London mayor Sadiq Khan has sealed the first deal to buy land through a new £250m fund, as he tries to ensure that plots in the capital do not fall into the hands of developers aiming to build luxury homes.

The land fund has been used to buy two thirds of a site currently used by St Ann’s Hospital in north London which had been earmarked for the development of around 470 homes, 14pc of which would have been affordable.

But Mr Khan’s fund has stepped in to buy the site from the local NHS Trust that owns the land in Haringey and which had put the original plans together. It will now have 800 homes built on it, half of which will be affordable.

The trust had intended to sell the site on the open market, but the fund’s intervention means that it can both make a profit from the land and put more affordable homes on the site because the fund would not seek as high a margin as a developer.