Emergency Measures: London's Housing Kick-Start Won't Counteract High Costs And Sluggish Market

London housebuilding is in crisis, hit by a barrage of problems including high interest rates, rising construction and materials costs, high rent and mortgage costs, and regulatory blocks.

So when the Labour government stepped in to shake up planning rules and try and get the capital building again, the hope was that lower affordable housing targets and amended regulations would provide a catalyst to a market seeing new starts and completions near record lows. At stake is a huge boost to London and the UK's productivity. 

Yet despite grand ambitions, there are concerns that the main upshot will be more of the same, with the national Labour administration outmanoeuvred in its bid to drive policy centrally.

“The stats speak for themselves. London has been hit by a series of whammies that go beyond planning, but planning at a national and local level is a big issue,” Savills Planning Director Matt Richards said.

“These are detailed planning changes and do represent a step change. Whether they prove meaningful is TBC, but certainly relaxation of rules such as cycling provision and affordable housing levels will assist some developers.”

The changes in regulations come as London’s housing delivery hits a historic low, with research specialist Molior reporting just 3,248 private housing starts during the first nine months of 2025 and 5,933 new home sales.

Meanwhile, a September report by Public First found that meeting London’s target of 88,000 new homes a year would boost the capital’s productivity by 5.6% over the long term, with total economic benefits peaking at £40B in 2034, or 1.6% of UK GDP. That is comparable to adding almost the entire economy of Manchester to the national GDP.

The new proposals include time-limited fast-track planning for schemes if they commit to a minimum 20% affordable housing, of which at least 60% must be for social rent, until 31 March 2028 or the publication of the new London Plan, whichever comes sooner.

Projects will avoid an upfront viability assessment to reduce delays and cost, while a so-called gain-share review means that if the market improves and a development becomes more profitable, more affordable homes must be delivered.

There will also be a reduction in the affordable housing threshold for the fast-track route from 35% to 20%, while schemes that start before 31 December 2028 may qualify for relief from the Community Infrastructure Levy, used by local authorities to fund infrastructure. Some design constraints will also be relaxed.

Finally, there are new powers for the mayor and the Greater London Authority to review and call in 50-homes-plus schemes where a borough is “minded to refuse” and act as decision-maker for developments of 10,760 SF or more on green belt land, with more use of mayoral development orders to override local vetoes. 

But Molior founder and Director Tim Craine said that in determining which part of government controls housebuilding, Mayor Sadiq Khan has sidestepped central government’s ambition to put itself in the driving seat.

“When Housing Minister Steve Reed attempted to assert control over London’s planning system, Khan deftly struck a deal that means he has only conceded on things like a few design constraints that shouldn’t have been there and the affordable homes cap, which in most cases couldn’t be held at 35% anyway, while keeping the late-stage viability review,” Craine said.

London now also has the gain-share mechanism, and these tools strengthen, rather than weaken, the GLA, giving it late-stage powers in the fast-track and non-fast-track planning routes, he added.

But late-stage reviews are unpopular with international investors because they create uncertainty over committing equity.

Craine said the new proposals do not address the real issues, namely that finance is expensive and construction costs remain high, impacting scheme viability.

“The previous decades have been fuelled by the opposite situation,” Craine said. “And that means that many build-to-rent schemes just aren’t worth building.”

Others see the GLA’s fast-track reform as pragmatic but warn that the new rules must be matched by local authority support.

“There will need to be a rethink on upward-only reviews, which continue to deter investment,” Mishcon de Reya Planning Partner Nicholle Kingsley said. “In the current market conditions, consideration should be given to trialling a period without any reviews to help accelerate housing delivery.” 

However, she said she is concerned that the relatively short period outlined for the emergency measures may mean additional investment is not forthcoming.

“The CIL and the measures proposed may benefit some developers, but it may not be as many as we hoped. We certainly need to look at the detail,” Kingsley said. “But development will need to move quickly. What I would say is that the fact that these proposals are coming through emergency measure should be focusing all parties.”

Savills' Richards said he is also concerned that delivery still appears to rest with the local planning authorities, and he said they do not seem pleased with the proposals and the mayor’s ability to call decisions in. 

“In terms of investors, the issue is around their relatively short-term nature,” he said. “In reality, a developer would probably need spades in the ground by December 2028, and for any investor looking at the medium to long term, that’s not much time. And they will no doubt be asking whether the CIL will still be in place by the time they are developing a scheme.”

The measures are in consultation for six weeks, a process that started on 1 November. Barratt London Regional Director Craig Carson pointed to uncertainty about the final guidelines. While the housebuilder is pleased with the focus on new homes, he added the devil is in the details.

“We don’t have enough to actually understand the impact on our portfolio, or indeed whether it's going to be less than we were all hoping for,” Carson said. “The way it's structured, the impact is definitely going to be on new developments submitted from Quarter 2 onwards, which does put pressure on, given the tight time frames.

“It's good that it's been driven by a joint announcement, but is there going to be buy-in from the local planning authorities as well, particularly on reduced numbers of affordable homes?” 

He said he is also concerned about demand-side stimulus, with the number of new homebuyers collapsing in the wake of high interest rates and housing prices beyond the grasp of first-time buyers.

“We don't have anybody to buy, and that doesn't complete the circle and doesn't give us the opportunity, therefore, to deliver much-needed new homes and affordable housing,” Carson said, also pointing to the lack of investors because of the clampdown on buy-to-let tax provisions, which has significantly reduced the numbers buying off-plan.

But Carson also said it is time to change mindset and cited the measures as one part of creating a more positive and focused atmosphere.

“We've got to drag ourselves back to saying that we are developing in the capital, one of the greatest cities in the world,” he said. “There's a strong demand to live and work in the capital. Therefore, there's always a flow of investment. But we've got headwinds facing us. If you look back over the last 24 months, we've had more regulatory change than I've seen in my career — the perfect storm almost.”

Whether the government’s homebuilding targets are achievable or not, he said it set an aspiration and focused the industry.

“With the emergency measures, while some of us might think they're not going far enough, the fact that they're trying to be creative and find solutions is what's encouraging,” Carson said.