The London Loophole

How London’s boroughs escape higher housing targets

“Every time I go to pull a lever, there are a whole bunch of regulations, consultations, arms-length bodies that mean the action from pulling the lever to delivery is longer than I think it ought to be” - Sir Keir Starmer MP, Prime Minister

One of Labour’s first acts in office was to bring back mandatory housing targets. Councils failing to build enough homes (or without a valid local plan) would now, in theory, find it much harder to block new homes. At the same time, annual housing targets went up across the country.

In London, the place with England’s most acute housing shortage, where the average monthly rent for a one bedroom flat is £1,500 and the average house price is 12 times the average wage, annual targets went up. The Mayor would now have to plan for 88,000 homes, up from the 52,000 homes required for the current London plan.

Since Labour reinstated housing targets and added 36,000 extra homes to London’s annual target, a number of London boroughs (including Camden, Haringey, and Tower Hamlets) have put new local plans out for consultation. You might expect that a two-thirds increase in London’s target will translate to boroughs planning to build (or at least approve) far more homes than before. You would be wrong.

Here’s the problem: London boroughs like Camden, Wandsworth and Lambeth don’t get their housing target directly from the NPPF’s ‘standard assessment of housing need’, they get it from the most recent London Plan. In other words, whatever the London Mayor decides their share of London’s overall target is. The issue is the last London Plan was published in 2021 when the capital was expected to build 52,000 homes per year. That’s a problem because it allows boroughs to dodge tough choices on density and ‘nice to haves’ when determining their plans.

A new London plan is in the works, but it won’t be ready this year. The Mayor recently ran a consultation on what should be in the draft London Plan, which will itself need its own consultation. If all goes well, we could have a new London Plan in place by 2027, though some suggest 2028 is more likely. From then on, all new local plans will have to use the new London Plan’s higher targets.

However, a new London Plan does not immediately require boroughs to rewrite their existing local plans to take account of higher targets. In fact, once a local plan is in place, there’s a five year window before it’s treated as ‘out of date’.

In theory, London councils could delay higher housing targets by drafting new local plans that come into force just before a new London Plan is made official. There are measures within the new NPPF designed to mitigate this risk, but they don’t solve the problem fully. First, councils are required to have a five-year supply of land released for development capable of meeting their housing target. From July 2026, councils with valid plans working off old targets, like many London boroughs, must add a 20% buffer to their five-year land supply. This applies as long as their plan’s target is less than 80% of their new target. Second, if targets set by the London Plan (or any other spatial development strategy) increase significantly then boroughs should begin preparing a new local plan early. So how long will that take?

The process of preparing a local plan normally takes 30 months, but that’s without any ‘slippages’. The draft NPPF doesn’t define a significant increase, so expect some boroughs to haggle for months over what is and isn’t significant. Expect delays.

Even if everything goes to plan, local plans based on 2024’s higher housing targets will not be in place in London boroughs within this parliament!

In the last year or two, housebuilding in London has collapsed. John Burn-Murdoch at the FT reports that London is building fewer homes currently than any other major world city. It is possible that even under London’s old lower housing target, many boroughs would have underbuilt by so much that the tilted balance in favour of sustainable development applies. However, London’s extreme collapse is likely temporary. As the Building Safety Regulator backlog clears and the relaxation of affordability requirements takes effect, it is more than possible that London returns to recent housebuilding highs. That’s still far too low, but it might mean that many boroughs are at least hitting or close to their old housing target. In that case, higher targets take effect again.

Closing the London Loophole

It isn’t hard to think up alternatives where London’s new higher targets take effect much sooner. One simple way to close the London Loophole would be to force London’s boroughs to, at the very least, revise their plan on the presumption of a proportional increase in the capital’s target. In other words, if a borough is meant to deliver 2% of London’s old housing target, then it must now figure out how it can deliver 2% of London’s new target. Safeguards could be put in place to account for the fact that some councils are currently delivering far more homes under the London Plan than they are expected to under the old method. For these councils the requirement to plan for a proportional increase in housing numbers could be waived.

When he took power, Sir Keir Starmer chose to pull the housing target lever. In some parts of the country, such as Cambridge, higher housing targets are already having an effect. Yet in the bits of England where housing is most unaffordable, his higher housing targets won’t fully take effect until 2030. If the polls are correct, there’s a good chance someone else will be PM then. This is no way to run a country.

Rather than blame ‘a whole bunch of regulations, consultations, arms-length bodies’ for frustrating his agenda, he should remember that he is in fact a Prime Minister commanding a massive majority. He can get rid of them. In this case, he does not need to wait five years before London’s higher housing targets bite in places like the borough of Camden. He can simply close the London loophole.