In order to successfully solve the housing shortage in London, the government would need to make changes to the laws surrounding compulsory purchase of empty or under-utilised commercial properties to create enough land to build the homes, the Policy Exchange said.
Around 27,000 homes are built in London each year, far less than the 50,000 needed to keep up with demand.
In its report The Homes London Need, the think-tank said buying and developing the land, as well as building the homes, would cost approximately £6.3bn a year, totalling £126bn over 20 years.
Half of that could be contributed by the government with the other half made up by institutional investment, the report suggested. If put into action, the level of investment would be on a scale not seen in London since the 1970s.
Once built, the homes would be made available to rent out or offered as shared ownership properties.
The government would be able to recover its investment through selling its stake in the homes to the co-investor. The ongoing returns would reduce the government’s investment to approximately £15bn over the course of 20 years, which the report pointed out is significantly less than the government’s Help to Buy scheme.
Depending on market conditions, the government’s investment could be reduced so it could be recouped within the 20-year period, the report said.