Affordable Housing Targets Set to Be Reduced as London Housebuilding Plummets
London’s housebuilding sector is bracing for one of the most significant policy shifts in recent years, as the government and the Mayor of London prepare to relax affordable housing requirements in a bid to revive stalled projects across the capital.
According to emerging details from the Department for Levelling Up, Housing and Communities, Housing Secretary Steve Reed and Mayor Sadiq Khan are finalising a package of temporary reforms intended to counter the steep decline in new housing starts. The measures will target what officials describe as an emergency slowdown in London’s development pipeline.
Recent data from the industry reveals a dramatic fall in construction activity. The number of homes under construction in London has dropped from roughly 60,000 in the period 2015–2020 to just 40,000 today, with projections warning this could fall to as few as 15,000 by 2027 if current trends continue.
In the first quarter of 2025 alone, only 3,248 new private-sector homes broke ground across Greater London, equating to a rate of 0.12 new homes per 1,000 residents, far below the national average of 0.5.
This slowdown has raised alarm across both government and industry, threatening the national pledge to deliver 1.5 million new homes over the life of the current Parliament.
Three main interventions are under discussion between City Hall and Westminster:
Reduced Affordable Housing Thresholds
The proportion of affordable homes required in fast-track planning applications could fall from 35% to 20%. This would make it easier for developers to qualify for streamlined approval, cutting months off project timelines.
Increased Subsidy Levels
The government is expected to expand funding for affordable units, allowing developers to claim subsidies covering up to 50% of the cost of discounted homes within new schemes.
Optional Community Infrastructure Levy (CIL)
Councils may be given discretion to waive or defer the CIL (a tax used to fund local services such as transport links and health facilities) to further ease financial strain on projects already hit by inflation, interest rates and stricter post-Grenfell regulations.
The move follows growing concern that the Building Safety Regulator (established in the wake of the Grenfell Tower tragedy) has become overwhelmed, with up to 10,000 applications reportedly awaiting review. Developers argue that this backlog, combined with higher compliance costs, has pushed many London projects into financial unviability.
While critics have voiced fears that lowering affordable housing targets risks deepening London’s housing inequality, supporters within government argue that some delivery is better than none. One official described the plan as an emergency intervention — 20% of something is better than 35% of nothing.
City Hall is expected to include an automatic review clause in the package, allowing the measures to be reassessed if market conditions improve before 2028.
For the construction industry, the forthcoming announcement represents a decisive moment. If implemented, the reforms could unblock scores of frozen developments and provide short-term relief for builders navigating cost pressures and planning delays.
However, it will also test the city’s ability to reconcile two opposing imperatives: accelerating growth and preserving affordability.
With London’s skyline dotted by stalled cranes and empty plots, the challenge now is not just to build faster, but to ensure that the homes delivered still serve the people who need them most.
