London Secures £1.5bn Boost to Accelerate Affordable Housing Development

London is set to receive a major injection of funding aimed at reviving affordable housing delivery, after securing £1.5 billion from a new government backed low interest loan scheme. The funding, confirmed by Mayor Sadiq Khan, represents the capital’s share of a wider £2.5 billion national programme announced by the government to support housing construction across England.

The loans will be made available to housing associations through a new City Hall Developer Investment Fund, overseen by City Hall. Under the scheme, housing providers will be able to borrow money at an interest rate of just 0.1 percent over a 25 year period, significantly lower than current commercial borrowing rates. City Hall believes this will provide critical financial stability for projects struggling to move forward in the current market.

According to City Hall, the funding is designed to unlock stalled or complex developments and help deliver thousands of new affordable homes across the capital. Rising interest rates, increased construction costs and delays linked to building safety regulations have all contributed to a sharp slowdown in London’s housing pipeline in recent years, leaving many developments unable to proceed without additional support.

The mayor said the scheme marks a significant shift in how affordable housing is funded in the capital. He described the loans as a practical response to long standing challenges, arguing that many viable projects simply need access to cheaper finance to get started. He added that City Hall would continue working with central government, local councils and housing partners to speed up delivery and ensure new homes remain genuinely affordable for Londoners.

The £1.5 billion allocation also builds on £322 million in grant funding announced last year through the National Housing Delivery Fund. Combined, these resources bring the total funding available through the City Hall investment vehicle to £1.82 billion, moving closer to its stated ambition of reaching £2 billion in housing support.

Despite the funding boost, City Hall has acknowledged that housebuilding in London remains under severe pressure. A recent report found that housing completions in the capital have fallen dramatically over the past decade, with some estimates suggesting an 80 percent or greater decline. Analysts point to a combination of high land values, financing costs and regulatory hurdles as key barriers to progress.

The government has said the loan scheme is intended to complement its longer term £39 billion Social and Affordable Homes Programme, which aims to deliver around 300,000 social and affordable homes across England over the next ten years. Housing and Planning Minister Matthew Pennycook said the funding would give London the tools it needs to tackle its housing delivery challenges.

However, the initiative has drawn criticism from City Hall Conservatives, who argue the loans amount to a taxpayer funded rescue package for developments made unviable by mayoral policy decisions. They claim Londoners are being asked to pay for failures in housing strategy rather than benefiting from a sustainable solution.

Applications for funding under the wider national housing programme are expected to open next month, with housing providers across London preparing to bid for support.