London developers to be allowed to reduce percentage of affordable homes | Housing

Developers will be allowed to build fewer affordable homes and demand higher subsidies to build them under government plans to tackle London’s housebuilding crisis.

Housing secretary Steve Reed and London mayor Sadiq Khan are due to unveil the package within weeks in what officials say will be a time-limited intervention designed to stem the steep decline in new buildings in the capital.

While the plans, the details of which are still being discussed, have been welcomed by developers, they have been condemned by homelessness charities, which say it will lead to record numbers of homeless people in the UK.

A spokesman for Khan said: “The mayor is working with the housing minister on a package of reforms that will accelerate house building in the capital.

“The changes, expected to be launched in the coming weeks, will aim to unblock stalled sites and give the mayor stronger tools to approve homes and bring thousands of homes forward more quickly, as we continue to build a better, fairer, more prosperous London for everyone.”

Shelter campaign and policy director Mairi MacRae said: “Plans to cut affordable housing targets in London will allow profit-driven developers to continue protecting their own bottom lines at the expense of 97,000 children growing up homeless in the capital.

“The government must urgently reverse these plans.”

Ministers have put new house building at the heart of their economic plans, with a target of building 1.5 million homes over the course of parliament, helped by changes to the planning system and adding billions of pounds more to social housing.

But this was not enough to prevent a sudden and steep decline in house building in London.

figures Published this week by consultancy Molior (pdf) It shows that the number of homes under construction in the capital has fallen from around 60,000 in 2015-2020 to 40,000 today. Molior’s predictions show the number will fall to as low as 15,000 by 2027.

In the first three months of 2025, builders started work on just 3,248 new private sector homes in the capital. A report by the Center for Policy Studies on Thursday showed that this equates to 0.12 new homes per 1,000 people, compared to the national average of 0.5.

Robert Colvile, director of the Center for Policy Research, said: “We are currently in a situation where we are building a 20th of the homes we need in London. This will undermine the government’s target of 1.5 million homes.”

Building a house in London has always been more expensive than in the rest of the country due to limited space; This means developers must build taller projects and often demolish other buildings first.

But costs have risen rapidly in recent years as a result of inflation, higher interest rates and tighter regulations after the Grenfell Tower fire.

Experts say the Building Safety Regulator, set up after the disaster, is struggling to cope with the number of applications it receives, with around 10,000 applications stuck in the approval process.

Khan and Reed are considering a number of measures to ensure the system moves forward quickly.

The first of these will be to change the rules regarding rapid planning applications that developers mainly use.

To qualify for the fast-track process, companies currently must include 35% of affordable homes in any new project. The government is considering reducing this to 20 percent.

The second measure would be to increase the amount of government subsidy available for the construction of affordable units, so companies could finance up to half of the cheaper homes they build.

A third would be to give councils the option of not charging a tax known as the community infrastructure levy, which forces developers to pay for local services such as roads and GP surgeries.

Officials want the measures to include an automatic review period if the economic situation improves before Khan’s term ends in 2028.

One of them said: “This is an emergency and we need to act. There is currently no social housing being built in London and 20% of something is better than 35% of nothing.”

Kate Henderson, chief executive of the National Housing Federation, said: “While we recognize the unique challenges facing development in London, it is crucial that we do not dilute our affordable housing targets.”