Sadiq Khan London Plan is inhibiting housing supply, Assembly hears

Before the mayoral election, the then housing secretary Michael Gove targeted Sadiq Khan’s London Plan, the blueprint for development in the capital, as the main cause of what he called the Mayor’s “chronic under-delivery” on his housing targets.

A government review reported “persuasive evidence” that the plan’s plethora of detailed requirements – on design, on safeguarding industrial land and, not least, on requiring 35 per cent of new homes to be affordable – was frustrating brownfield development, effectively piling too much cost on would-be developers.

The government may have changed, bringing a new focus on house-building in those previously-developed “grey belt” sites in the Green Belt in particular. But developers remain unhappy with the plan, the London Assembly’s planning and regeneration committee heard yesterday.

Faced with a complex, lengthy and expensive planning application process for large sites with uncertain outcomes, investors were increasingly looking for easier returns, the committee heard. “It’s harder now to develop housing than other uses,” said James Wickham from property consultants Gerald Eve. With fierce competition for development sites, City Hall should make the need for housing more explicit, added Syreeta Robinson-Gayle, from Barratt Homes.

Wickham also suggest the plan offered too much protection for “secondary” office space outside the centre and for industrial land. “If housing is the overarching priority it needs to say that,” he said. And affordable housing requirements were also creating disincentives to develop, the committee was told, in a system substantially reliant on private developers to provide affordable homes, usually secured through Section 106 agreements as part of the planning process.

Robinson-Gayle described City Hall’s attempt to streamline a process being often characterised by “horse-trading” over  a scheme’s viability, generally focused on how many affordable homes it could provide, by offering a “fast-track” planning process to developments offering 35 per cent affordable homes or more. But that process was breaking down, she said: “What happens is that if you come forward with a 35 per cent scheme you are often made to go back through the viability assessment process.”

Wickham said review mechanisms attached to viability assessments also disincentivised developers by capping profits. “This disadvantages housing compared to other uses,” he said, suggesting that developers should be rewarded for completing schemes quickly, even with lower proportions of affordable housing, by not having to face challenges over profit levels. “You get a slightly lower outcome, but that scheme actually gets delivered and you have the affordable housing, rather than lots of permissions granted but not started.”

Robinson-Gayle also warned that hard-up housing associations were no longer coming forward to take up the affordable homes developers supplied. “The section 106 system is creaking at the seams,” she said. “There is a lack of capacity from registered providers to take the number of affordable homes that are currently in planning. We could be in a position where developers will be building out affordable homes and there will be no one to take them.”

The continuing shortfall in new house-building in London – delivering just under 37,000 new homes annually over the last few years against a London Plan target of 52,000 a year, itself generally held to be an underestimate of need – was not all caused by planning rules, the committee heard.

Shortages of construction workers as well as planners, land costs, materials cost inflation and financing problems had all taken their toll, Assembly members heard. New safety regulations also had an impact, while small builders were squeezed out of the market and the supply of sites was constrained by Green Belt restrictions.

And crucially the system needed more money, speakers agreed. Robinson-Gayle (pictured) pointed out that private developers were broadly maintaining their rate of new building, while public sector house-building had slumped. “The challenge is not to disincentivise people that are doing something but to encourage others to do more,” she said.

That meant more funding – and longer-term funding certainty – for the capital’s councils and housing associations, currently struggling with broader economic constraints, the increasing cost of maintaining and improving existing stock and a £1 billion a year temporary housing bill for homeless families, said Joanne Drew from the London Housing Directors’ Group of London Councils .

There’s urgency needed all round. Government funding for affordable housing in the capital is due for renewal in 2026, but an emergency injection of some £2 billion is needed before then, according to Khan. The economic costs of delay are mounting up in the capital, where new homes are most needed.

How far will the new Chancellor Rachel Reeves go on providing more certainty to developers, on putting her promised taskforce to work on stalled sites in London, perhaps with Khan’s promised new mayoral development corporations, and on funding affordable homes too? So far house-builders, experts and politicians have praised Reeves’s pledges. But the devil, it seems, will be in the detail, at London level as well as nationally.

Watch the London Assembly planning and regeneration committee meeting in full here. X/Twitter: Charles Wright and OnLondon. Support OnLondon.co.uk  for just £5 a month or £50 a year and get things for your money too. Details here.