Affordable Housing Thresholds in London: What Developers Need to Know
The Mayor is committed to increasing the level of affordable housing delivered in the Capital through the planning process. To achieve this, the Mayor's London Plan sets out a target for new homes to be genuinely affordable.
The Mayor has also introduced the Threshold Approach to affordable housing through Policy H5 of the London Plan and Affordable Housing and Viability Supplementary Guidance.
The Supplementary Planning Guidance (SPG) explains how policies contained in the London Plan should be carried through into action. The SPG is a formal supplement to the London Plan and is an important consideration on planning applications. These documents provide a framework and input to local authorities when drafting their individual Local Plans.
A local plan is a blueprint created by local government that outlines the future development, land use and spatial strategy for a specific geographical area. In the case of Greater London, this is at Borough Level where thresholds can vary between local authorities.
This isn’t just the quantum of affordable housing that can vary but also the unit mix and the tenure mix. This can impact the Gross Development Value of a proposed scheme, which can determine whether a proposed scheme is viable or deliverable.
In October 2025, the Mayor of London announced emergency measures designed to increase housebuilding in London as follows:
A temporary relief from the Community Infrastructure Levy
CIL is a charge on landowners, which local authorities can apply to development in their area to pay for infrastructure and services such as schools, community facilities, transport improvements and parks.
The proposal would include a temporary reduction of CIL charges by 50% on schemes which will deliver at least 20% affordable housing. In schemes that deliver more than 20% affordable housing, the relief can exceed 50%.
Only schemes that are developed on brownfield sites, land which has been previously developed, would be eligible for CIL relief.
Removal of guidance which can constrain density
The Mayor has proposed removing guidance from the London Plan that limits development density. This includes reducing requirements for developments to include cycle storage and dual aspect for flats and removing limits on the number of flats that can be built around a building core.
Offering a time-limited planning route to developers
The proposed time-limited planning route will allow residential schemes on private land that can provide at least 20% affordable housing to proceed without an upfront viability assessment. These schemes would also be allowed to access grant funding for around half the affordable homes delivered.
This route would lower the affordable housing target for eligible schemes from the current requirement of 35% to 20%. This route will be open until March 2028.
Granting the Mayor new powers
The first is a requirement for boroughs to refer planning schemes of 50 units or more to the Mayor when they are minded to refuse the application. This would enable the Mayor to review the decision.
The second power would give the Mayor the ability to ‘call in’ development of a building of 1,000 sqm or more on Greenbelt or Metropolitan Open Land.
Establishing a City Hall Developer Investment Fund
The final measure included in the proposals is the confirmation of £322 million of initial grant funding for the Mayor to establish a City Hall Developer Fund. This fund will become available in 2026-27 and will be used by the Mayor to take a “more direct and interventionalist role to unlock thousands of new homes, including through targeted investment to accelerate delivery on sites.
What Is Affordable Housing and Why Does It Matter for Developers?
Affordable housing is generally defined as residential housing that costs no more than 30% of a household’s gross income (including utilities), allowing occupants to meet other basic living expenses.
Affordable housing tenures are generally split into the following:
Social Rented: usually subsidised or owned by local authorities or registered providers with rents determined by the ‘rent formula’ set by government.
Affordable Rented: rented homes provided by local authorities or registered providers at a discount to open market rent.
London Living Rent: a London-specific scheme offering below-market, subsidised rent to middle-income earners. Designed as a ‘rent-to-buy’ product to help households save for a mortgage deposit to eventually buy their home through shared ownership.
Shared Ownership: is a scheme whereby a purchaser buys a portion of a property while paying rent on the remaining share to a housing association or landlord.
Key Worker Living Rent: is a new product to help middle-income Londoners at rents based on a key worker’s typical earnings, making them more affordable than private rentals.
Discount Market Sale: a home ownership scheme where eligible buyers can purchase a property at 20% to 50% below its open market value.
The different tenure types add a layer of complexity in the planning process as the gross development value of each tenure varies. Knowing the value of each tenure in a proposal can assist developers in what a scheme can realistically provide whilst still remaining deliverable. For example, a social rented unit will have a lower gross development value than a shared ownership unit, which will have a material impact on returns.
The Planning Policy Framework Behind Affordable Housing
National Planning Policy Framework (NPPF)
Plans should set out contributions expected from development. This should include setting out the levels and types of affordable housing provision required, along with other infrastructure (such as that needed for education, health, transport, flood and water management, green and digital infrastructure). Such policies should not undermine the deliverability of the plan.
The London Plan and Mayoral Policy
The new London Plan was adopted in March 2021. Policy H5 relates to the delivery of affordable housing and Policy H6 relates to the threshold approach to development proposals. Under the London Plan, the minimum threshold level of affordable housing on residential development is set at 35% or 50% on public sector or industrial land.
If 35% or 50% affordable housing cannot be met, a scheme will be considered under the Viability Tested route in line with Policy H6 Threshold approach to applications and the Mayor’s Affordable Housing and Viability Supplementary Planning Guidance.
In line with the NPPF, PPG and the GLA, site-specific financial viabilities may be a material consideration in determining how much and what type of affordable housing should be required in residential and mixed-use developments.
Local Plan Requirements
Local plans and spatial development strategies are examined to assess whether they have been prepared in accordance with legal and procedural requirements, and whether they should. Plans are ‘sound’ if they are:
Positively prepared – providing a strategy which, as a minimum, seeks to meet the area’s objectively assessed needs, and is informed by agreements with other authorities, so that unmet need from neighbouring areas is accommodated where it is practical to do so and is consistent with achieving sustainable development;
Justified – an appropriate strategy, taking into account the reasonable alternatives, and based on proportionate evidence;
Effective – deliverable over the plan period, and based on effective joint working on cross-boundary strategic matters that have been dealt with rather than deferred, as evidenced by the statement of common ground; and
Consistent with national policy – enabling the delivery of sustainable development in accordance with the policies in the NPPF and other statements of national planning policy, where relevant.
Affordable Housing Thresholds in London: The Basics
Introduce this section as a practical breakdown of the key thresholds developers are most likely to encounter when bringing forward residential or mixed-use schemes in London.
The 10-Unit / 1,000sqm Threshold
Typically, development proposals of 10 or more units, or exceeding 1,000sqm of residential floorspace, typically trigger affordable housing obligations. However, some local authorities, such as the London Borough of Richmond Upon Thames and the London Borough of Hackney, apply lower thresholds when securing an affordable housing contribution.
How Thresholds Vary Across London Boroughs
Whilst Mayoral policy sets the strategic direction, local authorities have the power to set their own thresholds within their local plans. London boroughs such as Southwark, Islington and Camden have particularly robust local policies that developers should check early in the site appraisal process.
When and How to Challenge the Threshold
In the current market with softening private sales values and increasing construction and finance costs, a policy-compliant affordable housing provision is unlikely to be viable or deliverable.
Developers have the option of testing viability at the plan-making stage to determine what is realistically deliverable in the market.
We consider the most appropriate time to test the viability of a proposed scheme would be following the pre-application stage. The scheme is largely fixed at this stage, and gross development value and construction costs can be more accurately calculated. A full viability assessment can be submitted with the planning application to justify a reduced contribution from a policy-compliant scheme.
What Is a Viability Assessment?
A viability assessment in planning is a financial appraisal used to determine if a proposed development is financially feasible. Local planning authorities often require affordable housing, financial contributions or other planning obligations, which can often make a project unprofitable. A viability assessment can be used as a negotiation tool to shape a deliverable and viable proposal, whilst meeting both the developers’ and the councils’ aspirations.
When Is One Appropriate?
A viability assessment is appropriate for any scheme, not just schemes that do not provide a policy-compliant amount of affordable housing, as it shapes the S106 Agreement following a resolution to grant planning permission.
Key Inputs: Land Value, Build Costs and Benchmark Land Value
Outline the three most contested inputs in any viability assessment and explain why the benchmark land value, which is the minimum return a landowner would accept, is often the central point of dispute.
The three most contested inputs in a viability assessment are Benchmark Land Value, Gross Development Value and the build costs.
The Benchmark Land Value requires judgement bearing in mind that national planning policy guidance indicates that appropriate land for housing should be ‘encouraged’ to come forward for development.
Existing Use Value
The EUV, sometimes known as the Current Use Value for viability purposes, refers to the value of the asset at today’s date in the adopted planning use. It refers to the Market Value of the asset on the special assumption reflecting the current use of the property only and disregarding any prospect of development other than for continuation/expansion of the current use.
The Mayor of London’s most recent viability guidance states that where a proposed EUV is based on refurbishment or redevelopment of the current use, this would be treated as an alternative development scenario and the guidance relating to Alternative Use Value (AUV) will apply.
In Line with the NPPF and Mayors most recent guidance a landowner premium over and above EUV is considered appropriate in order to reflect the fact that sites will not be encouraged to come froward for residential led re-development if vendors can only sell them at pure EUV levels.
The Mayor considers that the EUV Plus Premium approach is usually the most appropriate approach for planning purposes, with an alternative use approach only being considered in exceptional circumstances and needing to be robustly justified by the Applicant.
The Alternative Use Value of the asset under an alternative planning use, either consented or for which permission might reasonably be expected to be obtained. Recent policy direction from the Mayor of London suggests that an AUV approach must fully reflect policy requirements and that the Mayor will only accept the use of an AUV whether there is an existing or implementable permission for that use.
Working with a Viability Consultant
Advise developers to engage a specialist viability consultant early, as a well-evidenced assessment submitted at the right stage can materially reduce the affordable housing obligation and enable negotiation of a deliverable and profitable scheme.
The Fast Track Route: Meeting the Threshold to Avoid Scrutiny
Under the threshold approach, development proposals that provide 35% affordable housing and 50% on public and industrial land, and that meet tenure, affordability, and other relevant requirements, can follow the Fast Track Route. This has now been revised to 20% under the new emergency measures.
The Fast Track Route enables developments to progress without the need to submit detailed viability information, with late viability review mechanisms which re-assess viability at an advanced stage of the development process.
The Mayor strongly encourages applicants to follow the Fast Track Route, which can speed up the planning process and increase the level of affordable housing secured in new developments.
Schemes that do not provide the threshold level of affordable housing or meet other relevant policy criteria, or provide off-site or cash in lieu contributions, must follow the Viability Tested Route and are subject to viability scrutiny, as well as early and late stage review mechanisms.
Under the threshold approach, schemes that follow the fast track route are subject to early review mechanisms if they do not reach substantial implementation within a specified timeframe. The GLA has issued standard S106 agreement review clauses which reflect the approach in the SPG.
Section 106 Agreements and Affordable Housing Obligations
Affordable housing requirements are typically negotiated during the planning application and secured through a Section 106 agreement, covering the number of units, tenure mix, timing of delivery, and nomination rights; drafting these agreements requires careful legal attention.
Common Mistakes Developers Make Around Affordable Housing
The most common mistake we see is the valuation approach to affordable housing values, with many developers assuming a percentage of Open Market Value. Affordable housing values are driven by policy and not the market. This can lead to developers overestimating the value of completed units. This can have a dramatic effect on the profitability of a scheme.
We have also noticed a trend of developers not seeking feedback from the registered provider market on smaller packages of affordable housing until after the S106 is engrossed. In the current market, the ability to dispose of small packages of affordable housing is very limited. This, in turn, means it is very difficult for schemes to come forward, as there is too much risk associated with building affordable homes that can’t be acquired by the market. Local authorities are also very reluctant to re-open S106 negotiations at this stage.
How Roscoe Group Can Help
We can provide robust viability assessments and negotiate a viable position on your behalf with the local authority. If a scheme can viably support a contribution towards affordable housing, we will ensure it is deliverable, whether through on-site provision that the registered provider market will acquire, an alternative tenure type that doesn’t require a registered provider, or a payment in lieu. We will also provide input on the terms of the S106 Agreement to ensure that, as a developer, you have a deliverable planning permission.
