0.97%)
     
  • GOLD FUTURES

    2,419.80
    +34.30 (+1.44%)
     
  • NIKKEI 225

    38,787.38
    -132.88 (-0.34%)
     
  • HANG SENG

    19,553.61
    +177.08 (+0.91%)
     
  • DAX

    18,704.42
    -34.39 (-0.18%)
     
  • CAC 40

    8,167.50
    -20.99 (-0.26%)
     

‘Renters’ champion’ Sadiq Khan plans to turn TfL into a £187m-a-year landlord

Mr Khan
Mr Khan has promised to cap thousands of rents charged on new homes built by Places for London - Stefan Rousseau/PA

Sadiq Khan has been criticised over plans to turn Transport for London into a corporate landlord despite supporting a national rent freeze.

The London Mayor wants to more than double the income from Places for London – known as “The TfL Property Company” – over the next six years. The £1.5bn subsidiary generated £75m last year, which Mr Khan intends to raise to £187m by 2030.

To achieve this Mr Khan needs to more than quadruple the number of rental homes on TfL’s books, from 4,000 to 20,000, by 2031. Profits would then be invested in the transport system, forming part of a broader strategy to diversify TfL’s income, offset costs and shield train ticket prices from further increases.

ADVERTISEMENT

As part of his campaign for re-election, Mr Khan has also promised to cap thousands of rents charged on these new homes by linking them to key workers’ and middle-income families’ salaries.

In a video posted earlier this month on X, formerly Twitter, Mr Khan promised to build 6,000 new “rent control homes”. He said: “While the Tories are in the pocket of the landlord lobby, I’ll be a renters’ champion.”

Places for London collected £58.6m in rents from small businesses last year, and a further £14.6m in parking charges. Two of its directors were also paid half a million pounds between them, which included pension contributions.

Transport for London (TfL) is one of the capital’s biggest landowners, generating millions of pounds in rental income from retail and work spaces in and above its stations.

Other major cities have successfully subsidised transport for years. In Hong Kong and Tokyo, apartments built above every station help to lower fares. In Tokyo, it costs 180 yen (£0.94) to travel up to six kilometres. A comparable trip in London with an Oyster or contactless card costs £2.80 – triple the price.

Meanwhile, the Paris metro system relies on the Mayor levying national insurance to keep ticket prices down. In the French capital, a single metro journey costs €2.10 (£1.80).

Low fares and rent caps

Reinvestment was the original reason for turning TfL into a corporate landlord and experts are sceptical about how Mr Khan can balance that with his promise to cap rents.

Ant Breach, of think tank Center for Cities, said: “It makes sense for the Mayor to build on land the city owns. But there is only so much land to build on, and so much profit which can be made from it.

“The Mayor has to make a choice – will he use the development profits to support the transport network or use it to subsidise the cost of the housing itself? You can’t do everything.”

Places for London netted a group loss after tax of £130m last year. In 2022, it had posted a £115m profit and received a £200m cash injection. Values of the properties on its books have also slipped in the past 12 months by £121m overall, more than offsetting gains of £90m made just after the pandemic.

Previously called “TTL Properties Limited”, it was incorporated in 2014 and became financially independent of TfL two years ago. In the summer of 2022, it secured a £200m revolving credit facility to help with “short-term liquidity challenges”.

Recommended

Sadiq Khan considers Tube surge pricing to plug home working black hole

Read more

A ‘fifth’ affordable rent scheme in London

Pegging rents to key workers’ salaries would create a new, fifth type of affordable housing in the capital.

Anna Clarke, of The Housing Forum, said that while more affordable housing is always welcome another scheme may just confuse everybody.

She added: “We already have quite a few different rent models already in London: Social Rent, Affordable Rent, London Affordable Rent and Intermediate Rent.

“I’m not really clear what benefits there would be from a new product that has broadly similar rent levels, other than making the system yet more complex.”

At least 40pc of flats built by Places for London already have to offer “London Affordable Rents”, which are supposed to roughly reflect social rents – though they are usually higher. Tenants are allocated by the Local Planning Authority, and individual boroughs can prioritise key workers if they wish.

A TfL development called “Park Avenue Apartments” is currently advertising homes from £1,050 per month. It is unclear whether or not this is a subsidised rent. The Telegraph could not find any other listings with rents attached.

‘Building on vital car parks’

So far, TfL says it has started on building 4,000 rental units – of which it has delivered 1,500 to date. However, some of the projects have generated significant resistance.

Former Transport Secretary Grant Shapps tried to block hundreds of flats from being built on a car park next to Cockfosters Tube Station, despite the Mayor having won planning permission in February 2022. Mr Shapps said the development would take away from much-needed parking provisions.

Last year, Levelling Up Secretary Michael Gove intervened in the case. He gave powers back to Enfield Council, resisting calls to continue the Government’s intervention. The Mayor then had to file another application to dispose of the land before building on it.

Alessandro Georgiou, councillor for Cockfosters Ward and leader of the Conservative group in opposition on Enfield Council, said last year that Mr Khan’s plans were “disgraceful” and would “create significant harm” to the area.

He added: “The elderly, disabled, commuters, shoppers and thousands of others will face significant harm as a result of the removal of this significant park-and-ride location.”

A £4.6bn market with a ‘PR issue’

In 2023, investment in the UK build-to-rent sector reached a record £4.6bn, according to estate agent Knight Frank. Some £1.9bn of this was transacted in the final three months, marking the “strongest-ever” quarter for the sector. Despite its success the sector has struggled to overcome its corporate image of institutional investors and eye-watering rents.

Renting a new-build typically costs around 10pc more than renting an older home let by a private landlord, according to property portal HomeViews. Though this depends on bills, which are often included in build-to-rent contracts.

Dan Patterson, Legal & General Investment Management’s residential head, oversees a portfolio of 5,000 build-to-rent apartments. At a conference in Cannes last month, attended by the Telegraph, he admitted that the sector “has a PR issue”.

Mr Patterson said: “It’s a really important part of housing tenure. It’s not exploitative. It’s what renters can afford in a certain location.

“Many people no longer wish to buy. They are renting because they want to, because it’s more flexible – even if they could afford to buy.

“I so often hear the repeated mantra about building more, but the majority want to remain in the rental sector.”