BLOGS

London's housing pipeline is sitting on a knife-edge. Tens of thousands of homes have planning consent or are progressing through the system — but a combination of viability pressures, building safety compliance costs, and elevated affordable housing requirements has kept many of those schemes firmly off the ground. Now, a series of temporary planning policy interventions from the Mayor of London is attempting to change that calculus. The question is whether unlocking supply today risks locking in an affordability gap that will define the city for a generation.

A pipeline under pressure

REalyse planning data covering London residential applications submitted since 2020 reveals the scale of the logjam. Across London boroughs, over 165,000 residential units are held in active planning applications that remain "in progress" — schemes that have not yet received a decision, or where the process has stalled between grant and construction start. A further 26,000 units have been formally withdrawn since 2020 across 2,374 applications, representing supply that developers have abandoned entirely.

That withdrawn supply is telling. With an average scheme size of just 11 units per withdrawn application, it is not only mega-schemes walking away — smaller, infill developments that form the backbone of neighbourhood-level delivery are also stepping back from the market.

At the larger end, 298 schemes currently in construction across London carry an average of 252 units per site, and schemes granted consent since 2020 account for roughly 180,000 proposed units. The arithmetic is stark: consented supply is not translating into built supply at the pace needed.

Southwark alone accounts for over 68,000 units sitting in active progress — a figure that reflects the borough's concentration of large-scale regeneration schemes, many of which have faced viability challenges driven by construction cost inflation and affordable housing obligations. Newham, Barnet, and Tower Hamlets collectively account for a further 32,000 units in progress, underscoring how strongly the pipeline is concentrated in outer east London and growth corridors.

What's changing on affordable housing and building safety

Under the London Plan 2021, major residential schemes are expected to deliver a minimum of 35% affordable housing by habitable room, rising to 50% on public land and for Build to Rent. For many developers, particularly those working with older land values, rising construction costs — driven in part by post-Grenfell building safety requirements under the Building Safety Act 2022 — have made these thresholds unviable without grant funding.

The response from City Hall has been to introduce flexibility. Temporary measures have allowed schemes to negotiate lower affordable housing contributions where developers can demonstrate a viability shortfall, with some schemes moving forward at thresholds in the 20–30% range rather than the 35% benchmark. Alongside this, GLA officials have worked with the Health and Safety Executive and building control bodies to streamline principal designer approval processes and reduce the number of schemes caught in gateway delays — a particular pinch point for mid-rise residential blocks between 11 and 18 metres.

The practical effect has been to reopen the conversation with developers who had mothballed schemes. In the Build to Rent sector — where REalyse data identifies over 16,900 BTR units currently in active planning progress across London, in schemes averaging 340 units apiece — the economics are especially sensitive to both affordable housing obligations and building safety compliance costs. BTR schemes are by definition institutional, long-term plays. When the cost base shifts by 15–20% due to regulatory change, the entire return profile of a scheme can fall below the threshold required for capital deployment.

The viability debate — and who bears the risk

Supporters of the threshold reduction argue the alternative is worse: a consented pipeline that delivers nothing. If a scheme granted at 35% affordable never starts, it produces zero affordable homes. A scheme that starts at 25% affordable — even under a "viability review" mechanism that could claw back value if land values improve — at least delivers bricks and mortar.

REalyse transaction data shows the pressure context clearly. Across London postcode areas, the average sold price per square foot in 2024 was approximately £667/sqft, with average transaction prices of around £625,000. For renters, the gap between what the market commands and what qualifies as "affordable" — typically set at 80% of market rent in London — remains substantial across most boroughs, and continues to widen as wage growth trails house price and rent inflation.

The risk in lowering thresholds, however, is that developers and landowners price the policy relief into future land acquisitions. If lower affordable housing obligations become the baseline expectation rather than a temporary concession, land values adjust upward accordingly — and the next round of schemes faces the same viability problem, just at a higher base cost. This residual land value dynamic is the central tension in London's planning system, and it is not resolved by adjusting the affordable housing percentage alone.

Long-term affordability: the deeper question

The planning system's blunt instrument — a percentage obligation attached to the planning consent — was never designed to be the sole mechanism for affordable housing delivery. But in the absence of sustained grant funding through Homes England or the GLA's Affordable Homes Programme, it has increasingly become exactly that.

Between 2020 and 2025, REalyse data shows that over 43,000 units in London applications were ultimately refused, and a further 26,000 withdrawn. Not all of those refusals or withdrawals are attributable to affordable housing disputes — but viability negotiations feature heavily in the public record of stalled strategic applications. The cumulative effect on long-term affordable housing delivery is difficult to overstate.

What the current policy moment clarifies is that London faces a choice between two inadequate options: enforce high thresholds and watch the pipeline stagnate, or relax them and accept lower affordable housing delivery in exchange for more market-rate supply. Neither solves the underlying problem, which is that the gap between what households can afford and what it costs to build has become structural, not cyclical.

Outlook: data-led decisions in an uncertain planning landscape

For investors, developers, and lenders, the current policy environment creates both opportunity and risk. Schemes that were stalled on viability grounds are re-entering the market. BTR operators with existing consents are finding renewed appetite from funders who had paused capital deployment pending regulatory clarity on building safety. Boroughs like Southwark, Newham, and Harrow — where REalyse data shows large volumes of in-progress units — are likely to see the most immediate activity.

But the temporary nature of the measures is important. Viability review mechanisms, clawback clauses, and sunset provisions on affordable housing flexibility mean that the financial model for schemes starting now must be stress-tested against a future in which obligations revert to the 2021 London Plan standard — or potentially go further under a revised Plan. REalyse analysis of comparable land values, sales rates, and rental yields by borough can help development teams and lenders stress-test assumptions before committing to a scheme that looks viable today but may not survive a policy correction tomorrow.

The pipeline is there. Whether it delivers the city London needs — or simply the city the market will fund — depends on decisions being made right now.