Budget 2026: What Chancellor must do to tackle London's housing crisis

Tackling London’s housing crisis is set to be a major test for the Chancellor in this week’s Budget . Soaring rents, a shortage of affordable homes and a lack of building is putting increasing strain on the capital. Many boroughs are also now being forced to the brink of bankruptcy by the cost of providing temporary accommodation . London leaders are urging John Healey to unlock housebuilding, boost affordable housing provision and give renters and first-time buyers a fairer deal.

Council Homes Lord Sadiq Khan with Andy Burnham PA Archive The cost of housing homeless families in temporary accommodation is putting extreme pressure on town hall coffers, with boroughs now spending £5.5 million a day on the issue, the cross-party London Councils has said. Boroughs have called for further increases to grant funding, building on the investment previously announced, to help create over 50,000 potential new council homes.

Chair of London Councils, Cllr Stephen Cowan, said the Government’s devolution agenda offered “exciting opportunities for the capital” but unless there was new funding for housing the growing gap in town hall budgets threatens to destabilise delivery. “Strengthening London boroughs by devolving new fiscal resources would put us in a much stronger position to tackle London’s challenges, grow the economy, and maximise London’s contribution to the public coffers,” he said.

“The benefits would be felt not only by Londoners but by communities around the country. “Boroughs have a vital role to play, but are too often held back by enormous budget pressures. “As we plan how best to invest in local services, to build housing, and to grow our economies, a worsening funding gap looms large over everything we do. “For too long, the funding available to us has failed to keep pace with skyrocketing costs and demand for services.

“Everyone knows the local government finance system is broken. The upcoming Budget is an opportunity to help stabilise town hall finances, give boroughs more fiscal tools, and support the local delivery we all want to see.” Homelessness Westminister has the highest number of homeless people dying in London AFP/Getty The Mayor of London has said he has “three big asks” of the Chancellor, including additional devolution powers to turbocharge building and more support to help the homeless.

Lord Sadiq Khan met with the Prime Minister on Thursday to lay out his demands for the Budget and among them was more support for housing in the city. He told the Standard: “On housing I’m hoping for some detail in relation to how we are going to reduce rough sleeping. “I’m hoping we have next week details of more investment by this Christmas. “We’ve got ideas of how we can invest that [money]. “We want to change the rules around verification and bedding down.

“We do a really good job once somebody’s sleeping rough on the streets, we have taken 20,000 people off the streets, wouldn’t it be great if we stopped that getting on the streets in the first place.” Social Rents Campaigners as they take part in a protest organised by the London Renters Union in Westminster AFP/Getty London’s largest landlords have called for 25% of the capital’s £5 billion stamp duty revenue to tackle the housing crisis.

The proposal, worth around £1.3 billion-a-year, would create a dedicated fund for permanent social housing and homelessness prevention. The G15 group of London’s largest landlords said if the city had been allowed to retain 25% of the stamp duty generated over the last decade then about £11 billion extra would have been available to invest in building. Ian McDermott, chair of the G15 and chief executive of Peabody, said: “London’s housing crisis is increasingly an economic problem as well as a social one.

“If people who work in the capital can’t afford to live here, that affects employers, public services and London’s ability to support growth across the country. “The Budget is an opportunity to give London more of the tools it needs. “That includes greater control over housing investment and allowing the capital to reinvest some of the revenues its housing market generates in permanent homes, rather than continuing to spend billions managing homelessness.”

The Chancellor is reportedly set to make the Government's revived Help to Buy scheme more generous PA Archive First-Time Buyers The Chancellor is reportedly set to make the Government's revived Help to Buy scheme more generous. Mr Healey was expected to exclude households earning more than £90,000 outside the capital and £110,000 in the city from the new Your First Home scheme. It offers first-time buyers a 20% equity loan to help them buy a new-build home, with an initial interest-free payment and a minimum deposit requirement of 2.5%.

However, the Times reported that the Chancellor was concerned this would exclude many modest earners and has decided to instead set the cap at £110,000 outside London and £140,000 in the capital.