London’s struggling housebuilding sector is set for sweeping reforms after the government and City Hall agreed to relax key planning and affordability requirements in a bid to revive stalled projects and boost supply across the capital.
Under a new “Homes for London” package announced jointly by Housing Secretary Steve Reed and Mayor Sadiq Khan, developers will temporarily be required to provide fewer affordable homes, gain relief from the Community Infrastructure Levy (CIL) and benefit from loosened design standards.
The measures come amid a sharp fall in construction activity, with housing starts in London down 55.9% year-on-year to just 2,040 in the first half of 2025, according to official data.
The capital’s slowdown has left delivery far short of the government’s ambition to build 88,000 homes a year in London – part of a national target of 1.5 million new homes over the current five-year parliament.
JOINT INTERVENTION
The joint intervention follows weeks of negotiations between the Department for Levelling Up, Housing and Communities and the Greater London Authority.
Both sides described the package as a pragmatic response to the “perfect storm” facing the industry, with high interest rates, rising construction costs, lingering post-pandemic effects and Brexit-related supply pressures combining to make many schemes financially unviable.
TIME-LIMITED PLANNING
At the heart of the plan is a new time-limited planning route allowing developers on private land to secure permission without a viability assessment if they commit to delivering at least 20% affordable housing.
Roughly half of those affordable units will be eligible for government grant funding. A “gain-share” mechanism will apply to projects extending beyond 2030, ensuring that if market conditions improve, a portion of additional profits is channelled back into affordable housing delivery.
Developers meeting the new thresholds will be eligible for a 50% reduction in CIL charges, with higher discounts available for schemes that exceed the 20% affordable housing benchmark. The government will consult on the details next month, with relief applying to projects that start before the end of 2028.
DUAL ASPECT DESIGN RULES
To improve scheme viability, elements of London Plan guidance that constrain density will also be eased.
Mandatory “dual aspect” design rules, limits on the number of dwellings per core, and strict cycle storage requirements will be relaxed, giving developers more flexibility in design and layout.
Alongside the planning reforms, the mayor will gain enhanced powers to intervene directly in housing applications. Khan will be able to “call in” schemes of 50 homes or more where boroughs are minded to refuse permission and take decisions on developments over 1,000 square metres of greenbelt or metropolitan open land.
City Hall will also be able to issue Mayoral Development Orders for strategic schemes without borough consent – a move intended to accelerate delivery on large sites.
CITY INVESTMENT FUND
A new £322m City Hall Developer Investment Fund will also be launched from 2026 to unlock stalled projects and invest directly in major developments, complementing national programmes such as the forthcoming £16bn National Housing Bank.
Officials said the combined measures were designed to “make a material difference” to stalled schemes across London and encourage boroughs and developers to get projects moving again.
Khan (main picture, inset) described the agreement as “the boldest step in a decade to get London building again”, while Reed said it demonstrated “a new era of cooperation between government and City Hall” to tackle the capital’s housing crisis.
INDUSTRY REACTION
Following the substantial slowdown in housing in London over many months a substantial decision was much needed.
But yesterday’s announcement contains all the elements of a budget, just a month before the much-awaited national Budget. And one which will have significant implications on that trajectory of the economy.
While the development sector will inevitably welcome this considerable package of measures, the fiscal aspect is significant. Essentially, significant emergency measures are being activated to stimulate the housing market.
Decision making removed form a lower level
In today’s announcement, the 32 London boroughs and the City of London are being directed to enable the Mayor to override planning decisions to schemes as low as 50 homes or above which in practice means almost all housing schemes that are delivered across London.
Other notable muscular powers include using Mayoral Development Orders which in essence is giving direct powers to City Hall to make direct planning decisions without the need for borough planning committees.
All quite seismic and important changes to get housing delivered even if the thorny issue of local May elections are on the horizon.
The rush is on
Perhaps unsurprising given the urgency, time is at the centre of this document: the time-limited planning route which reduces the 35% affordable housing requirement to 20% for fast track applications to breeze through will be available until 31 March 2028; or the publication of the revised London Plan, whichever is earlier.
And, the planning tax, called the community infrastructure levy (CIL) will see a 50% relief, presumably supplemented by central government if the planning consents are commenced by the end of December 2028.
It will be interesting to see how London looks in March 2028 but in the rush for sites to be commenced, I anticipate many more holes in the ground and perhaps fewer completed schemes than these emergency measures intend.
And in reality these timescales are already compromised: by local elections which will enforce a period of purdah on planning decisions, and by a mayoral election which may result in a new policy direction.
Consideration of the consumer
Much of this policy document is focussed on getting homes built (or in some respects merely commenced).
Another important factor to consider is the consumer: what does it do to support homebuyers in getting on the housing ladder? My inclination is that it does nothing. Next month’s Budget will be vital to join the dots between delivery and demand.
THIS IS GOOD NEWS
After a prolonged collapse in house building across London, today’s announcement of action from the Government and Mayor of London is very good news.
The fact that the Mayor and the Government are jointly proposing key changes to planning policy and how planning decisions are made in London, alongside ongoing reforms at the Building Safety Regulator, indicates the seriousness of the efforts to tackle those structural issues that have led to the slump in housing delivery across the capital this year.
The breadth of the reforms reflects the scale of the housing crisis confronting London and its ripple effect across the country. Kick-starting housing delivery in London is fundamental to the Government’s aspirations of delivering 1.5m homes in this Parliament.
Significant policy changes
The Government and the Mayor appear to have grasped the nettle. The proposed temporary reduction in affordable housing to 20% and introduction of temporary CIL relief are, in my view, the most significant measures for developers.
Both will make a real difference to the viability of schemes that might otherwise have been shelved.
Greater Mayoral intervention in planning applications is also notable, with the scope for intervention reduced from 150 to 50 home schemes.
This could be positive provided the Mayor’s office has the capacity to manage the additional caseload and the Mayor is willing to overturn local decisions. While it doesn’t change the fundamentals of the planning process, it does signal a more active role for the Mayor in directly tackling the housing crisis by approving more applications.
Design relaxations, such as easing the dual-aspect and cycle storage requirements, are welcomed, though in practice the greatest benefit of this will be for those schemes still on the drawing board.
Timing matters
After years of under-delivery, timing is critical. The six-week consultation period starting in November means these measures are unlikely to take effect before the new year – and with the reduced 20% affordable housing rate applying only to permissions secured by 31st March 2028, the window of opportunity is limited.
In reality, the changes will benefit those applications already in the pipeline or those that have been approved but have not commenced on-site due to viability issues.
We can expect a rush to get permissions granted before the 31 March 2028 cut-off, but more immediately we will see a flurry of applications to amend existing permissions to enable them to benefit from the reduced affordable housing requirement and additional CIL relief. These will add to the workload for local planning authorities across London.
Whilst the reduction in the affordable housing requirements seems counter intuitive when London faces a housing crisis, the true mark of success will be a significant increase in housing starts, as others have said this week, 20% of something is better than 35% of nothing.
