Since Labour took office in July 2024, a series of initiatives have been rolled out to accelerate the planning system and support increased housebuilding. These include reforms to the National Planning Policy Framework, the Planning and Infrastructure Bill, and updated housing targets, with London’s goal now set at 88,000 homes per year. Efforts to boost affordable housing delivery have also been significant, with multi-million top-ups to the current Affordable Housing Programme (AHP) ending in 2026, a new £39 billion Social and Affordable Homes Programme (SAHP) at the Spending Review, a rent settlement at CPI +1 over 10 years, and a consultation on the implementation of rent convergence.
However, despite the Spending Review proposals and, more recently, the emergency measures announcements, the number of affordable housing starts in London has plummeted.
The scale of the challenge to deliver the housing that London needs is huge, and public subsidy alone will not be enough. Our updated report, The case for private investment into affordable housing in London, builds upon our 2022 research in partnership with CBRE and reveals why private investment is critical to help bolster and support the delivery of new affordable homes.
This isn’t a failure of policy ambition – it’s a recognition of market mathematics. Even with the new 10-year SAHP representing the largest social housing investment since the 1970s, private capital has to fill the gap. The question isn’t whether private investment is needed, but how quickly we can unlock it at scale.
In addition to the recommendations outlined in our 2022 report, the path forward requires further strategic intervention across multiple pressure points:
- Streamlining the process for setting up an FPRP and ensuring parity in the treatment of repayment of grant. Establishing a for-profit RP (FPRP) can often take many years, and rightly so, but the process should be streamlined to enable more FPRPs to be established faster. In addition, parity should be created between non-profit and FPRPs regarding the repayment of grant.
- Increasing the provision of other forms of subsidy to improve viability – for example, through interest-free loans, which can bridge the gap between the amount that developers can afford to sell the affordable homes they build and the price that is paid by institutional investors.
- Implementation of a tax credit scheme, which can be used to fund the delivery of new affordable homes. As seen in the US, the implementation of a tax credit scheme would enable profitable corporations to pay future corporation tax liabilities upfront for a fixed term in exchange for a discount on the total amount paid. This lump sum is immediately available to the Government and can be used in the short term to further capitalise existing grant funding programmes, such as the SAHP, to deliver more affordable homes.
- Active promotion of partnerships and private sector investment within affordable housing by all levels of Government. Shifting the narrative is important, signalling to the market that national, regional, and local Government sees the investment community as an integral stakeholder within the affordable sector. The GLA can directly support this approach through the establishment of partnerships with institutional investors, such as those seen between Homes England and FPRPs.
Labour’s commitment to deliver 1.5 million homes across England in this Parliament is ambitious, and London needs every tool available to meet its 88,000 annual target.
The Government has provided the policy framework and funding commitment. The market has demonstrated the need. With the right combination of public backing and private investment, we can begin to deliver affordable homes at the scale the capital desperately needs. The question is whether we can move fast enough to match the urgency of the challenge.