Government cuts affordable housing target to 20% to boost London housebuilding

The government has announced new emergency measures to tackle London housebuilding targets by slashing affordable housing requirements to 20%.

After weeks of speculation, the government unveiled the Homes for London plan, offering temporary relief from the Community Infrastructure Levy (CIL).

This includes 50% borough CIL relief for qualifying schemes that commit to delivering at least 20% affordable housing, down from the previous 35% target.

Property experts have welcomed the change, saying that Mayor of London Sadiq Khan’s original 35% affordable housing targets had stifled developers and hit overall housing supply.

Getting spades in the ground is crucial

In a press release, the government admitted that housebuilding in London is facing “the perfect storm” due to spiralling construction costs and wider economic conditions. Despite Mr Khan pledging to build 88,000 homes a year, data shows only 3,950 new homes were completed in the first half of this year.

Under new powers, Mr Khan will be able to fast-track housing. This will include the ability to review and call in housing schemes of 50 homes or more where boroughs are minded to refuse. City Hall can also become the decision-maker for developments of 1,000sqm or more on green belt land.

The government has also confirmed an initial £322 million to establish a City Hall Developer Investment Fund to help the Mayor further increase housebuilding.

Housing Secretary Steve Reed says the government’s plan will help deliver their manifesto promise of 1.5 million homes.

He 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.”

Urgent action is required

The Mayor of London, Sadiq Khan, said: “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. With these significant new powers and the initial £322 million of funding from the government, plus the short-term emergency action to get more investment flowing into affordable housing. I’m confident that we can kickstart housebuilding and deliver more of the affordable homes Londoners badly need.

“I will always do everything I can to accelerate the delivery of genuinely affordable homes as we continue to build a better, fairer London for everyone.”

Industry reaction

Royal Institution of Chartered Surveyors (RICS) CEO Justin Young says the 20% affordable housing target is a better approach.

He said: “The subdued state of housebuilding in London is routinely reported in the RICS UK Construction survey each quarter. This impacts house and rental prices as reflected in the institution’s monthly Residential Survey. The Government and the Mayor’s Office package announced today should help propel housebuilding forward.

“Whilst RICS supports the creation of affordable housing, it is clear that the 50% target in projects is not working. Revising the target provision to 20% to receive Community Infrastructure Levy (CIL) relief should help move the industry forward, increasing potential profitability and confidence amongst housebuilders.”

He adds: “Getting rid of late-stage viability assessments where housebuilders commit to 20 per cent affordable housing will soften a barrier to equity investment.

“Developing the call-in powers of the Mayor are also welcome. The Mayor will have the ability to get projects moving, even in local authorities where they have been delayed indefinitely.

“A City Hall Developer Investment Fund, with an initial allocation of £322m of grant investment is a powerful resource and makes it clear that this government is serious about getting London housebuilding moving again.

“RICS would add that increased resources for the Building Safety Regulator (BSR) are crucial if it is to tackle the growing backlog of projects. Getting decisions quicker and removing overregulation will improve confidence amongst developers and cost planners, meaning the new homes people need are built.”

Matthew Evans, Partner (Planning team) Forsters, said: “The requirement for London councils to secure 35% affordable on new home schemes has been stifling development and is reflected in start on site statistics, which most recently show that only 731 market homes were started in London in Q2 2025.

“Proposals to introduce a lower requirement at 20% may unlock some development, but in many cases this requirement will still be too high to change viability challenges which developers are grappling with in the Capital.

“Top-down affordable housing requirements fail to consider local context and land values, there would be greater benefit in introducing more flexibility in affordable housing requirements borough by borough.”

He adds: “It remains to be seen whether cutting affordable housing requirements to 20% London-wide will stimulate the housing market and start to make a real difference to supply.  The speed of the consultation and implementation through “emergency” London Plan Guidance is very welcome, rather than wait for the London Plan process to run its course, the government has shown willingness to grasp the nettle now.

“Temporary relief from CIL will also be widely welcomed across the industry, though with that being implemented through secondary legislation, that change may take a little more time to come into effect.”