In an earlier blog, we explored how London's affordable housing and viability landscape has evolved since the adoption of the London Plan 2021.
With the Draft London Plan 2026 now out for consultation until 15 October, this article takes a closer look at the proposed affordable housing policy changes and considers whether they represent a genuine shift in approach or simply an evolution of the existing framework.
Draft Policy HN3 introduces a new location-based threshold approach for residential developments of 36 homes or more. Schemes meeting these thresholds can access the Fast Track Route through planning, in what is arguably the most significant affordable housing change proposed in the Draft London Plan.
By introducing lower thresholds in lower-value outer London locations, the policy acknowledges the differing viability challenges faced across the capital and represents a welcome move towards a more nuanced approach.
That said, the proposal is less generous than the emergency Support for Housebuilding London Plan Guidance (LPG) measures introduced in 2026. Unlike those measures, the Draft London Plan does not provide a universal 20% Fast Track threshold across London, offers no accompanying Community Infrastructure Levy (CIL) relief, and provides limited clarity on how it will align with the forthcoming Affordable Housing Programme.
The move towards a variable threshold system also reflects the political and legal challenges associated with the Support for Housebuilding LPG, with a judicial review currently underway. Local authority resistance may continue under the new framework. For example, boroughs including Lewisham, Waltham Forest and Haringey, all of which have expressed concern regarding the 20% threshold introduced through the LPG, would still be subject to a reduced 25% threshold under the Draft London Plan.
A key question remains whether these revised thresholds will be sufficient to maintain development viability when the London Plan is eventually adopted, likely in 2028. The timing is particularly important given the risk that the underlying viability evidence becomes outdated before implementation. The London Plan 2021, for example, was first published in draft form in 2017 before being formally adopted in 2021, creating a disconnect between policy assumptions and market realities.
Draft Policy HN3 also proposes a departure from the tenure requirements established under the London Plan 2021.
For Build-to-Sell (BtS) schemes, affordable housing provision would comprise:
For Build-to-Rent (BtR) developments, the proposed mix would be:
Building on the equivalency principle established through the Accelerating Housing Delivery Planning and Housing Practice Note (2024), the draft policy introduces greater flexibility for developers seeking to adjust tenure provision while maintaining policy compliance:
This is a positive development and recognises that different tenures generate different levels of value. However, unlike the 2024 Practice Note, the policy stops short of allowing full site-specific equivalency testing, which may limit flexibility in certain circumstances.
The Draft London Plan removes London Affordable Rent (LAR) from policy and instead focuses on Social Rent as the preferred low-cost rental tenure.
While Social Rent typically generates slightly lower values than LAR, it benefits from access to grant funding and has already been the Greater London Authority's (GLA) preferred tenure for several years. In practical terms, this change largely reflects established delivery trends. The question however remains whether Section 106 Social Rent homes will be able to secure grant funding through the new Affordable Housing Programme.
Similarly, London Living Rent (LLR) is replaced by KWLR. Both are intermediate rental products, but KWLR is supported by clearer operational guidance through the Planning and Housing Practice Note on Key Worker Living Rent Homes (2026).
Importantly, KWLR permits annual rental growth at CPI + 1%, without requiring rents to be reset upon reletting, as is the case with LLR. This provides greater certainty for both BtR operators and Registered Providers (RPs).
However, while KWLR rents are based on borough-wide affordability metrics, value implications can vary significantly between sites. The financial impact of this transition should therefore be assessed carefully on a case-by-case basis.
Draft Policy HN3 introduces fixed affordable housing thresholds for developments delivering between 10 and 35 homes:
From a viability perspective, the lower London-wide threshold for small sites is welcome. However, it remains questionable whether a 20% requirement goes far enough to unlock delivery across all locations.
A further challenge is the practical delivery of affordable housing on smaller developments. On schemes of 10 to 35 units, policy compliance could require between two and seven affordable homes across multiple tenures, creating management and operational complexities.
The draft policy does recognise these challenges by allowing schemes to access the Fast Track Route where a payment in lieu (PiL) is proposed. However, as discussed below, concerns remain regarding the methodology used to calculate these payments.
There is an opportunity for the policy to go further by explicitly supporting PiL solutions on smaller sites, while also providing greater flexibility around tenure mix requirements, including departures from the proposed 60/40 split.
Draft Policy HN3 introduces greater flexibility for Purpose-Built Student Accommodation (PBSA) and co-living developments to achieve policy compliance through a combination of approaches.
For PBSA schemes, compliance can be achieved through:
For co-living developments, compliance would be achieved through:
This approach largely reflects practices that have emerged across London in recent years. Nevertheless, its formal inclusion within regional policy is a positive step that should provide greater certainty and encourage developers to pursue the Fast Track Route.
It is particularly welcome that the new lower affordable housing thresholds can also apply to alternative living schemes where traditional C3 affordable housing is delivered. This represents a significant improvement on the Support for Housebuilding LPG, which restricted many of the new measures to conventional C3-led residential development and often required PBSA, co-living and mixed-use schemes to comply simultaneously with multiple policy requirements.
Despite greater flexibility around PiL options, the GLA continues to adopt what appears to be an overly simplistic methodology for calculating contributions.
The GLA’s formula is:
100% market GDV minus policy-compliant GDV = PiL contribution
While straightforward, this approach does not account for the differences in development costs between a fully private scheme and a policy-compliant affordable housing scheme. As a result, the calculation can overstate the level of contribution that is realistically supportable.
In practice, this is likely to push many applicants into viability-tested routes, creating the very delays and negotiation processes, along with the late stage review mechanism liability, that the Fast Track system was designed to avoid.
Consequently, while the expanded ability to utilise PiL solutions is welcome, the prescribed methodology may continue to generate protracted viability discussions between developers, boroughs and the GLA.
While the Draft London Plan 2026 introduces several notable affordable housing changes, most represent an evolution of policies and delivery approaches that have already emerged through guidance, practice notes and negotiation over recent years.
Ultimately, the success of the new policies will depend not only on their design but also on the robustness of the evidence that underpins them and their ability to remain relevant in a rapidly changing market.
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