Warning over impact of rising construction costs on affordable housing delivery as homelessness crisis deepens, reports James Cracknell

Mayor of London Sadiq Khan has written to Michael Gove demanding £2.2billion from the government to boost affordable housing in the capital – amid a warning over developers “downing tools” on major schemes.

New City Hall data shows a 41% year-on-year drop in major planning applications being referred to the mayor for approval and a 53% fall since 2021, with national forecasts indicating the construction sector faces a recession this year thanks to soaring costs.

Khan’s letter to the housing secretary warns of homebuilding “grinding to a halt” and that London has “reached crisis point in relation to housing affordability and homelessness pressures”.

As well as the £2.2bn demand to help build an extra 10,000 affordable homes in the capital, in the longer-term Khan continues to call for a funding settlement that meets London’s affordable housing need – independently assessed by housing experts Savills as £4.4bn a year.

Enfield Council leader Nesil Caliskan has echoed the mayor’s demand, as data obtained by the Dispatch under the Freedom of Information Act shows major development planning submissions in the borough have dropped by 26% in a year and by 40% since 2021.

There have also been requests by developers to reduce previously-approved levels of affordable housing on their schemes, with one recently being allowed by Enfield’s planning committee to halve its affordable quota and axe its social-rent homes entirely.

The council has simultaneously been dealing with a severe homelessness crisis that has seen hundreds of families forced to live in hotels for several months.

Cllr Caliskan said: “Boroughs like Enfield have invested to bring forward regeneration schemes that will increase the supply of homes and improve the quality of existing housing, both directly and in partnership with developers and housing associations. 

“The good progress made is now at severe risk due to the serious implications of market conditions and this requires the additional investment being called on by the mayor. The housing crisis for Londoners has risen to a new level with families and a staggering one in 23 children living in hotel accommodation for prolonged periods of time.

“Without this [£2.2bn] investment the situation is set to get worse and councils are powerless to respond.”

Prime Minister Rishi Sunak recently announced a review of the mayor’s London Plan in a bid to accelerate homebuilding, after claiming not enough was being built in the capital. But the mayor has pointed to record-breaking affordable housing delivery, including the highest level of council homebuilding in London since the 1970s. This is a record he says is now being put at risk by “government inaction”.

Khan said: “With spiralling costs, the housing sector is increasingly facing a perfect storm of pressures. The national housing crisis is not just piling pain on households, but it’s threatening future housebuilding too. The government cannot afford to sit around any longer. We need urgent investment from the government to keep our city and our country building.

“If not, government inaction is seriously risking housebuilding grinding to a halt across the country and putting a stranglehold on the progress we’ve made in London.”

Angela Wood, chair of the G15 Development Directors Group, added: “The delivery of new affordable homes for Londoners is on a cliff edge. The G15 has skilled teams that are ready and able to deliver the new homes that are desperately needed. But rising costs, high interest rates and housing associations’ need to prioritise investment in existing homes means that the supply of new social homes is going to fall.

“With one-in-50 Londoners effectively homeless and in temporary accommodation this is a growing housing emergency.”

The mayor this week also reconvened his ‘London Housing Delivery Taskforce’ – comprising leaders from London councils, unions, construction bodies, developers, community groups, industry and housing associations – to look at what is needed to safeguard affordable housing delivery.

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