Last week, during an in-depth feature for Inside Housing, Deputy Mayor for Housing Tom Copley made the case for the continuation of the London planning and viability framework. This is despite declining housing starts and an exodus of domestic and international investors from the Capital.
London’s land market has effectively shut down with only a handful of transactions taking place. Most housing commentators anticipate permissions and starts to continue their journey downwards even if there are a series of corrective measures introduced over the next few weeks.
Rather than a summer lag leading to an energetic City Hall response in the autumn, are we are witnessing a widening disconnect between the data points and the sentiment? What’s driving this gulf between rhetoric and reality? My view: it’s a combination of complexity, misconception and the UK state failing to connect itself between the various tiers of governance. Let’s examine the defense and try to understand it.
The Copley Case
To summarise Mr Copley’s position, he considers the changes to the Building Safety Act are the major challenge that London house building has faced. He believes the system will bed in and London and other cities will see a gentle recovery over 2025 and 2026. He’s right – the Act has been calamity. Will it bed in? Unlikely, the embedded costs that come with the new requirements are here to endure which means something has to give. If the UK state wants a higher level of fire protection, than it has to pay for it somewhere.
A 35% threshold for affordable housing is still necessary, Mr Copley maintains, because it offers an incentive to deliver the maximum amount of affordable housing possible across all available sites. If a developer is unable to achieve 35%, then Mr Copley invites developers to go down the viability route where his team of experts will ‘comb’ the numbers to ensure their case is genuine. Sounds simple? Not really.
Where rhetoric meets reality
Mr. Copley desperately wants to see new affordable homes in the Capital. But so does everyone. The problem is the numbers don’t add up.
No C3 residential site can achieve a 35% affordable housing threshold without either the extinguishment or a significant reduction of land value, the extinguishment of profit or a truckload of grant. This means that whilst some housebuilding might continue, it will only be through structured, highly complex deals associated with private/public partnership.
In my experience, this will only achieve a relatively small amount of new housing, perhaps no more than 20,000 – in a vintage year. Many fewer in a poor year.
Why? Because it involves a number of unicorns arriving on the same site at the same time. It requires a great deal of patience and skill. I have worked on a range of public land deals and agreements, they require a huge amount of expertise, expertise which isn’t in abundant supply.
Therefore, a threshold of 35% is no incentive if you want to push more land into production. This is evidenced by the muted activity over 2025. If you want to read the tea leaves, ask any senior London land agent and they will tell you the market is inactive. They should not be ignored.
Now let’s turn to viability. If you are a developer or investor wishing to make a major investment into the London built environment you want as much certainty as possible. We are talking big numbers here after all.
A 35% threshold target is perceived by the majority of London’s planning committees as the gold standard. If you can’t achieve it, then something’s wrong and the blame falls on the developer’s shoulders.
This doesn’t mean that applications won’t get heard and accepted if they fall short, but it’s a heck of a lot of work. Many investors simply do not want to be put into the position where there is political vagueness. This is moreover out of Mr Copley’s control.
Despite this, a vanishingly small number are still willing to accept the political risk. But then you have to contend with the viability system Mr Copley has inherited. It is fraught with complexity and deadlock.
The numbers are not just ‘combed’ – many of them are base assumptions not hard costs and require expert management and much time to get agreement on. Normally after many months of negotiation you are then saddled with a late-stage review with a 80%+ marginal tax threshold. It’s all far too complex as I explained in a previous post. Mr Copley takes no account of the divergence in assumptions, the time it takes (that costs) and the limited appetite to invest with a late stage review in any of his remarks.
London land market stand off
Molior, London’s leading housing data collector identifies there are 281,000 unbuilt permissions across the Capital. Getting planning is not really the problem. It’s the planning taxes and viability assumptions which acts as a blockade to building. Rob Perrins, CEO of London’s leading brownfield developer Berkeley Homes made this point over the weekend ably in the Times.
According to Molior, their research suggests fewer than 1,000 homes commenced construction in London during Q3 2025. At this pace, they claim London is on track for just 5,000 residential construction starts in all of 2025.
It’s not City Hall’s fault we have ended up in this situation. However, the operating environment has changed. One big thing that hasn’t changed is that London housing requires other people’s money to build the homes it needs. Investment capital is mobile. It won’t invest if the rewards are obscure and the time it takes is too long.
Affordable housing can be delivered but it needs a systemic rethink if we are going to achieve anything like the numbers Mr Copley wishes.
