London is poised to fall short of its revised affordable housing targets, requiring nearly 10,000 homes to commence construction in the next three months to meet its goals, according to BBC News.
The shortfall comes as the capital grapples with a persistent housing crisis, particularly impacting families and disabled Londoners, a recent report from City Hall’s Housing Committee revealed. The report found that only three percent of all homes built through the Affordable Homes Programme (AHP) between 2016 and 2025 had four or more bedrooms, with the vast majority consisting of studios or one- and two-bedroom properties.
The situation is further complicated by a decline in private sector housebuilding, which has fallen by 84% since 2015. Construction work began on 5,547 private-sector residential homes in 2025, a significant drop from the 33,782 started in 2015, according to research from consultants Molior.
In February 2026, the government announced a £2.5 billion national loan scheme, with London receiving a £1.5 billion share to be administered through a new City Hall Developer Investment Fund. These loans will be offered to housing associations at an interest rate of 0.1% over 25 years, substantially lower than current market rates. Mayor Sadiq Khan stated the funding would “kickstart” affordable housing delivery in the capital, providing support for stalled or complex developments.
However, the Conservatives have criticised Sir Sadiq Khan’s handling of housing policy, describing the loans as a “rescue package” funded by London taxpayers. City Hall maintains the funding will support unlock developments and support the construction of thousands of new homes.
The £1.5 billion allocation, combined with £322 million in grant funding from the National Housing Delivery Fund, brings the total investment available to £1.82 billion, nearing the £2 billion ambition. Despite this, City Hall acknowledges ongoing pressures on housebuilding, including high interest rates, rising construction costs and delays related to building safety regulations.
In October 2025, City Hall reduced the affordable housing quota for developers from 35% to 20%, citing a need to expedite planning decisions and incentivize construction. The move was intended to encourage more housebuilding, but its impact on the delivery of genuinely affordable homes remains to be seen.
A spokesperson for the Mayor of London, Sir Sadiq Khan, affirmed that tackling the housing crisis remains a top priority.
