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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. 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 consultation and 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. 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.” 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 last week. 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. 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”. John Dickie, chief executive at BusinessLDN, said: “With housing starts, planning applications and house sales at historic lows in the capital, the Government and Mayor are right to take action to accelerate delivery of the new homes that Londoners desperately need. “As housebuilding costs have spiralled in recent years, construction has faltered. Temporarily adjusting the percentage of affordable homes... will help to get more shovels in the ground."
