Sadiq Khan hailed “bold measures” as he joined housing secretary Steve Reed last week to unveil a five-point package to breathe life into the capital’s flatlining housebuilding sector.

London calling: a report this month by Molior estimates that only 6% of the residential completions needed in the capital are expected to materialise

The mayor of London said he was confident the co-ordinated intervention would kickstart activity in the city – but the scale of the challenge is frightening.

A report by housing insight specialist Molior London this month warned that just 6% of the 176,000 residential completions needed in the capital across 2027 and 2028 to meet the government’s development targets are expected to materialise. The study counted 3,248 private homes starting construction in the first three quarters of this year, against a goal of 66,000.

Separate figures from the Home Builders Federation (HBF) in September showed just 966 projects gaining approval in London in the 12 months to June 2025, the lowest since records began almost two decades earlier.

This report said developers and investors were “increasingly electing” to avoid high-rise schemes in London due to post-Grenfell design requirements and delays securing approvals from the Building Safety Regulator (BSR).

Meeting the requirements of the London Plan has also been challenging, with major residential applications taking seven weeks longer to determine in the capital than in four other big UK cities, according to the HBF.

The HBF also cited plummeting buyer demand due to high interest rates and the end of Help to Buy loans as reasons for the slowdown, along with a lack of power grid capacity and various taxes and policy requirements.

City Hall said this summer that the capital needs 88,000 new homes a year to meet demand. Achieving this would deal with almost a third of Labour’s goal of building 1.5 million homes in this parliament.

There are currently 281,000 unbuilt homes with planning permission
Paul Rickard, Pocket Living

The government and the mayor appear to have recognised the gravity of this crisis and the threat it poses. The mayor and the minister outlined five measures last week, but there is a question mark over whether they will be enough to trigger sufficient change.

The measures include halving Community Infrastructure Levy (CIL) payments for housing projects starting before 31 December 2028 and consisting of at least 20% affordable homes. This tax relief could rise where more submarket homes are provided. However, it could also be reduced “where the full available amount is not shown to be warranted”.

Hitting the new 20% affordability threshold, down from 35%, will also allow housebuilders to enter a fast line to swerve upfront viability assessments for many schemes on private land, and access grants for half the subsidised homes in these proposals. But a gain-share review will kick in for schemes still at early construction stages in April 2030, with councils taking 60% of any surplus profit made.

A welcome start

Elsewhere, changes to London Plan guidance will relax requirements for dual-aspect homes; limits on dwelling numbers per core; and rigid cycle storage rules. The mayor will also be given extra call-in powers to review any scheme with at least 50 homes that a borough is “minded to refuse”, and to intervene on proposals of 10,800 sq ft or larger on the green belt or metropolitan open land. Finally, an initial £300m of grant funding will be allocated from 2026-27 as a City Hall Developer Investment Fund.

While developers largely back the measures, some say much more is needed.

HBF chief executive Neil Jefferson hails it as a “very positive move” and adds that the “flexible” approach to affordable housing should “allow some investment in new housing to return”. But he points to a complex soup of factors holding the sector back.

“While mayoral and borough policies have reduced viability, central government has continued to levy additional taxes and policy costs on delivery,” he says. “More widely, London faces an acute affordability challenge, in particular for first-time buyers, which limits the ability for builders to invest, and recent delays caused by the problems with the BSR.”

Paul Rickard, chief executive of one-bedroom specialist developer Pocket Living, backs “a sensible short-term move that should unlock thousands of schemes across London and help restore confidence in the market”.

Riverside blues: London is facing an acute housing affordability challenge

But he also calls for “longer-term structural reform”, including measures to get approved projects built. “There are 281,000 unbuilt homes with planning permission,” says Rickard. “We expect policymakers to work with the sector to find innovative and fair ways to extend these interventions to consented schemes.”

Danny Pinder, director of policy for real estate at the British Property Federation, claims the government’s “more pragmatic” approach to affordable housing is “essential to start unlocking development” in the capital. But he also wants “further steps to improve the viability landscape” in next month’s Budget – a pivotal date in the industry’s calendar.

Pinder adds that the announcement won’t solve “the delays at the BSR, where 55,000 homes are stuck waiting for sign-off for construction or remediation, half of which are in the capital”.

There does appear to be movement on that front. New BSR figures released this month show it is on course to clear its backlog of legacy cases by January, with chief executive Charlie Pugsley stating that the summer overhaul is already showing positive results. The regulator’s new Innovation Unit is now meeting or exceeding its 12-week service-level target on the majority of cases. While not everyone is yet impressed, this is significant progress – back in July, the average gateway 2 approval time stood at 36 weeks.

GLA still to consult

Olivia Harris, chief executive of affordable housing provider Dolphin Living, says it is great to see a concerted effort to increase development in London, pointing out that “20% of something is more than 35% of nothing”.

“My ask is that this reduction is done alongside considering a change in tenure choice to intermediate rent, to unlock developments that would otherwise not be financially deliverable,” she adds.

While the emergency package has central government support, the Greater London Authority (GLA) is still set to consult on the proposed measures over six weeks from November. It says it aims to use a mixture of secondary legislation and local plan guidance to implement them, with details of grant funding to be brought forward separately.

Matthew Evans, partner in the planning team at law firm Forsters, also largely welcomes the “emergency intervention” from Khan and Reed. But he warns: “Bread-and-butter C3 housing is not being built; most developers we work for have moved to student accommodation or co-living. We are effectively starting from zero; that is the reality.”

He adds that while housebuilders would “bite hands off” for the CIL relief promised, the 20% threshold for fast-track planning may still not be low enough to encourage them to use this route. “We are seeing schemes going in for zero [affordable housing]. There will be people preferring to go through the full process and aim for below 20%. We’ve seen a number of schemes approved recently with under 10%.”

The overall package of measures could act as kindling to spark activity, Evans says. “It will get us moving and once the market sees people building out straightforward housing again, they might join the bandwagon and it might snowball.” But, he starkly adds, there is “a long way to go to 1.5 million homes”.

Molior founder Tim Craine goes further, saying the latest measures are unlikely to be of any benefit without action at the Budget to boost house sales.

“Labour’s job was to create an environment in which developers could attract equity into residential development,” he says. “Not only does the late-stage [viability] review remain, it now exists in the fast-track route as well.

Pity the SMEs and the entrepreneurs.”