A Government memo was leaked earlier this month expressing the commitment to launch a package that aims to fertilise property construction throughout London. Following weeks of speculation arising from the leaked memo, the Government has recently confirmed this direction to the public, arguing that it will bring about important changes to accelerate property construction.
‘Extraordinary challenges call for extraordinary measures’, Alister Henderson, partner at Carter Jonas, commented, adding: ‘The proposals announced in the government policy document are indeed extraordinary, demonstrating that the government is serious about turning around the problem.’
Current Construction Efforts
Despite the Government’s pledge to build 1.5 million properties by the end of the parliamentary term, observers have noted that the current rate of building is insufficient to reach that goal. From an annual perspective, only around 200,000 are under construction, which would ultimately fail to reach the 1.5 million properties target in a five-year period.
London has been noteworthy in falling behind construction expectations. According to the Home Builders Federation, only 30,000 homes were built in London between June 2024 and June 2025. This is significantly below the Government’s annual target of 88,000 properties.
These figures come from a broader history of slow construction across London. Between 2015 and 2020, there were 65,000 homes for private rent or sale under construction in London at any given moment, and this is expected to go as low as 15,000 by 2027 under some estimates.
Part of the issue is due to several development projects being postponed, thus driving up development time and administrative costs, features which discourage prospective developers from investing in the London construction market. According to Molior Consultancy, one in six housing projects has currently stopped development. This has resulted in around 5,600 properties not being constructed due to financial and regulatory issues holding up property development.
Ben Walden-Jones, head of residential development at JLL, said that the London construction industry is suffering from a ‘death by a thousand cuts’, arguing that the company ‘usually would have at least two launches a month in London, [but] we now only get around one launch every two months. It’s as low as five schemes a year coming through.’
These inadequacies have prompted concerns over the state of the London construction market. The current data indicates that only 3,950 new affordable homes have been completed and ready for the market over the first half of 2025 – a far cry from the pledge, in the words of Housing Secretary Steve Reed, of ‘getting spades in the ground in London’.
Government Package
The first important point of the package is the establishment of the Developer Investment Fund. The £322 million fund intends to support housing regeneration and construction projects in order to hit the 88,000 homes a year target. This fund coincides with the additional support previously announced under the Social and Affordable Homes Programme, which pledges to invest up to £11.5 billion over the next five years in order to deliver up to 180,000 affordable homes.
In addition to the direct financial investment, the Government has introduced incentives such as up to 50% CIL relief for schemes delivering at least 20% affordable properties, City Hall intervention for planning application refusals for developments consisting of more than 50 properties, and lifting some regulations regarding property design and housing density within a particular area of development.
In announcing these measures, Mayor Khan argued that affordable housing ‘has always been a top priority for me as mayor’, elaborating: ‘With these significant new powers and the initial £322 million of funding from the government – plus the short-term emergency action to get more investment flowing into affordable housing – I’m confident that we can kick-start house-building and deliver more of the affordable homes Londoners badly need.’
Industry leaders have welcomed this direction. Danny Pindar, director of policy at the British Property Federation, said: ‘We have been raising the issue of viability – or lack thereof – for some time and it’s good to see the Mayor and Government recognise this. Housing delivery has been brought to a standstill in London and a more pragmatic approach to affordable housing delivery is essential to start unlocking development.’
Package Expectations
The systemic issues of the London construction market are unlikely to be overturned by the package. However, what the package sets out is incisive in tackling some of the biggest hurdles the market faces, particularly when it comes to peeling back some of the administrative and regulatory restrictions that have prolonged active development.
Alongside the financial investment and benefits, the package sets out to encourage developers to bring online regeneration and development projects across London. Considering the importance the Government has stressed in bringing to market as many properties as possible, the package is an overall positive step in encouraging property development in London.
