Real reasons Sadiq Khan’s housing strategy is failing London
The real reasons Sadiq Khan’s housing strategy is failing London are slowly becoming impossible to ignore. London’s housing crisis didn’t start with the current Mayor, but after eight years in office and two manifestos, the capital is still nowhere near building the homes it needs. Instead, building has slowed to a crawl, developers are retreating, and residents are left facing a future of unaffordable rents and near-impossible routes to homeownership.
This month’s surprise announcement by the Mayor, who once vowed to protect the green belt, marked a clear U-turn in policy. Sadiq Khan now admits the protections are “unsustainable”, arguing that London simply has to build outwards if it wants to house its population. The problem is, for many, this change feels like too little, too late.
The numbers paint a grim picture. In the first quarter of this year, private developers began just 1,210 new homes across the capital, nowhere near the 88,000 a year set out in the London Plan. In 2015, that figure was over 9,000. Even affordable housing, which often relies on partnerships between developers, housing associations, and City Hall, has sharply declined. From nearly 28,000 affordable homes started in 2022/23, the latest figures show fewer than 4,500 got underway in the past year.
So what went wrong?
A mix of spiralling costs, rising interest rates, post-Grenfell regulatory delays, and the collapse of the old funding model have all played their part. Developers are navigating what industry experts call a “perfect storm”. The cost of materials, wages and compliance have soared, while financing has become harder to secure. In many cases, developments that might have broken ground five years ago no longer add up financially.
And then there’s Gateway 2 – an added hurdle brought in after the Grenfell tragedy. While well-intentioned, the new safety sign-off process for buildings over seven storeys has created significant backlogs. Some developers say they have billions tied up in approved plans they simply can’t get started on, because they’re still waiting for paperwork.
To add to the pressure, the foreign investment model that once underpinned much of London’s construction has been eroded by tax reforms. Off-plan sales to overseas buyers were never universally loved, but they helped get large projects off the ground and funded a proportion of affordable housing through cross-subsidies. With higher stamp duties and the scrapping of non-dom status, many of those investors have left. That exit may feel politically satisfying to some, but it has left a funding vacuum with no clear replacement.
Housing associations, once considered a reliable partner in the drive to build affordable homes, are struggling too. Groups like Peabody say they’ve been forced to shift focus from new builds to safety, repairs, and managing existing stock. That’s understandable but it means even fewer homes are being added to London’s shrinking supply.
As for the green belt, loosening planning restrictions might provide some relief. However, it’s unlikely to solve the problem alone. Experts say land release must be paired with reforms that make development viable again, especially for smaller building firms, who have historically played a big role but now face too many barriers to entry.
The Mayor’s office points to “disastrous” housing inheritance from previous governments and says it is working with Westminster to fix the problems. Khan has also pledged to support small and medium-sized developers and explore how parts of the green belt can be more sensibly used.
Still, Londoners will want more than good intentions. With young families leaving the city, school enrolments falling, and tens of thousands on waiting lists, the need for action is urgent. Labour’s national housing target of 1.5 million new homes depends heavily on London pulling its weight. If things don’t shift soon, it will become a a political problem well beyond housing.
What’s clear is that the real reasons Sadiq Khan’s housing strategy is failing London go far beyond planning permissions or policy slogans. The system is jammed at every level, from regulation and finance to supply chains and labour. Until those issues are tackled head-on, even bold-sounding policy shifts won’t amount to much on the ground.
For more updates on London’s housing crisis and further insights into what’s shaping the capital’s future, visit EyeOnLondon. We’d love to hear your views in the comments.
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