London Slashes Affordable Housing Target to 20% in Bold Move to Address Housing Crisis

London’s already strained housing market is bracing for a major policy shift, as City Hall moves to lower the target for affordable homes in new developments from 35 per cent to 20 per cent.The change, aimed at unblocking stalled schemes and jump-starting construction, has ignited a fierce debate over how best to confront the capital’s housebuilding crisis. Supporters argue that easing requirements will coax developers back to sites mothballed by rising costs and economic uncertainty, while critics warn it risks entrenching unaffordability and sidelining low- and middle-income Londoners. As the city grapples with record rents, soaring waiting lists and a chronic shortage of genuinely affordable homes, the decision marks a pivotal moment in the battle over who London is being built for-and at what price.

Mayor under fire as affordable housing target cut to 20 per cent amid deepening London crisis

City Hall is facing mounting criticism from campaigners and backbench politicians after confirming that only a fifth of new homes on major developments will now be required to be “genuinely affordable”. The move, billed by officials as a pragmatic response to stalled schemes and surging construction costs, has instead reignited accusations that the governance is bowing to developer pressure at the expense of low and middle‑income Londoners.Housing charities argue that the decision will lock thousands out of the capital’s housing market, with unions warning that key workers already pushed to outer boroughs will be forced even further from their jobs.

Developers, meanwhile, are privately celebrating what one planning consultant described as “the loosening of the handbrake”, predicting a rush of previously mothballed projects back into the pipeline. Critics say any uptick in cranes on the skyline will come at a steep social price, pointing to boroughs where waiting lists are already stretching into decades. Among the sharpest concerns being raised are:

• Growing disparity between luxury schemes and social rent provision
• Increased pressure on already stretched temporary accommodation budgets
• Weakened leverage for councils during Section 106 negotiations
• Risk of speculative land values rising faster than wages and benefits

*Indicative figures based on recent market listings.

Developers welcome relaxed rules but critics warn of long term social and economic costs

Developers have largely hailed the lower threshold as a long‑overdue reset,arguing that the previous 35-50 per cent benchmark was “mathematically unachievable” on many central London sites once land,finance and construction inflation were factored in. With fewer units now required to be let at social or discounted rents, major housebuilders say they can unlock stalled schemes, move marginal plots into viability and bring in private capital that had been drifting to regional cities and overseas markets. Industry lobby groups insist that,under the new regime,larger schemes will complete faster,supporting thousands of construction jobs and boosting council tax and business rates as long‑dormant sites finally move off the drawing board and into delivery.

Housing campaigners, though, warn that short‑term gains in crane counts may mask a deeper erosion of social mix and affordability across the capital. They point to waiting lists already stretching into decades in some boroughs and caution that shifting the dial towards market‑rate units risks further entrenching London as a city for high earners and overseas investors. Critics also fear a domino effect: weaker bargaining power for planners, higher land values baked in by developer expectations, and a growing reliance on housing benefit to prop up low‑income renters in an increasingly expensive private sector.Their concerns center on:

• Rising rents in areas where new supply is almost entirely market‑rate
• Concentrated poverty on remaining estates as mixed‑tenure ambitions fade
• Fiscal pressure on councils forced to fund temporary accommodation
• Widening wealth gaps between homeowners and lifelong renters

Boroughs struggle to reconcile viability assessments with local need for truly affordable homes

Planning departments now find themselves trapped between spreadsheet logic and the realities of Londoners on waiting lists. Viability appraisals, commissioned and paid for by developers, routinely argue that anything above the newly reduced 20% quota would render schemes “undeliverable”. Yet housing officers point to record numbers in temporary accommodation, overcrowded flats and rising homelessness. In practice, the balance of power often tilts towards the consultant’s model, not the council’s policy, with opaque assumptions on build costs, land values and profit margins going largely unchallenged under time pressure to approve applications.

To navigate this tension, some boroughs are experimenting with tougher clarity rules and standardised benchmarks, but the gap remains stark between what is deemed “viable” on paper and what residents actually need. The conflict plays out in committee rooms where councillors must choose between approving schemes with too little social housing or risking no homes at all. Key flashpoints include:

• Disputed land values that lock in inflated purchase prices as a “given”.
• Optimistic profit assumptions defended as industry ‘norms’.
• Rising construction costs used to justify scaling back on low-rent units.
• Limited in-house expertise to interrogate complex financial models.

Policy rethink urged to link planning consents funding and land release to higher affordability levels

Developers, councils and housing campaigners are converging on a single message: the levers of the system must be pulled together, not in isolation. That means using planning permissions,public funding and public land disposal as a single,integrated toolkit to drive genuinely affordable delivery,rather than treating each as a separate negotiating arena. Under a revamped framework, schemes that deliver deeper discounts on rent and ownership could move faster through the system, with boroughs empowered to attach clear affordability thresholds as conditions of consent. At the same time, central government grant and mayoral funding would be weighted towards projects that lock in long-term affordability, rather than relying on short-lived “discounted market” products.

Reformers argue this approach would end the current race to the bottom, where viability assessments quietly hollow out affordable quotas after permission is granted. Rather, land release by public bodies could be explicitly tied to stronger social outcomes, with transparent benchmarks for what Londoners should expect from each major site:

• Priority access for social rent and key worker homes on public land
• Fast-track routes for schemes exceeding baseline affordable targets
• Clawback mechanisms if promised homes are not delivered

Wrapping Up

As ministers and City Hall recalibrate targets in the face of spiralling costs and stagnating output, London’s housing crisis appears no closer to resolution-only reframed. Supporters of the 20 per cent threshold insist it is indeed the realism needed to get cranes back on the skyline; critics see a retreat from social responsibility at the very moment demand for affordable homes is most acute.What happens next will depend not just on planning policy, but on political will and market confidence. With a general election on the horizon and pressure mounting from renters, would‑be buyers and councils alike, the battle over how – and for whom – London builds is set to intensify. The stakes could hardly be higher: the future shape of the capital, and who can afford to live in it.