The Government is looking at cutting the number of affordable homes developers in London are required to build in a bid to meet its flagship housing target, The i Paper has revealed.
Labour came into power with an ambitious manifesto commitment to build 1.5 million homes by end of Parliament.
But homebuilding has slowed to a virtual standstill in London with only 3,950 new homes completed in the first half of 2025, against the Government’s target of 88,000 new homes a year.
In the hope of jolting the market back into life, the Government has been meeting with homebuilders and has proposed changes which would mean they only have to make 20 per cent of the houses they build in a development “affordable” – of which 10 per cent would be paid for by developers and 10 per cent by local councils.
The current target for affordable homes is 35 per cent.
Here The i Paper explains the winners and losers of this potential policy change.
What is ‘affordable’ housing’?
According to the Greater London Authority (GLA), “affordable” housing means “social rented, affordable rented and intermediate housing, provided to eligible households whose needs are not met by the market.”
Only 3,950 new homes were completed in London in the first half of this year, despite a Government target of 88,000 new homes a year (Photo: Mark Kerrison/In Pictures)The GLA says eligibility is “determined with regard to local incomes and local house prices.”
The Government says affordable homes should mean those that are rented out for at least 20 per cent less than the local market rate.
Determining the market rate should take into account a property’s size, type and location.
What is the problem?
Developers complain that having to include affordable housing in their property schemes makes them financially unviable.
In other words, the project does not deliver enough profit for those involved.
It is often claimed that developers need a minimum profit margin of between 15 to 20 per cent in order to go ahead with a housing scheme.
Building homes that have be offered to market at cheaper rates reduces this profit margin.
What difference could a change make?
In the year 2022-23, developers made a start on building 25,658 affordable homes in London and 13,954 were completed.
This would suggest the target worked to some extent.
But in the past two years the figures have dropped dramatically, with just 2,358 starts in 2023-24 and 3,991 in 2024-25.
Cutting back the targets could therefore mean that more homes are built helping Labour hit its target, though these schemes would be likely to deliver more profit for developers.
Steve Turner, executive of the director of the Home Builders Federation (HBF), said the industry would welcome such a move.
Chancellor of the Exchequer Rachel Reeves during a visit to the Fairham Development, a housing development site in Nottinghamshire, in February (Photo by Jonathan Brady – WPA Pool / Getty Images)But he added that the affordable homes target is “not the only reason housing delivery has collapsed”.
Turner pointed to the implementation of the new Building Safety Regulator – brought in following the Grenfell disaster – which is holding up developments.
What about tenants?
Experts and political leaders worry that cutting back affordable housing targets will make it even harder for lots of people living in London to find somewhere they can afford to live.
Aydin Dikerdem, cabinet member for housing at Labour-run Wandsworth Council, said: “This would be a huge blow to social housing delivery in London.
“Every planning permission we already have at 35 per cent will likely be resubmitted at the lower figure with less social and affordable housing; it won’t speed anything up, in fact, it could do the opposite.”
Fleur Donnelly-Jackson, cabinet member for housing at Labour-run Brent Council, said: “Talk of lowering affordable housing targets naturally gives us pause for thought. In Brent, over 800 households approached us as homeless in September alone, so the answer to the housing crisis must be to keep up our ambition for both more affordable housing and a greater pace of delivery.”
Could the target be cut back elsewhere?
Professor Janice Morphet, of the Barlettt School of Planning at University College London (UCL), said allowing the affordable homes target to be cut back in London “sets a precedent” and “could have a ripple effect around the country.”
Labour-run Birmingham City Council has already proposed reducing its affordable housing target from 35 per cent to between 20 and 25 per cent.
Edinburgh council’s housing convener, Lezley Marion Cameron, sparked controversy last week by suggesting its 35 per cent target should be cut.
However, not all political leaders are convinced that affordable housing targets are the answer to the housing crisis.
In Manchester, which has experienced a boom in high-end apartment building in recent decades, the council has frequently waived through developments with zero affordable housing in the city centre because developers say it is not viable to include the 20 per cent required.
The council has recently become more focused on attempting to use its own development company to deliver homes exclusively for social rent elsewhere in the city.
Labour Mayor of Greater Manchester Andy Burnham recently stated that he believes giving developers affordable housing targets “doesn’t work”.
Instead he has argued that the £39bn the government set aside for affordable housing should all be ploughed into funding council homes built by local authorities instead.
Currently, only 60 per cent of the figure has been set aside for ‘social and affordable’ housing.
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