The mayor of London has accused property developers of constructing “too many luxury penthouses that only the very wealthiest investors can afford” and insisted the rate of affordable house building has to significantly increase.

In a new assessment of housing need, Sadiq Khan said the pace of construction should increase from 29,000 homes a year to 66,000, adding that 65% of these homes needed to be affordable, far higher than the current rate of 38%.

“The housing crisis is a major factor in the high cost of living in the capital, as well as putting home ownership out of the reach of many young Londoners who fear they will never get a foot on the property ladder,” Khan told the Guardian. “In the worst cases, it can affect social cohesion, cause poor health and plunge residents into poverty. I cannot overestimate how terrible a situation we inherited.”

City Hall calculates that a new approach will require a major shift in strategy, switching the emphasis from building blocks of luxury apartments in central London to constructing more family housing in the cheaper suburbs.

Between 1997 and 2016, London’s population increased by a quarter – an extra 1.7 million people – but only 370,000 homes were added to the stock. One result has been a rise in the number of families sharing with other families, which now affects 470,000 households.

The figures are contained in a stark assessment of housing need that will form the basis of the London Plan, a five-year planning strategy due to be published next month.

Khan said: “Successive prime ministers have failed to invest anywhere near enough in building new affordable homes. The previous mayor [Boris Johnson] stopped investing in homes for social rent altogether and cut the number of new affordable homes he funded to the lowest level since records began.”

Khan revealed that no homes for social rent – the cheapest available – were built in London in the last year of Johnson’s mayoralty. Just 29,000 homes a year of all types were built between 2013-14 and 2015-16.

The mayor is using the figures to pile pressure on the chancellor, Philip Hammond, to include in next month’s budget a dramatic increase in state subsidies for affordable housing in the capital from £500m to £2.7bn a year.

The new strategy is set to focus on building more homes in outer London and will include a presumption in favour of development on small sites in suburban town centres. Khan is also pushing for greater powers from the government to force unused sites, including public land, into use for housing, including speeding up compulsory purchase orders.

Despite City Hall’s assessment that 65% of all new homes must be “affordable” – which Khan defines as being rented for no more than a third of average earnings, or under shared ownership schemes – insiders concede this is unlikely to be possible. Khan is expected to set the target for affordable housing at a more achievable, but still highly ambitious, 50% in the London Plan.

St George Wharf in Vauxhall. Photograph: Jack Taylor/Getty Images

There has been a growing anger at the number of luxury developments, especially among people struggling to afford starter homes or to rent cheaply. One totemic example is the 50-storey St George’s Wharf tower beside the river Thames at Vauxhall where two-thirds of homes were last year revealed by the Guardian to be in foreign ownership, with a quarter held through secretive offshore companies based in tax havens.

Concern spread to the suburbs earlier this month when it emerged that the London borough of Redbridge had agreed to allow the supermarket firm Sainsbury’s to build 683 homes, only 4% of which are guaranteed to be affordable.

Last month, Theresa May announced an extra £2bn for council housing nationwide, but was accused of tinkering when it emerged that it would only result in an extra 5,000 homes a year being built.

In common with town halls across the country, Khan is lobbying for councils to be allowed to borrow to invest in homes. The communities secretary, Sajid Javid, said on Sunday that the government might authorise extra public borrowing to fund infrastructure to deliver more housing. According to some reports, his department believes £50bn is needed. However, Hammond told the Commons this was not government policy.

Andrew Boff, the Conservative deputy chair of the London assembly’s housing committee, warned that Khan’s approach of increasing the proportion of affordable homes needed in each development was putting developers off building any housing.



He believes increasing the whole housing supply would result in lower prices and therefore greater affordability. “He would see more homes built if he had a lower figure for affordable homes,” Boff said. “If you increase the number, the price will go down.

“Despite the rhetoric, he has managed to start 20% fewer homes a year than his predecessor after 18 months in office. This directly goes against his promise in his manifesto that each year would be an increase in the number of homes being built.”

City Hall insiders point out that this is a result of the low number left in the pipeline by the previous Conservative administration.

Jonathan Seager, the executive director of housing at London First, the business lobby group, said: “These new figures show us that the housing crisis is worsening. It is now one of the most serious challenges facing business, preventing firms from recruiting and retaining the talent they need to grow and succeed.”