Developers have been advised to “roll up their sleeves” and quickly bring forward new housing schemes in London if they want to benefit from a change in the rules on affordable housing.
Housing Secretary Steve Reed and mayor Sir Sadiq Khan are expected to confirm next week that the rule that 35 per cent of homes in new developments have to be affordable will be slashed to around 20 per cent.
But this will be time-limited and unlikely to last more than two years, The Standard has been told.
A City Hall source said the new rules would only last while the construction industry remained in crisis – with the expectation of the affordable housing ratio returning to a higher level before the next mayoral elections, which will be held in May 2028.
“It would be a time-limited emergency measure that would be lifted as soon as possible, depending on market conditions,” the source said.
“This is not meant to be the ‘new normal’. Developers have got to get their skates on. The clock will be ticking. They need to roll their sleeves up and deliver.”
The mayor’s team accepts that housing starts have collapsed in London, but believes that reducing the demands on developers could result in more affordable homes being provided.
“We are in a situation where 20 per cent of something is better than 35 per cent of nothing, or 35 per cent of very little,” The Standard was told.
Earlier this week, homebuilding analysts Molior warned that the number of private homes under construction in London was set to slump to as few as 15,000 - about a quarter of “normal” levels - by the end of next year.
Normally about 60,000 to 65,000 homes are being built in the capital at any one time. However, this has dropped to 40,000 currently, and with few new schemes coming through and more reaching completion, this will collapse to just 15,000- 20,000 new homes actively under construction across London by 1st January 2027.
Separate data published by the Greater London Authority said that only 347 affordable homes were started across London between April and June.
In 2023/24 there were only 2,358 affordable starts, though this increased to 3,991 in 2024/25, according to City Hall data.
A new report by the Centre for Policy Studies said an average home in London was almost 12 times more expensive than the average London salary, while private renters can expect to spend 40 to 50 per cent of their income on rent.
Its analysis of Molior data, which covers private developments of 20 or more houses, found that 80 per cent of homes finished last year received planning permission under Boris Johnson’s London Plans, even if they were signed off during Sir Sadiq Khan's mayoralty. Just a fifth were built under the plan Sir Sadiq put in place in 2021.
The regulatory environment has made the cost of building so high that even if the land is provided for free, developments in half of London are unviable, according to Molior.
According to the Centre for Policy Studies, the 2021 London Plan identified 47 opportunity areas with potential for at least 2,500 homes, yet delivery in these areas has fallen.
Sir James Cleverly, Tory shadow Housing Secretary, said: “London needs more homes than anywhere else in the country, yet under Sadiq Khan, housebuilding has fallen off a cliff.
“Last year, fewer than 4,000 homes were started, less than five per cent of London’s target under Labour’s 1.5 million homes pledge.
‘The new CPS report, The City That Doesn’t Build, exposes the scale of London’s housing collapse. It finds that Boris Johnson’s London Plan delivered more homes last year than Sadiq Khan’s Plan – despite Boris leaving the office of Mayor nine years ago.
“That’s further proof that Khan’s leadership has buried the capital in red tape and stopped homes being built.”
Report author Ben Hopkinson, head of housing and infrastructure at the Centre for Policy Studies, said: “London’s dramatic decline in new homes starting construction should be a national crisis.”
