What does the Draft London Plan mean for SME Housebuilders?

The Draft London Plan, published by the Greater London Authority (GLA) for consultation until 15^th October 2026, marks some fairly significant shifts in approach to residential planning in the capital. The Draft Plan seems to prioritise a 10 year time horizon, accepting that current market challenges need priority actions including reduced affordable housing thresholds and unlocking green belt sites in 8 outer London Boroughs.

Facing a continuing criticism for policies that have stymied housing delivery, the Mayor is trying to streamline the planning framework and remove uncertainty.  This echoes what is being sought at a national level albeit the new NPPF has frustratingly been delayed until at least September.

Here we aim to highlight the key revisions that could help SMEs and reactivate urban housing supply.

Simplified Planning and the Small Sites Policy

At Planning Insight we have highlighted how excessive planning complexity and rigid requirements disproportionately penalise smaller builders and block small sites from being delivered.  The draft Plan directly responds to these concerns:

• Shorter, Less Prescriptive Framework: The draft document is roughly half the length of the 2021 Plan, deliberately stripping out micro-managing policies to reduce planning uncertainty, remove unachievable requirements and streamline decision making.
• Small Sites Policy & Design Code: To provide greater design certainty and accelerate permissions, the Plan introduces a dedicated Small Sites Design Code geared toward optimising backland, infill, and suburban densification which ought to lead to much faster decision making.
• Application Scope (Up to 0.25 Hectares): Applicable to parcels up to 0.25 hectares (typically yielding up to 25 units), the Code establishes standardised design rules. Where a proposal complies with the Code, it benefits from a ‘presumption in favour’ of development, bypassing lengthy design negotiations.

Fast-Track Relief for Minor Schemes (<10 Units)

The draft Plan introduces a significant operational distinction between major developments and minor residential schemes (i.e. proposals for less than 10 homes). Whilst some exemptions already existed for <10 unit schemes, micro-builders operating under this 10-unit threshold can now bypass an extensive list of major-development mandates, saving tens of thousands of pounds per site in consultant fees and viability reports:

The 20% Affordable Housing Fast-Track Route (10–35 Units)

One of the most consequential policy shifts for supporting SMEs is the introduction of a dedicated Fast-Track Route for 10 to 35 unit developments (Policy HN3).

Schemes of 10 to 35 units in any London Borough will be expected to provide 20% affordable housing (except on Green Belt land where the requirement remains 50%).

There is also an opportunity for payment in lieu to be agreed with the LPA where management of a small quantum of affordable housing on site would be problematic.

To remain eligible for ‘fast track’ (i.e. avoiding viability review) such schemes need to provide a tenure split at 60:40 low cost rent vs 40% intermediate.  An alternative tenure split can be agreed where 75% or more affordable housing is proposed in the scheme.

Schemes for 36 units or more may be eligible for lower affordable housing thresholds depending which Borough Banding they site within (see below).

Schemes on Green Belt Land will continue to require 50% affordable housing to qualify for fast track.

Schemes on Public Sector Land will be eligible for fast track when providing 40% affordable housing (reduced from current Plan threshold of 50%) or potentially 25% affordable where significant transport of healthcare infrastructure is being delivered.

Schemes on Industrial Land will be eligible for fast track when providing 35% affordable housing (reduced form current Plan threshold of 50%).

Key SME Concessions Under Policy HN3:

• Universal 20% Threshold: On non-Green Belt land across all 33 London boroughs, any development yielding between 10 and 35 units qualifies for the Fast-Track Route if it delivers 20% affordable housing.
• No Viability Appraisals: By meeting the 20% threshold, SMEs avoid costly Financial Viability Assessments (FVAs) and the threat of late-stage viability review mechanisms providing there has been a substantial start on site within 2 years of permission.
• Parity Across Central and Outer London: Unlike larger scale developers who will now face higher affordable thresholds in central boroughs, an SME building 20 homes in Westminster (Band A) is subject to the same 20% fast-track rate as an SME building 20 homes in Havering (Band C).
• Commuted Sum Options: To prevent on-site management challenges for small flatted blocks, Policy HN3 permits developers of 10–35 units to pay an equivalent financial contribution (payment-in-lieu) toward off-site affordable housing where on-site delivery is unfeasible.

Strategic Spatial Framework: Viability Bands & Land Release

For larger schemes (36+ units), the draft Plan replaces the former blanket 35% threshold with a more nuanced approach introducing three ‘bands’ with equivalent Affordable Housing Thresholds.

Spatial Viability Bands (Policy HN3) applied to 36+ unit schemes:

• Band A (35%): Applied across high-value central and inner boroughs (and Richmond upon Thames). Drops to 25% if delivering 100% Social Rent or Key Worker Living Rent.
• Band B (25%): Drops to 20% if delivering at least 80% Social Rent.
• Band C (20%): Baseline threshold for 13 outer London boroughs, protecting developer viability in lower-value markets.

Green Belt & Grey Belt Release (Policy G2):

While maintaining a 90% brownfield delivery target, the draft Plan identifies approximately 56,000 homes to be delivered through selective Green Belt and “Grey Belt” release across eight outer boroughs: Enfield, Barnet, Hillingdon, Redbridge, Havering, Barking & Dagenham, Croydon, and Bromley.

Key focus areas include Crews Hill & Chase Park (Enfield), East of Ickenham (Hillingdon), and the Hainault Loop (Redbridge). While sites released from the Green Belt carry a higher 50% affordable housing mandate, they open up critical suburban extension parcels suitable for regional housebuilders.

Summary thoughts

Viability remains a key challenge.  Some commentators remain extremely critical of the viability basis underpinning the affordable housing approach, particularly on Green Belt sites where 50% affordable remains the starting point.

Closer alignment with the expected alterations to National Policy and the resulting streamlining of policy and removing of ‘grey areas’ ought to lead to less uncertainty and faster decision making by Planning Authorities.

While the London Plan is moving toward what might be a more realistic set of Borough targets for the medium term, this does not correspond with actual need calculated via the ‘standard method’ and those Boroughs without up to date Local Plans will face immediate 5 Year Housing Land Shortfalls.  This ought to realise opportunities to bring forward applications on brownfield, infill and even greybelt sites where, subject to addressing other policy requirements, there will be a presumption in favour of approval.

The proposed changes ought to provide greater confidence to the SME industry in being able to actively finance and deliver smaller scale schemes.

Two further suggestions from Planning Insight are:

• Perhaps some more of the <10 unit exemptions should be applied to 10-35 unit schemes to further boost delivery and reduce LPA processing times; and,
• Perhaps the 10 and 35 home thresholds are insufficient to really unlock SME delivery at scale when mid scale projects should be at least up to 50 homes or even 150 units on higher density locations.