Sir Sadiq Khan’s status quo won’t get London building again

Meanwhile, investors who have already bought their sites have mothballed projects. Many are in the wait and see mode – waiting for what the Budget brings and what the bond markets might do. 

A later than usual Budget gives chancellor Rachel Reeves more time, but it gives no time for capital markets to digest. Later also means Christmas break and then we are into the spring before business might resume.

This is bad news for developers and builders relying on investment capital for housing starts. London’s pool of unviable consents is the only thing growing in this sector.

So what’s driving this gulf between Mr Copley’s 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 Mr Copley’s defence and try to understand it.

The Copley case

To summarise Mr Copley’s position, he considers the changes to the Building Safety Act to be a major challenge affecting housebuilding in London housebuilding. He believes the system will bed in, and London and other cities will see a gentle recovery over 2026. 

With a little time, business will return to normal and London’s headline requirement of 35% affordable housing can be maintained.

Mr Copley is right on the Building Safety Act – it’s been a calamity.

Will it smooth out? Unlikely, as the embedded costs that come with the new requirements are here to endure.

Moreover, the elongation of the development process – now upwards of seven years for a high risk building – from project start to housing completion is just too long for many wishing to invest in the built environment.

The planning system was always slow, but adding another verification system with similar levels of ambiguity and delay is too much for many serious investors.

Mr Copley believes London’s viability planning mechanisms can help unlock sites that have no hope of achieving affordable thresholds in the current climate. He 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. The problem is that the numbers don’t add up. 

No Class 3 residential site can achieve a 35% affordable housing threshold without writing off land value, the extinguishment of profit or a truckload of grant. Sometimes all three in combination, particularly in outer London locations. This means that while some housebuilding might continue, it will only be through structured, highly complex deals associated with private/public partnership.

“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 so far”

In my experience, this will only achieve a relatively small amount of new housing. 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 so far.

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’ as Mr Copley puts it – 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. 

Mr Copley takes no account of the divergence in assumptions, the time it takes (which costs) and the limited appetite to invest with a late-stage review in any of his remarks he made to Inside Housing.

Where do we go from here?

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 a systemic rethink is needed if we are going to achieve anything like the numbers Mr Copley wishes. 

Nick Cuff, managing director, Urban Sketch