Mayor puts affordability ahead of profitability

Sadiq-Khan-Mayor of London Sadiq Khan is willing to have Transport for London take a financial hit on its site disposals to reach his 50% affordable housing target, documents have shown this week.

They also show that TfL will have to cede overall control of the sites for the mayor to reach his manifesto pledge.

Last week Estates Gazette revealed that developers on TfL’s procurement framework would struggle to build out schemes with an affordable commitment of 50%, and exposed the pressure TfL was under to obtain the best value for its sites.

The GLA Act requires TfL to achieve best value on sites it or a subsidiary develops as if it were a commercial enterprise, but not if its sells them.

A mayoral decision issued this week states that the mayor is willing for this to be the case. TfL said that it had planned to be a minority partner in most of its sites.

Advice to the mayor on Kidbrooke, SE3, the first site to be released by TfL since Khan was elected, show the difficulties associated with increasing affordable housing under the GLA Act.

The directive states: “While the disposal of the land with 50% affordable housing could reduce the land’s residual value and return to TfL, the significant provision will provide housing for local people.

“The mayor may conclude that on this occasion this benefit justifies the financial impact of the lower land value and reduced return to TfL.”

Since TfL chief executive Graeme Craig was appointed in 2012, the transport body has been working up plans for the disposal of its London assets, which it intended to use to plug a shortfall in government funding and the gap left by Khan’s fare freeze, another manifesto pledge.

Claire Fallows, a partner at Charles Russell Speechlys, said: “In directing TfL how to exercise its functions of disposal or development in this case, the mayor is electing to draw on his wider responsibilities for social and economic development, including housing for those living and working in London.

“He concludes that the significant need for housing for local people in Kidbrooke justifies the reduced return to TfL.”

The 3.1-acre site in Kidbrooke has the potential for 400 homes. The Royal Borough of Greenwich’s Core Strategy requires that at least 35% of the homes are affordable.

TfL land disposals: how the law reads

The Greater London Authority Act, 1999, section 11, paragraph 29: “If Transport for London engages, either directly or through a subsidiary, in any activities authorised by paragraph 11 or 15(2) or (3) above, it shall in carrying on those activities act as if it were a company engaged in a commercial enterprise or (as the case may be) shall exercise its control over that subsidiary so as to ensure that the subsidiary in carrying on those activities acts as a company so engaged.”

And the mayor of London Sadiq Khan’s decision:

“When either disposing of, or developing, the land described in paragraph 2 below, TfL shall take such steps and measures as it considers necessary and practicable to ensure that not less than 50% of any residential accommodation that may be constructed on the land will be used as affordable housing as defined in paragraph 3.”


Jim Ward, director, Savills research and consultancy

Against the backdrop of many conflicting needs and interests, the mayor, working with the GLA, must decide what will take precedent. The right balance (or compromise) must be found if we are to boost and not stall the delivery of housing.

This is no small challenge. Many TfL sites are large and complex, many in multiple land ownership. Network Rail is a common neighbour and has its own objectives, including its own housing land release target.

Additionally sites are often centred around key transport hubs, so there is the challenge of building homes while maintaining access transport links. Normal practice would be to generate enough land value to put the infrastructure in place before the site is built out. Such constraints will make it very difficult to deliver at 50% on all such sites. 

The viability of affordable housing delivery can be enhanced by increasing the density of development, which the London plan encourages around stations, so TfL and partners will therefore need to secure buy-in from boroughs to allow building at the densities needed to create viability. 

There are no precedents for delivery at 50% and the mayor has signalled that he recognises that achieving ambitious goals for London will be an iterative process requiring pragmatism and compromise.

Read more >>> Khan seeks viability experts for Homes for Londoners team