London’s housing market is facing its most challenging period in years. High interest rates, spiralling build costs, and regulatory changes have slowed construction starts to a halt. Molior data shows just 3,248 private starts in the first three quarters of 2025, compared to 60,000–65,000 homes under construction annually between 2015 and 2020.
Against this backdrop, on 27th November the Mayor of London announced a consultation on draft London Plan Guidance (LPG) proposing a package of emergency measures aimed at accelerating housing delivery and boosting affordable homes in the Capital. In addition, the GLA has also published an update to the Accelerated Funding Route (AFR) to provide a simplified approach to calculating GLA grant funding.
The draft LPG also identifies that the government will be consulting on a time-limited Community Infrastructure Levy (CIL) relief to support viability.
What’s in the Package?
The measures announced in October, and now subject to consultation, include five core components:
1. A New Time-Limited Planning Route – Affordable Housing
The draft LPG introduces a temporary route alongside existing Fast Track and Viability Tested routes:
- Apply the fast track route (no viability assessment required) to developments that include 20% affordable housing on a habitable room basis on private land, industrial land (where industrial capacity is being re-provided), and utilities sites where evidence of contamination and remediation is provided.
- Apply the fast track route to developments that include 35% affordable housing on public land, or industrial land (where industrial capacity is not being re-provided).
- Applies to new applications and existing consents seeking to maintain or exceed affordable housing levels.
- Must be tenure compliant.
- Excludes Green/Grey Belt sites, PBSA, and large-scale co-living schemes unless these uses form less than 50% of residential floorspace. Also excludes schemes involving demolition of existing affordable housing such as Estate Regeneration.
These measures have the potential to streamline the planning process for compliant schemes and reduce upfront costs associated with viability assessments.
2. Grant Funding Incentives
Schemes meeting the new thresholds under the new time-limited route can access grant funding:
- Available for units above the first 10% (nil grant).
- Revised benchmark grant rates are provided.
- Applicants are encouraged to aim for 35% or more affordable housing where possible, using grant and CIL relief to support viability.
The additional funding support could assist with solving the viability gaps for a range of residential developments.
3. Review Mechanisms
Following the above, if schemes meet the eligibility criteria and construction has reached the first-floor level by 31 March 2030, no further viability reviews will be required.
Where this is not achieved, a late review will be undertaken once 75 per cent of homes within the scheme or within the final phase or plot are occupied. Reviews will capture surplus profit if viability improves, with a share directed to additional affordable housing.
4. Flexibility on Design Standards
Two Housing Design Standards are proposed for removal:
- C4.1 (Dual Aspect): Currently restricts single-aspect dwellings except in exceptional cases.
- B2.5 (Dwellings per Core): Limits to eight dwellings per core per floor.
Removing these standards could allow more efficient layouts and higher densities, supporting viability without compromising daylight, ventilation, or privacy. This is particularly significant for constrained urban brownfield sites.
5. Reduced Cycle Parking Standards
Cycle parking requirements will be reduced until 31 March 2028, with borough-specific standards based on cycling mode share.
Current London Plan standards often require:
- 1 space per studio or 1-bed 1 person dwelling
- 1.5 spaces per 2 person 1 bed dwelling
- 2 spaces for larger dwellings
The draft LPG introduces lower minimum standards, grouped by borough cycling mode share:
- Band 1 (high cycling rates): 1.0 space for 1-bed, 1.5 for 2-bed
- Band 2 (medium cycling rates): 0.9 space for 1-bed, 1.3 for 2-bed
- Band 3 (low cycling rates): 0.7 space for 1-bed, 1.2 for 2-bed
Importantly, the reduced standards also apply to Purpose-Built Student Accommodation (PBSA) and large-scale co-living schemes, with proposed requirements ranging from 0.7 spaces per room (Band 1) to 0.5 spaces per room (Band 3).
There is also added flexibility on types of cycle parking that may count as long term provision; considerations to allowing cycle parking below the minimum standards in certain circumstances; and guidance on the type of storage solutions. This change could reduce costly basement construction.
Updated Accelerated Funding Route (AFR)
The Accelerated Funding Route (AFR) update allows projects delivering at least 20% affordable housing to apply for grant on all units above the first 10% without an Additionality Viability Assessment, provided planning decisions are issued by 31 March 2028.
Revised benchmark grant rates include £220k for Social Rent, £70k for Shared Ownership, and up to £140k for Intermediate Rent, offering greater certainty and faster funding for stalled schemes.
CIL Relief
The draft LPG also identifies that the government will be consulting on a time-limited Community Infrastructure Levy (CIL) relief to support viability. Where a scheme provides at least 20% affordable housing, amendments to the CIL regime will allow 50% borough CIL relief to apply to residential floorspace (excluding student and co-living accommodation) in schemes or phases that commence after the relief is in place and before 31 December 2028. Higher levels of relief can apply where affordable housing exceeds 20%.
Size of the problem
- According to Molior, as of Q3 2025, 156 sites are stalled (started construction but have stopped) with consent for c.44,000 homes; c.15,600 of which are affordable (35%)
- The largest share of the future pipeline are homes consented on site with full planning permission (42%) that have not yet started. If built out, these sites could deliver c.208,000 homes (2.4 x the annual London housing target of 88,000 homes), including c.77,000 homes.
- These sites have likely not progressed towards construction due to a large number of viability challenges and low market confidence that homes will sell upon completion.
- Two thirds of sites (66%) with full planning contain blocks over 18m so will also be subject to Gateways 2 and 3 regulations and associated delays.
What Does This Mean for Developers?
With thousands of homes consented but not started, the draft LPG seeks to offer a pathway to accelerate delivery and maintain affordable housing levels during a difficult market. The consultation offers the opportunity to set out any changes/additions considered necessary to better bolster housing delivery in London.
Developers should engage with the consultation, which is now running for six weeks until Thursday 22 January 2026.