Leaked memo reveals plans to slash London affordable housing targets to 20%

A leaked memo reveals the Labour government plans to cut affordable housing targets in London.

The i newspaper reveals the Housing Secretary Steve Reed and London Mayor Sadiq Khan have held talks over an emergency reduction of cutting affordable housing targets to 20% of which developers will have to pay for 10%, while the other 10% will come from councils.

Industry experts have welcomed the rumoured proposal but warn buy-to-let landlords need to be encouraged to invest in the housing market.

Affordable housing is a vital part of our effort to build 1.5 million houses

Mr Khan’s targets require private housebuilders to make 35% of homes within each development affordable.

Many housing developers say the targets are too high and difficult to make a profit with the leaked memo now proposing 20% instead of 35%.

According to the i paper, a source close to Mr Reed said any changes which would be favourable to developers would come with a clear expectation that they deliver more homes.

The source added: “Affordable housing is a vital part of our effort to build 1.5 million houses, and one cannot happen without the other. The government has inherited a housing crisis, with London particularly badly affected, and we make no apology for seeking to understand the full range of options available to boost supply.”

Sources close to Mr Khan said that any cut to affordable housing ratios would be a temporary measure, but acknowledged that the existing target may not be realistic in the current economic climate.

The source told the i: “Sadiq will always prioritise getting as many affordable homes built as possible, and has shown that by completing more new homes of all tenures in London than any time since the 1930s prior to the pandemic.”

However, figures reveal despite Mr Khan pledging to build 88,000 homes a year in London, data reveals only 3,950 new homes were completed in the first half of the year.

Industry reaction

Ryan Etchells, chief commercial officer at property lender Together, said: “While this move will be welcomed by the housebuilders we support as it will make some new schemes viable, it is unlikely to be a silver bullet in creating the significant number of new, affordable homes needed to meet the government’s ambitious targets.

“In the type of slow housing market we’re currently experiencing, developers will only build properties at the rate and a price at which they can sell them. Delivering fewer affordable homes will probably not see home builders cutting their overall pricing, meaning affordability will remain an issue for first time buyers and home-movers, particularly in London.

“We need to look into other major issues which are massive contributors to the housing crisis such as construction labour shortages, cost of materials and huge delays caused by the Building Safety Regulator, which are hampering progress for developers up and down the country.”

Mr Etchell adds buy-to-let landlords need to be encouraged to invest.

He said: “In addition, there were also 720,000 empty homes in England last year, according to the government’s own figures, and these could be re-purposed into high-quality and sustainable places to live for homebuyers.

“In the meantime, we need to encourage more buy-to-let landlords into the private rented sector by removing or re-thinking damaging tax and regulatory barriers brought in by successive governments. By driving up landlord’s costs and tenants’ rents, they have proved a major hindrance to the expansion of a sector which remains vital in providing the necessary homes for the UK population.”