Sadiq Khan’s ideological aversion to profit is blocking London housebuilding
Just as measures to stimulate the housebuilding sector are being warmly received, Sadiq Khan is undermining efforts with talk of rent caps, writes Andrew Teacher
It is not without some irony that in the same week it was reported that Sadiq Khan was being lined up for a life peerage, more emergency measures were announced by housing secretary Steve Reed to fix the capital’s housing crisis – a crisis that is now having a knock-on effect across the whole country.
Reed talked about a number of hurdles, referring to interest rates, skyrocketing construction costs and a lack of foreign buyers. But he ignored the biggest problem of all – the Mayor himself.
Clearly, some of the overhanging issues are leftovers from the Conservative Party’s kneejerk response to the Grenfell tragedy. Namely the botched Building Safety Regulator, alongside a cut-and-shut set of tax reforms which, when combined with the slowdown in China’s housing market and a ban on Russian buyers, have helped bring much of the overseas buying market to a halt.
This matters because, without the forward funding that came in from investment buyers, major developers would not have the confidence to start on large schemes, which is why the most recent data on housing starts show just 5,547 private homes began construction in London in 2025 – an 84 per cent decline from 33,782 in 2015.
Not rent caps again
The package of emergency measures, first trailed last October, includes a reduction in the fast-track affordable housing threshold to 20 per cent from 35 per cent. Many commentators misquote this figure as being the minimum developers need to offer in order to secure planning consent. The London Plan’s actual position is perfectly clear: affordable housing needs to correspond with what is viable.
Just as City Hall was confirming the emergency measures – which were warmly received by the likes of Berkeley Group executive chairman Rob Perrins in The Sunday Times – Sadiq Khan was once again rehearsing his desire to introduce rent caps.
In a press release launching a new £400,000 Renters’ Rights Enforcement Fund, the Mayor said: “I believe the next step is for ministers to devolve the power to cap rents so we can tackle the capital’s problems of both affordability and supply.” It may be electioneering and there may be a proposed carve out for build to rent, but investors don’t look at such nuances. The nonsensical fiction that rent caps would somehow help supply is precisely the kind of doublethink that has screwed Scotland’s housing market for years.
Put 12 economists in a room and give them a problem and, for the most part, you will come out with a dozen different answers – except on rent caps, where everybody agrees they have a negative impact on supply and affordability. At a national level, the Renters’ Rights Act adds further red tape when it too should exclude professional investors who have nothing to gain from random evictions or unfair behaviour. The complex rules befuddled our own Chancellor let us not forget – so will any lesser minds cope?
Khan continues to disincentivise developers
The bigger problem, though, is the disincentive this creates for investors. For years, developers warned about what would happen and, in fairness to politicians, investors cry wolf all the time. But the real problem here, particularly in London, is an ideological aversion to profit – a
word you will rarely see, if ever, in planning policy or the London Plan. We need to remember that governments do not build homes – private sector investors do.
The upshot of all this is that with global uncertainty turned up to the max, these new measures may be too too late.
Labour needs to listen. This means recognising that it cannot continue to say one thing and then do the other. And it says quite a lot about the state of politics today that, having failed so prominently on a key policy area, a politician can still end up being promoted.
And as a footnote, just in case anybody was wondering who the biggest provider of affordable housing in London has been, it is Berkeley Group. According to Molior London, Berkeley is currently building 2,500 of the 25,300 affordable homes under construction in the capital – 10 per cent of the total, on its own balance sheet, more than any single housing association, local authority or other developer. Add in a further 750 affordable homes under construction in a joint venture with Peabody in Plumstead, and the picture is clear enough: London needs the City to deliver housing of all tenures.
Andrew Teacher is co-founder at Lauder Teacher