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Construction minister Nick Raynsford, speaking recently on the urban white paper, put his finger on a dilemma. The white paper is emphatic that there is no "one size fits all" solution to urban renewal. Yet, the minister's recent decision to turn down all three proposals for new development south of M4 junction 11, which sought to implement Berkshire's approved development plan, until an urban capacity study had been carried out, smacks of a standard approach.

We are now building less housing than we did in the depths of the early 1990s recession – 140,000 dwellings in 1999 compared with 155,000 in 1991 – and emerging regional housing targets for both brownfield and greenfield land are going to deliver, at best, only two-thirds of the housing that is needed. It is hard to see how we are going to fit the quart into the pint pot.

Take what's happening in London. The much-heralded regeneration of east London and the Thames corridor is gathering pace due in no small part to the intense efforts of the housebuilding industry. From Kew to Purfleet, derelict and underused sites continue to be transformed.

This has been driven not only by government policy but also by market pressures. As London reinforces its status as a world city, the demand for residential property continues to grow. There is evidence that this continuing pressure and confidence is not only spreading eastwards down the estuary but also into the hinterlands in boroughs like Greenwich, Lewisham, Tower Hamlets, Barking and Newham, assisted by transport improvements such as the Jubilee Line Extension and the Docklands Light Railway. The attractiveness of this area is clear from the recently announced bid to host the 2012 Olympic Games, centred on east London, a move supported by the mayor of London.

The strain of this growth is beginning to tell. Restrictive government policy on greenfield development and greater public resistance to development outside the capital has led to a shortage of land. Competition for these sites is fierce. It is estimated that London requires about 45,000 new dwellings every year, but regional guidance proposes accommodation for only 23,000 households.

Meanwhile, the capital is eagerly awaiting the mayor's Spatial Development Strategy which looks likely to contain guidance on social housing and tall buildings. The report of the mayor's housing commission recommends that the SDS should set the target that at least half of new housing in London should be affordable. It also recommends that this overall target of 50% should be made up of 35% social, rented homes and 15% of intermediate different forms of cheap housing both to buy and rent.

We are now building less housing than we did in the depths of the early 1990s recession

Tensions are rising. The City of Westminster has recently published its first replacement Unitary Development Plan. It proposes a 25% affordable housing provision. The mayor of London has objected. He wants a clearer indication of the types of affordable housing and an overall target taking into account metropolitan need. This suggests that the policy should help meet capital-wide rather than just local needs.

Although the development industry has come to terms with the need to provide affordable housing on site, the issue in London has become increasingly complicated due to the scarcity of public subsidy and rigid adherence by local authorities to percentages of affordable housing. These matters are finding increasing prominence in a large number of supplementary planning guidance notes issued by the local authorities. The concern is that, by dramatically increasing the burden of provision on developers, sites will not be brought forward for development and the twin objectives of regeneration and social housing provision will not be advanced.

This dilemma is not beyond resolution. A flexible approach to the provision of affordable housing between developers and authorities, which takes account of the difficulties – particularly those of decontamination and land assembly – of bringing forward brownfield sites will do much to meet the demand for affordable housing while enabling profitable developments to be pursued.

Such innovative approaches could involve the provision of "cluster" units (individual rooms with certain shared facilities such as kitchens, often on a relatively short-term let) particularly for key workers, which can help relieve pressure on local authority housing waiting lists. This recent innovation is still being treated with suspicion by some local authorities although such units can often be provided without the need to rely on public subsidies. They can also form an integral part of mixed-use schemes and contribute to meeting metropolitan-wide housing needs in the broadest sense, as sought by the mayor.