London Mayor Sadiq Khan’s ambitious plan to ease the capital’s housing crisis through a major publicly-owned development fund appears to be teetering on the brink of financial collapse, according to startling revelations from government auditors. The Greater London Authority’s property arm, optimistically dubbed the London Housing Fund when it was established in 2012, has racked up a staggering £300 million in outstanding loans that it has repeatedly failed to repay – setting the stage for a humiliating taxpayer-funded bailout.
Alarms began sounding as early as last year, when internal reviews cited by the Financial Times pointed to an alarming lack of transparency and accountability at the fund, which ranks as one of Britain’s largest public landowners with over 635 hectares to its name. Auditors ominously warned they were “not provided with evidence” justifying the chronic repayment delays, nor any clear plan to remedy the shortfalls.
A Legacy of Mismanagement
While the fund’s original £300 million debt dates back to its inception under then-mayor Boris Johnson, the current administration’s apparent mishandling of the situation has only deepened concerns. The first tranche of the loan came due way back in 2018, yet GLAP failed to remit a single pound until a token payment earlier this year – six years past the deadline.
But far more troubling than the tardiness of the transfers is what one official audit bluntly described as a baffling absence of “supporting documentation to formally agree the non-repayment.” Put simply, no one seems willing or able to justify why the fund has been allowed to serially default on its obligations – nor to clearly account for how its considerable assets have been utilized.
A Hands-Off Approach
Curiously, some of London’s highest-ranking public officials sit on the steering committee charged with overseeing the fund’s operations, including Khan’s own chief of staff. But if they’ve taken a hand in righting the ship, there’s precious little indication of it in the public record. In fact, one particularly damning finding suggests the committee routinely neglected even to keep minutes of its proceedings, sidestepping the most fundamental duty of transparent governance.
There is a risk that decisions made on the loan have not been formally agreed, documented and processes are not in place for the management of risks.
Internal audit report
The scathing language speaks to an almost unfathomable degree of laxity for an entity entrusted with stewarding hundreds of millions in public money, experts say. And it only adds to suspicions that a backdoor bailout may already be a fait accompli – with taxpayers left to foot the bill while fund executives evade accountability.
The Threat of Taxpayer Exposure
Indeed, auditors have raised red flags that Mayor Khan may ultimately tap public coffers to help GLAP settle its colossal debts, a galling prospect for citizens who’ve seen years of austerity budgets slash support for education, transit, and other essential services. Having promised to stanch London’s affordability drain, the mayor could soon be asking constituents to subsidize the very mismanagement that’s stalled progress.
To be fair, GLAP did manage to scrape together £33 million for a partial repayment in March. But that’s a far cry from the £300 million principal that remains untouched as the original 2018 maturity date recedes further in the rear view. Officials have vaguely cited economic headwinds in the construction sector to justify the glacial pace of progress, yet have divulged few specifics on revised targets.
The Path Forward
As public pressure mounts, the fund insists it’s turning a corner, adopting new protocols around documentation and accountability. But for jaded Londoners, that may be too little, too late – particularly in light of the yawning chasm between GLAP’s immense promise and its decidedly lackluster results to date.
At its launch, the fund trumpeted a bold mandate to help build up to 68,000 new homes and generate thousands of jobs in the capital’s deprived neighborhoods. A decade on, its combined assets in coveted districts like the Docklands and Greenwich Peninsula remain largely untapped, as an affordable housing crisis metastasizes unabated.
With auditors now sounding the alarm over a potential taxpayer-sponsored rescue, the question is whether the fund and its political patrons will at last be called to account – or if Londoners will again see their dreams of accessible housing sacrificed on the altar of bureaucratic dysfunction. As the specter of public bailouts looms, only one thing is certain: the stakes for both the city’s coffers and its most vulnerable citizens could scarcely be higher.
