Transport for London will be forced to sell its landholdings at “a financially disadvantageous” price if Mayor Sadiq Khan is to deliver his manifesto promise of ensuring 50% of all homes built on public land are affordable.

During the build up to May’s election, Mr Khan pledged to leverage TfL and City Hall’s extensive landholdings to boost the number of low cost homes available to Londoners.

The capital is facing a severe housing crisis which is driving up overcrowding, forcing some Londoners to relocate outside the city and adversely affecting the quality of life of many lower and middle income households who struggle to pay their rent.

A shortage of new properties is also making it harder for Londoners to buy their own home, a problem many say is worsened by developers marketing new properties to overseas buyers.

Mr Khan’s plans to increase the number of affordable properties on the rental and ownership markets, coupled with his promise that such homes will be offered to Londoners first, have the potential to dramatically ease the crisis.

By increasing the supply of homes across all tenures, the Mayor’s policies could slow the rise in rents and make home ownership more attainable, outcomes which would be welcomed by thousands of struggling Londoners.

However briefing papers recently presented to Mr Khan reveal that delivering his ambitious plans will mean breaking a second election pledge to retain ownership of public land in order to generate “an income stream” for future investment.

Under provisions set out in the 1999 Greater London Authority Act, TfL is legally required to maximise the sums it generates from the commercial exploitation of its assets, this would include the building of new homes by the agency.

The briefing documents, which relate to a parcel of land in Kidbrooke, state that requiring 50% of homes built on the land to be affordable when planning rules imposed by Labour-run Greenwich council only mandate 35% would place TfL in breach of the law.

They state: “When developing its land either directly or through a subsidiary, TfL is obliged by paragraph 29 of Schedule 11 of the GLA Act to act as if it were a company engaged in a commercial enterprise or exercise its control over that subsidiary so as to ensure that the subsidiary, in carrying on those activities, acts as a company so engaged.

“As the development of the land with 50% affordable housing will lead to less than the maximum return available and reduce TfL’s financial return, TfL would not itself be able to develop the land in line with the Mayor’s aspirations for affordable housing.”

To get around the rules, officials have proposed setting up joint venture companies with developers and other partners to which TfL would sell its landholdings, previously claimed by Mr Khan to be “equivalent to 16 Hyde Parks”.

However because the 50% affordable housing requirement would reduce the land’s value to any potential partner, TfL would still be in breach of its general duty “to act rationally” by securing the best price for its assets.

The documents warn: “Because TfL’s functions and purposes are to provide transport to, from and within London, and do not include housing functions, there is a question as to whether, in the absence of a direction, TfL would be entitled to adopt a financially disadvantageous approach to disposal or development on the basis of advantages relating to the provision of housing.”

Mr Khan has therefore accepted a recommendation that he issue a ‘Mayoral Direction’ ordering TfL to sell the land at below its true market value.

As a result of the Mayor’s instructions, TfL will only retain part ownership of the land and “its income share will be less than it would be if the land was developed with 35% affordable housing.”



Even then, the documents warn that the 50% target may not be achievable, stating that: “If the scheme is less financially viable due to increased build costs and reductions in revenue generated from the sale of residential and commercial units, the overall quantum of affordable housing may need to be reduced.”

To avoid this, officials say Mr Khan could provide “grant funding” to the joint venture, gifting developers both cut-price land and taxpayer subsidy.

The decision to sell the land below market value and to willingly reduce future revenue also contradicts the Mayor’s pledge to boost TfL’s commercial income and use the proceeds to fund his fares freeze without cutting services.

Labour members on the London Assembly previously criticised former Mayor Boris Johnson for his use of joint venture companies, including at Earl’s Court, and opposed his instruction to sell axed fire stations at below market rate.

Some of the party’s MPs also campaigned against a new TfL Bill which would make it easier for the agency to form partnerships with commercial developers.

However the implication of the briefing document is that such arrangements will become increasingly common during Mr Khan’s time at City Hall.

Update: Tories on the London Assembly say the legal advice means the Mayor should “ditch this affordable housing requirement before he bankrupts TfL any further”.

Keith Prince, GLA Conservative Transport Spokesman, said: “Selling Transport for London’s land with a massive 50% affordable housing requirement ensures it will be sold for well under market value.

“Sadiq should have checked if selling TfL land for under market value was legal before promising this requirement, as all bodies have to achieve best value when selling public property.

“Not only could it have legal repercussions, it is bad for an organisation that has a £640million Khan-fares-freeze sized hole to fill in their budget.”

A spokesperson for the Mayor commented: “Sadiq has asked TfL to deliver 50 per cent affordable housing across their portfolio of sites and to balance this with a need to boost income.

“This land at Kidbrooke lay largely unused for the previous Mayor’s entire time in office, but under the new Mayor’s direction will now both generate income for TfL and see hundreds of new homes built – half of which will be affordable homes for Londoners to rent and buy.”