Housebuilding in London is facing the most challenging financial circumstances in decades, but there are good reasons to be hopeful – Sadiq Khan is taking the hard decisions needed to turn things around.
When the Mayor was first elected in 2016, he inherited a system whose potential had been squandered by his predecessor, Boris Johnson. Construction costs were low and interest rates were nearly zero, but Londoners were seeing very little benefit from this. Johnson would wave through developments with very low proportions of affordable housing, and council housebuilding was at rock bottom.
By taking the right decisions at the right time, such as introducing a fast-track route for development schemes offering 35 per cent genuinely affordable homes and backing councils to get building again, Sadiq got the most out of a growing market, with private development subsidising a boom in social and affordable homes.
The numbers speak for themselves: before the pandemic, Sadiq not only helped deliver the most council homes built since the heydays of the 1970s he also oversaw the most housing completions of all tenures since the 1930s.
But in recent years, economic conditions conditions have seen housebuilding nosedive. Some of this has hit development across the rest of the country too: Covid-19 and the war in Ukraine increased the prices of materials rapidly, and shortages of construction workers post-Brexit did much the same for labour costs. Between 2020 and 2025, the price of steel bars rose by 40 per cent, and the price of concrete by half.
Other challenges are more specific to London. Ninety-six per cent of our newly built homes are flats, meaning developers here are more likely top be reliant on borrowing in order to meet the high upfront costs and long delivery timelines involved. It also makes them particularly susceptible to rising interest rates, including the sort we saw as a result of the disastrous 2022 mini-budget.
The last government also badly botched the introduction of new building safety rules. The Mayor and I have long called for stronger regulations to prevent a repeat of the horror of the Grenfell Tower fire, and we will continue to enforce stronger fire safety rules than national government’s – such as banning combustibles on the walls of the affordable homes we fund – to address London’s unique situation.
But the chaotic way the second staircase rule was introduced for all blocks of flats above six storeys meant that many housebuilders had to pull planning applications and even mothball otherwise viable schemes without warning. At the same time, unnecessary, bureaucratic delays from the new Building Safety Regulator left some sites stalled for more than a year.
This perfect storm has been devastating, with housing starts dropping rapidly and sites being left vacant for months while Londoners in desperate need of secure housing go without. The overwhelming majority of these problems were cooked up not in City Hall but by the last government in Whitehall.
Sadiq is doing all he can to get London building again by cutting complexity for housebuilders and freeing up more land for development with a streamlined London Plan; by using his planning powers to call-in and approve more developments; by preparing to green-light building through new mayoral powers; and by actively exploring building on the Green Belt, which can be a win-win for housing and access to nature.
But we can’t undo a crisis that wasn’t caused by City Hall on our own. That’s why we are working closely with the current government to cut Building Safety Regulator delays and make more schemes economically viable through a time-limited emergency package to speed up and cut levies for schemes that provide 20 per cent or more affordable housing.
That comes on top of a record £11.7 billion secured for a new, ten-year, Social and Affordable Homes Programme, and nearly £2 billion in grant and low-interest loans to back an innovative new City Hall developer, which will bring together the private and the public sectors to unblock the sites across our city that have the most potential for rapid development. Unlike the last national government, the current administration understands the scale of the challenge and is working with City Hall, investing to get councils and developers building again.
In the face of falling housing starts, some have grasped for easy answers, blaming City Hall for the results of economic conditions and policy choices far beyond its control. Others have wrongly claimed that Sadiq has imposed unnecessary regulations or peddled downright false figures about the number of homes City Hall has helped to deliver. The truth is very different. Sadiq has backed builders with a rapid, unashamedly pro-housebuilding response to worsening economic conditions
When he was first elected, Sadiq made bold calls to make the housing market work better for Londoners. We saw the results: housebuilding numbers not seen since for decades, including tens of thousands of new housing association and council homes for social rent.
Now, faced with much more difficult circumstances, Sadiq is doing it again – making the right calls for the right time to turn the tide on the housing crisis and get London building again.
Tom Copley is Deputy Mayor for Housing and Residential Development. Follow him on Bluesky.
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