London mayor Sir Sadiq Khan has been given permission to slash the amount of affordable homes in new developments from 35 per cent to 20 per cent.
The new target was announced by Housing Secretary Steve Reed on Thursday afternoon after weeks of speculation that the mayor was watering down one of his benchmark targets in a bid to kick-start the dormant London housing market.
A note from the Ministry of Housing, Communities and Local Government said the “emergency” intervention would be “time-limited” and run until March 2028. It is being brought in after more than a third of London boroughs recorded zero housebuilding starts in the first quarter of this year.
The current situation was described as a “perfect storm” due to the impact of the pandemic, high interest rates, spiralling construction costs, regulatory red tape and wider economic conditions.
City Hall hopes this will encourage developers to “roll up their sleeves” and quickly bring forward new housing schemes. Sir Sadiq will get extra powers to intervene in schemes that boroughs are minded to oppose - and an additional £322m in housing funds, on top of more than £11.7bn already earmaked for social housing over the coming decade.
But Labour MPs and homelessness campaigners fear the move could lead to fewer homes being built for the hundreds of thousands of Londoners on council waiting lists.
And the London Renters Union, which represents about 7,000 renters in the capital, slammed the cut to affordable housing targets.
The Government believes the emergency measures will benefit “tens of thousands of Londoners” by significantly ramping up housebuilding, unlocking stalled sites and ensuring more affordable homes are built across the capital.
The proposals are subject to a six-week consultation starting next month. The aim is to bring in the new rules as soon as possible afterwards.
The new system will end before the next mayoral elections, which are due to take place in May 2028. Sir Sadiq has indicated he will seek a fourth term of office but not formally confirmed he will stand again.
Proposed developments with at least 20 per cent affordable housing will be fast-tracked – compared with the mayor’s previous requirement for 35 per cent to be affordable to qualify for his fast-track procedure.
Developers will also be exempt from paying a “community infrastructure levy” - effectively a local tax levied on new schemes that helped to fund the building of Crossrail, now known as the Elizabeth line.
According to the MCHLG, the “use it or lose it” route will come with strict conditions to speed up the delivery of new homes, which if not met will require developers to share their profits with local boroughs to deliver more affordable homes.
Sir Sadiq will get the power to review and call-in housing schemes of 50 homes or more where boroughs are minded to refuse – far lower than at present.
The £322m will be used to establish a City Hall developer, a 2024 manifesto pledge from the mayor.
Mr Reed said: “Getting spades in the ground in London is crucial if we want to see the biggest increase in social and affordable housing and meet our target of delivering 1.5 million homes in our Plan for Change.
“I have worked closely with the Mayor of London to give the capital the shot-in-the-arm it needs to ensure more Londoners have an affordable home of their own.”
Sir Sadiq said: “Affordable housing has always been a top priority for me as Mayor. We have started more new council homes in London than at any time since the 1970s and, prior to the pandemic, completed more new homes in London than any time since the 1930s.
“But there’s now a perfect storm facing housebuilding in London due to a combination of high interest rates, the rising cost of construction materials, the impact of the pandemic and ongoing consequences of Brexit. All of this means we are now in the midst of the most difficult period for housebuilding since the global financial crash.
“Urgent action is required, which is why I've been working with the government on this package of bold measures. I grew up in a council house, so I know the importance of social and affordable homes. I'm not willing to stand by while the supply of affordable housing for Londoners dries up.
“I'm confident that we can kickstart housebuilding and deliver more of the affordable homes Londoners badly need.”
But Zoë Garbett, a Green Party member of the London Assembly and the party’s former mayoral candidate, said it was a "misguided attempt to solve the housing crisis".
She said: “For too long we’ve entrusted our basic right to a home to a cartel of property developers who’ve made billions turning our city into a playground for the rich, while 90,000 children in London are forced to live in temporary accommodation.
“Lowering these targets will not solve our housing emergency. It will only serve to protect the profits of the same developers who got us into this mess, while driving up prices and slashing the delivery of desperately needed social homes."
She added: "Londoners deserve a Mayor who fights for them – not one who takes orders from billionaire developers.”
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,” The Standard was told last week.
However, some industry experts warned this could result in developers seeking to renegotiate already approved planning consents to reduce the number of affordable homes they are required to build.
Last 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.
In a letter to Sir Sadiq on Thursday, the London Renters Union warned that “allowing developers to build more extortionate flats” would “represent a major betrayal” of low-income renters.
“As Mayor of London, you have repeatedly stood for election on a platform of being on the side of renters and on the side of low-income Londoners,” Bekah Hesse, from the London Renters Union, said in the letter.
“You have previously been a passionate advocate for an end to Section 21 evictions and rent controls, both essential measures.
“Your 2024 manifesto included commitments to build 40,000 new council homes and to ‘empower’ renters to stand up to their landlords.
“Allowing the affordable homes targets to be slashed would represent a major betrayal of low-income renters across our city.
“We urge you to take action in support of the people facing the sharpest end of the housing crisis. As the Mayor of London, you can take a principled stand against this attempt by the central government to further the interests of private developers at the expense of ordinary Londoners.”
Labour MP for Croydon East, Natasha Irons, argued that this was a temporary measure in a bid to see homes being built in London.
She told the Standard: “I think we are in a situation where nothing is being built, and 35 per cent of nothing is nothing.. .Developers have said they need flexibility. Now that they have got it, they must prove they can and will build.”
The regulatory environment introduced in the wake of the Grenfell tower disaster 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.
Earlier this week, prominent London Labour MPs Florence Eshalomi, who chairs the Commons housing select committee, and Walthamstow MP Stella Creasy, opposed a reduction in the affordable housing quotas.
Ms Eshalomi, who has been mentioned as a potential mayoral candidate if Sir Sadiq decides not to stand again in 2028, told The Guardian: “Solving the housing crisis relies not just on how many new homes we build, but also on their affordability.
“One of the main drivers of the crisis we are in has been the failure over many decades to build homes that are within reach of local people.”
“This problem has been particularly acute in London, where all too often we have seen developers prioritise profitable luxury units over housing that meets the needs of people already living here.”
Ms Creasy said: “We desperately need genuinely affordable housing and protections for tenants – I hope the mayor will hold firm that these targets matter.”
Mairi MacRae, the director of campaigns and policy at Shelter, warned against developers being “allowed to wriggle free of their responsibilities to build their fair share of social homes”.
Rob Perrins, chair of Berkeley Group, said: "We commend the Secretary of State and Mayor of London's leadership in bringing forward this package, which goes a long way towards resolving London's viability challenge.
"For these measures to work in practice, every organisation involved in housing delivery must now get behind them, and act with real urgency and conviction to increase homebuilding at pace. As viability is restored, we stand ready to invest some £3 billion into new land and homebuilding activity."
Mark Allan, chief executive of Landsec, said: “The Secretary of State, the Housing and Planning Minister and the Mayor of London should be congratulated on the pace and focus they have brought to agreeing this package.
“The package announced today should go a long way to unlock delivery on stalled sites and accelerate delivery on others, ensuring thousands more homes – including social and affordable homes – are delivered for the benefit of Londoners. We’re keen to get moving.”
Craig Carson, regional director of Barratt London, said: “These welcome proposals will help us start to tackle the housing crisis we face in London. Alongside this emergency package, it is vital that government looks at ways we can support homebuyers in London."
