House Building: London

Matthew Pennycook Excerpts

Wednesday 5th November 2025 Westminster Hall

[The Minister for Housing and Planning (Matthew Pennycook)]

It is a pleasure to serve with you in the Chair, Mr Mundell. I start by congratulating the hon. Member for Old Bexley and Sidcup (Mr French) on securing this important debate, and I thank other hon. Members who have spoken for their passionate and—with some notable exceptions—thoughtful contributions. It has been a good debate. I also welcome the shadow Housing Minister, the hon. Member for Orpington (Gareth Bacon), to his place. It is a pleasure to debate opposite him, and I thank him for the kind words he said about me in particular.

It is not in dispute that house building in London is in crisis. The causes of that crisis are multifaceted. London has faced development challenges common to all parts England over recent years, including a significant increase in the price of building materials, a rise in financing costs, and planning capacity and capability pressures. However, it is important to recognise that the capital also faces a number of distinct challenges unique to its housing market that differ in important ways from the rest of the country.

Those challenges include the fact that London is overwhelmingly reliant on flatted developments that have become more challenging to deliver over recent years. It has depended over recent years on demand for international buyers and investors, whose appetite to purchase private market homes has diminished. It also has a higher proportion of landowners, and traders acting on their behalf, who are global investors allocating development funding based on competing returns globally and across asset classes. The combination of those and other factors has resulted in a perfect storm for house building in our capital. That perfect storm has real-world implications for Londoners in housing need.

As you will know, Mr Mundell, as part of our overhaul of the national planning policy framework in December last year, we addressed the fantastical housing target of over 100,000 given to London by the previous Government. That target was based on the punitive application of the now-abolished urban uplift, and it bore no relation whatsoever to addressed housing need in our capital. However, London is still falling far short of the more appropriate target of 87,992 homes per year, which results from the new standard method that we put in place.

We have heard the statistics cited by many hon. Members. Overall home starts in London in 2024-25 totalled just 3,990. In the first quarter of this year, more than a third of London boroughs recorded zero housing starts. I do not mean to single out the hon. Member for Old Bexley and Sidcup—this applies across the board—but in the borough of Bexley, construction was started on just 160 homes, and completions numbered just 210, in the whole of 2024. Those numbers are far too low. In short, London housing delivery is on life support, as is broadly recognised across the Chamber.

In the first 15 months of this Government’s life, we took steps to support the mayor and the GLA in addressing the house building challenges facing the capital. We withdrew the previous Government’s direction of March 2024, which required the GLA to complete an unhelpful, partial review of the London plan, and we have provided the GLA with certainty on grant by making it clear that up to 30% of our new £39 billion social and affordable homes programme will be allocated to London.

However, although those and other vital interventions were beneficial, the Government concluded over the summer that we had no choice but to take further decisive action. That is why, on 23 October, via a written ministerial statement, as is often the case—it was not snuck out; it was published on the Government website for all to see—the Secretary of State and the Mayor of London announced new emergency measures designed to arrest and reverse the collapse in house building in London by lowering development costs and improving scheme viability. The time-limited emergency measures, which I should stress to hon. Members are subject to consultation, are as follows.

First, we will introduce mandatory partial relief from borough-level community infrastructure levy charges for qualifying brownfield residential schemes that start construction before the end of 2028. As hon. Members will be aware, CIL funds strategic infrastructure, such as schools and health facilities, but if no development is taking place, boroughs do not benefit from CIL payments. The more schemes we can get moving, the more CIL funds flow into borough coffers. The reliefs we have announced will cover 50% of the CIL charges for schemes with at least 20% affordable housing, with greater relief for higher proportions of affordable homes, to incentivise house builders to deliver more.

Secondly, we will remove elements of planning guidance that can constrain density. The mayor, supported by Government, will consult on revising guidance in respect of dual aspect requirements, the number of dwellings per core and cycle storage standards. Looking ahead, the next London plan will streamline requirements to reduce duplication and complexity, making it easier to build homes quickly, without compromising quality.

[Bob Blackman]

Do the new standards apply to new planning applications that are being considered or to ones, already in the pipeline, in which developers have proposed developments with less affordable housing?

[Matthew Pennycook]

As I have said, there will be consultation on the specifics of many parts of this package, but I will address his particular point about the new time-limited planning route. This route, which will be open for two years, will allow schemes on private land in London to proceed without a viability assessment, provided that they deliver at least 20% affordable housing—importantly, with a minimum of 60% social rent. To incentivise schemes to come forward on this basis, grant funding will be made available for homes above the first 10%, which will remain nil grant.

Crucially, a gainshare mechanism on schemes or phases of schemes not commenced by 31 March 2030 will ensure that, if market conditions improve, communities benefit too. In our view, that is a pragmatic, temporary measure to unlock delivery now, while maintaining our commitment to affordable housing in the long term. It will sit alongside the GLA’s existing fast-track route, which retains its 35% affordable housing threshold.

[Emily Thornberry]

Will the Minister give way?

[Matthew Pennycook]

I will give way in one second, because I am addressing my right hon. Friend’s point. She got to the nub of the issue, and she said that she recognises that 20% of something is better than 35% of nothing. There is obviously a judgment to be made about what the appropriate package is. We think we have come upon the right package, but it is important to say—again, I do not single her out in saying this—that Islington borough started 20 homes in 2024-25. It is not okay to say that we can wait for these schemes to come forward in the years to come and we can go slow. Such is the crisis that we do need to respond, and the guardrails we have put in place around this package will deliver, get those homes started and make sure that we see more social and affordable homes come forward.

[Emily Thornberry]

The Minister may know about the Barnsbury estate, which was due to be rebuilt but the building had to be stopped because suddenly we had to build a second staircase. If that had not happened, there would be many more starts in Islington. The biggest site coming is Moorfields, and our concern is that, if only a tiny proportion of that is social housing and the CIL money is cut, it will be a huge opportunity lost to Islington—the best opportunity that we have had for housing local people.

[Matthew Pennycook]

I recognise my right hon. Friend’s point. I cannot comment on specific applications, but it is important that I emphasise that applicants will be expected in the first instance to seek grant to maintain or increase the level of affordable housing in existing section 106 agreements. Only where that has been fully explored with the GLA, and has been demonstrated not to be possible, can schemes be renegotiated via a deed of variation with the aim of delivering at least the relevant level of affordable housing established in the new planning route, and on the same terms.

We are providing the mayor with new planning powers that expand his ability to intervene directly in applications of potential strategic importance in order to support housing delivery and maximise densities. Those powers are set out the policy statement that we published on 23 October. In response to the concerns raised around those specific powers, I think Londoners would expect, with the scale and severity of the housing crisis we have in our capital, the mayor to do everything he possibly can to ensure homes are not being ruled out without good reason on sites, and to ensure that sites are coming forward with appropriate density.

[Munira Wilson]

Will the Minister give way?

[Matthew Pennycook]

I will give way briefly, but it will be the final intervention that I accept.

[Munira Wilson]

Does the Minister accept that sometimes the mayor’s intervening slows down development? Earlier, I cited the example of Stag brewery in Mortlake. That development of 1,000 units would have started years ago, but thanks to the mayor calling it in, it was slowed down and it has still not been built.

[Matthew Pennycook]

I am not going to comment on the use of the mayor’s planning powers in specific instances. We think these additional expanded powers are a sensible response to the crisis in house building that London faces.

Finally, we are providing £322 million of funding to establish a City Hall developer investment fund. Building on the success of the mayor’s land fund, which has already delivered 8,000 homes five years ahead of schedule, this new fund will allow the mayor to take a direct, interventionist role in unlocking thousands of homes, driving regeneration and creating thriving communities.

It is also worth noting that alongside the implementation of this package of support, the Government intend to clarify the use of section 73 of the Town and Country Planning Act 1990 so that an application under the section to vary a condition of a planning permission should no longer be used as an alternative means of reconsidering fundamental questions of scheme viability or planning obligations.

In the time available to me I am not going to be able to respond to all the points that have been raised. There have been a number of very good points. I could speak, for example, about what more can be done on TfL land. I think it is worth noting that Places for London is on site, constructing nearly 5,000 homes, 56% of which are affordable. It has already delivered 1,600, but there is definitely more we can do on TfL land around train stations. There is more that the Government are doing on the release of public sector land. I am happy to write to my hon. Friend the Member for Hackney South and Shoreditch (Dame Meg Hillier) about that in particular. I can assure hon. Members that our new social and affordable housing fund will leave a role for acquisitions to be funded.

We know that there is no single simple solution to the development crisis that London is facing. Action to address the acute viability challenges facing residential development in the capital is a necessary intervention, but it is not sufficient. We know that a revival of house building in the capital is dependent on other factors, including increased demand for private for-sale homes, but taken alongside the reforms we are making to the Building Safety Regulator and the significant grant funding we are allocating to London for land, infrastructure and affordable housing, this time-limited package will give house building in London a shot in the arm, and the Government look forward to working with the mayor and the GLA to implement the package and kick-start house building in our capital.

[David Mundell (in the Chair)]

Mr French, you have 30 seconds to conclude the debate.