Sadiq Khan has come under fire over plans to turn Transport for London into a corporate landlord despite openly supporting a national rent freeze.
Transport for London (TfL) is already one of the capital’s biggest landowners, sitting on a portfolio of nearly six thousand acres. For years, it has generated millions of pounds in rental income from retail and work spaces in and above its stations.
But in more recent years a big opportunity has emerged in the shape of “build-to-rent” – a sector where developers and investors are pouring billions into brand new rental housing at a record pace.
Mayor Sadiq Khan wants to more than double income to Places for London – otherwise known as “The TfL Property Company” – over the next six years. The £1.5bn subsidiary generated £75m last year, but by 2030 Mr Khan wants it to be bringing in £187m.
To do this, the Labour politician needs to more than quadruple the number of rental homes on TfL’s books, from the 4,000 it has started to date to 20,000 by 2031.
Profits are then 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.
But in a bid to be re-elected as London Mayor, 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 told the camera: “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.
Low fares and rent caps
Other major capitals are already ahead of London’s transport network. In Hong Kong and Tokyo, apartments built above every station have – for years – subsidised cheap fares for city goers and visitors.
In Tokyo, it costs 180 yen (£0.94) to travel up to six kilometres. In London, a trip in Zone 1 with an Oyster or contactless card costs £2.80 – triple the price.
In Paris, instead of investing in property the local 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).
Experts are sceptical as to how Mr Khan can balance the need to reinvest rental profits into TfL to keep ticket fares down and make them internationally competitive, with his more recent promise to cap thousands of rents.
Reinvestment was, after all, the overriding reason why Mr Khan began to help turn the local government body into a corporate landlord in the first place.
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.
Mr Khan to create ‘fifth’ affordable rent scheme
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.
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.
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 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.”
‘Building on vital car parks’
Places for London, previously called “TTL Properties Limited”, was incorporated in 2014. Two years ago, it became financially independent of TfL – meaning it is now 100pc independently funded.
In the summer of 2022, it secured a £200m revolving credit facility to help with “short-term liquidity challenges”.
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 secretary Grant Shapps tried to block hundreds of flats from being built on a car park next to Cockfosters Station, despite the Mayor having won planning permission back in February 2022. Mr Shapps said the development would take away from much-needed parking provisions.
Last year, Levelling Up Secretary Michael Gove intervened. 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 too.
But despite its success on paper, the sector has struggled to overcome its corporate image – one 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.”
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