The long-awaited government and City Hall intervention to kickstart housebuilding in London has finally emerged, complete with its the well-trailed reduction in affordable housing quotas for private development from 35 per cent to 20 per cent as its controversial centrepiece.
The package not only reduces that affordable threshold, which gives developers who meet it a “fast-track” route to planning permission, it also cuts by 50 per cent the Community Infrastructure Levy (CIL) councils charge developers and allows government social housing grant to support half of the new 20 per cent affordable requirement. Some City Hall design rules will be relaxed too and Sir Sadiq Khan will gain new powers to decide applications over the heads of the boroughs.
For the main proposals, a time-limited “use it or lose” approach will apply, giving developers essentially two years, to April 2028, to get 20 per cent affordable schemes approved and underway with that CIL relief and additional grant. Doing so would also spare them City Hall’s current “late-stage” review option, which claws back a share of “surplus” profits to fund more affordable homes, as long as building is well underway by April 2030.
Twenty per cent of something?
Will all that be enough to make developers’ schemes stack up financially? The property industry has broadly welcomed the intervention. It would go “a long way towards resolving London’s viability challenge,” said Rob Perrins, chair of major London housebuilder Berkeleys.
There are reservations though, with some warnings that in current economic conditions even a 20 per cent affordable threshold may not be low enough. Recent high-profile planning appeal rulings on economic viability saw the 1,000 home Stag Brewery scheme approved at 7.5 per cent affordable, and 16.6 per cent affordable agreed for the 434 home Cuba Street scheme.
As a six-week consultation period on the proposals begins this month, the property lobby will also be seeking more relaxation, or even the scrapping of Mayor Khan’s viability rules, which they claim significantly deter investors. The rules remain in place for “20 per cent” developments which do not get underway quickly, as well as for schemes falling short of the threshold.
Further dilution of what has been a flagship policy for Khan since his first election win in 2016 seems unlikely. Ceding the 35 per cent threshold won’t have been easy for the Mayor, and his review mechanism ensuring that extra profit resulting from an improved market benefits the community as well as the developer has been an article of faith too.
Some industry responses have been too downbeat, according to the more optimistic Jon Neale of consultants Montagu Evans. The new measures, he said, “will be much more impactful than many in the market are assuming; while modest individually, acting together, they strongly support viability.”
Town Hall concerns
Councils seem less enthusiastic, though, which will be a concern for policymakers. The cooperation of the boroughs which, as local planning authorities (LPAs) will be the first port of call for developers looking to take advantage of the new incentives, is an essential element of the plan.
Southwark Liberal Democrat opposition leader Victor Chamberlain succinctly set out borough doubts in Inside Housing magazine. In his view, the intervention might boost viability “short-term”, but risked “underwriting private margins” rather than providing more social housing and improving infrastructure over time. And shifting more planning power to City Hall could undermine local decision-making at a time when “public trust in development is already too fragile,” he wrote.
A lukewarm response from the London Councils collective was notable. It said boroughs would be “looking at the proposals in detail to understand the implications for housing delivery in our local areas”. More council funding would be the “quickest and most effective” way of getting more homes built, added the group’s executive member for housing, Waltham Forest leader Grace Williams.
The clock is ticking
But with consultation responses to be considered, London Plan amendments drafted and, for some of the changes, secondary legislation enacted, the package is unlikely to be fully in place until well into the New Year. That leaves already a relatively limited window for action. As consultancy Lichfields puts it, “the extent and speed of change is…reliant on how quickly [the measures] are formally adopted after the consultation and then the response of London’s LPAs: it will be incumbent on the boroughs to embrace the measures…and to apply them positively in their decision-making.”
Uncertainty around next May’s council elections brings added urgency. With Green Party London Assembly member and 2026 Hackney mayoral contender Zoë Garbett already condemning the measures as serving “only to protect the profits of the same developers who got us into this mess”, Khan will want to get the boroughs on board and see some rapid progress.
Enter the Mayor
Perhaps anticipating borough reluctance, the measures include a new mayoral power to rule on schemes of 50 homes or more where councils are “minded to refuse” the application, on top of the existing “call-in” powers. In a clear message to council planning committees, this would allow the Mayor to “review whether the right decision had been reached in the context of the housing crisis”.
There’s new money too – a £322 million “City Hall developer investment fund” to help the Mayor “take a more direct and interventionist role to unlock thousands of new homes”. And on the horizon, a streamlined power to make Mayoral Development Orders approving schemes “upfront” without gaining borough consent.
To date, Khan has intervened relatively infrequently. Now we may see more flexing of mayoral muscle, though with town hall alarm bells ringing reassurance may be needed that this isn’t a permanent shift towards City Hall-level rather than council-led planning.
The elephant in the room…
There are 281,000 unbuilt homes in schemes already given permission but currently stalled. This is the “lowest hanging fruit”, according to leading planning lawyer Simon Ricketts. But the proposal merely suggests that that developers unable to meet the conditions of their permissions should seek to negotiate individual “deeds of variation”.
Will councils be keen to look again at schemes they’ve already approved, allowing developers to water down affordable home commitments that had been accepted in good faith? Ricketts is doubtful: “At the very least we need specific encouragement for local planning authorities to accept developers’ requests to engage,” he argues, coupled with “some sort of oversight, monitoring and/or route for complaint where authorities refuse”.
Dismal demand is another concern, prompting calls for new Help to Buy-style incentives for buyers, though some, notably housing journalist Peter Apps, argue this will simply keep already overinflated house prices too high. Fundamentally, a system pegging around half of affordable supply to the fortunes of private developers needs a rethink, according to the Centre for Cities think tank: “If affordable housebuilding is to increase substantially in the city, public spending to build it has to increase.”
Meanwhile though, the onus, in the government’s words, is on developers and boroughs, to “get on with approving and building the homes that so many Londoners need”. As Landsec’s Chris Hogwood puts it, “they are all going to have to trust each other a bit more. None of this is going to be 100% perfect. But it’s always going to be better than no homes being delivered at all.”
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