ºÃÉ«ÏÈÉúTV

Ever since Ken Livingstone declared that he wanted to see housing developments in the capital contain at least 50% social housing, housebuilders have been nervous. "He's just shooting from the hip," say opponents. But Ken is serious, and if he gets his way, it would mean the end of fortresses of affluence like Lord Rogers' Montevetro building in Battersea, west London.

His declaration has a simple premise: demand must be satisfied by supply. Livingstone sees London's housing stock as central to the city's viability. Without a sufficient supply of affordable housing, he argues, more and more firms will decide that they cannot set up in a city where their staff cannot live. In their place will be increasing numbers of the very wealthy and the very poor.

"Despite the very flawed decision to deny the mayor housing powers, I am determined to make an impact on London's need for affordable homes," he told a gathering of London housing associations last week.

Although the mayor cannot directly legislate on housing, he can ensure that housing planning becomes part of the Greater London Authority's Spatial Development Strategy, which in turn is to be made part of the London boroughs' local plans.

Although the strategy is not due until next summer, Livingstone can make life extremely difficult for developers in the meantime. He has the right to veto any residential scheme that contains more than 500 units or covers more than 10 ha of land, and he has made it clear that developments without enough social housing will not get past him.

The much-heralded Wimpey/St George joint venture behind the Project Vauxhall scheme, a £400m refurbishment of two housing estates in Lambeth, south London, was criticised for reducing the number of social units from 911 to 619 and introducing 2463 private units. This may have weighed with tenants who later rejected the scheme. Sources with the scheme later admitted that further negotiation with the mayor was going to be necessary if the project was ever going to get off the ground.

I am determined to make an impact on London’s need for affordable homes

Ken Livingstone

Ironically enough, St George's director of regeneration, Charmaine Young, is the only developer on the Housing Commission, a panel of housing experts appointed by the mayor to address London's housing issues.

The commission has until 31 October to tackle such thorny issues as defining who are key workers (those without whom the capital cannot function, such as teachers and hospital porters), how much housing should be provided for them, and who is going to pay for it.

It is the issue of payment that may prove to be the stumbling block. Although Livingstone has called for £30m of central government cash to fund a starter home initiative for key workers, developers are already counting the cost of providing social housing and other section 106 (planning gain) add-ons. They are horrified at the thought of providing more.

"Housebuilders are doing a good job. We cannot be expected to fund everything," says Tony Pidgley, chairman of Berkeley Group. Speaking to ºÃÉ«ÏÈÉúTV last week, Pidgley said Livingstone's ruling would force housebuilders to abandon the London market.

Housebuilders are also wondering what the precise rules will be. For example, must the affordable and the affluent housing be on the same site, or could they be on different sides of London? But perhaps it is not surprising the strategy is lacking in detail – Livingstone admits that he has yet to hold a formal discussion with any major developer.

We all have to accept that there has to be a range of types of households

Alan Cherry, Countryside Properties

Providing mixed tenure schemes is hardly a new problem. The current recommendation, in planning guidance PPG3, is that schemes contain 25% social units. The social housing providers in such arrangements are usually housing associations, which provide units for rent or shared ownership. But the associations complain that their housing needs are often given the lowest priority in the planning of new housing.

"Our practical experience of section 106 is that we are often the end of the chain," says Richard McCarthy, chief executive of housing association the Peabody Trust.

In areas with high land prices, housing associations often do not have the financial backing to satisfy a developer that they will be able to pay their way. McCarthy suggests that the solution lies in initiatives to evolve "creative" partnerships with the aim of allowing affordable and well-designed housing that will please the association, and still generate enough revenue to make a profit for the developer.

Can it be done?

He also suggests that housing associations be given more help to buy land, rather than waiting, begging bowl in hand, for the local authority or developer to provide it.

Housebuilders are doing a good job. We cannot be expected to fund everything

Tony Pidgley, Berkeley Group

Martin John, regeneration manger at Newbury-based Sovereign Housing Association, agrees that housing associations are often too dependent on financial partners, a situation that is increasingly apparent country-wide.

"Because we can't provide the full market value, we are still often dependent on local authorities to get us the land. But when they have to work in partnership with a housing association because the authority has stipulated it, housebuilders often take the approach of using the association to guarantee cash flow. They have an association identified before building and then throw those houses up first," he says.

Housing associations can get hold of the cash by way of section 106 agreements, but that does not remove the main stumbling block to mixed tenure developments: social housing's poor image. "Affordable housing hits house prices," says Ivan Ball, technical director at housebuilder Linden Homes. "Most purchasers are snobs; they don't want to put money into property that is next to what they perceive to be council housing. You can't blame developers for wanting to separate the two."

Ball says discrimination against social housing can be designed in or out of a scheme. He cites a Linden scheme on the former Caterham Barracks, Surrey, where the 27.5% social housing component will be owned by housing association the Guinness Trust.

"The scheme is unusual in that it only has one access route. We decided that creating a ghetto of the social housing would affect their value enormously, so we pepperpotted them. But this might not have happened without just the one entrance. We like to think of this site as a model of good practice, as we could have walled off the social units. It's not unusual to see schemes with social housing that have two entrances."

Affordable housing hits house prices. Most purchasers are snobs

Ivan Ball, Linden Homes

But Ball adds that working with housing associations can create its own problems for developers.

"It is easier to work with Guinness than a lot of other trusts as they are less restrictive in the type of external materials they will use on their houses. It is no good using an association that insists on wooden doors when you want to use metal ones, as the difference between the rented and privately owned homes will be obvious."

Nick Stonley, managing director of Alfred McAlpine Homes London, adds that developers are often unduly criticised for building affordable units that are smaller than their standard homes.

"Housing associations cannot afford four-bed detached houses. They want four-bed terraces instead and they all have their own room-size specifications," he says. Stonley also points out that not all councils, in London or elsewhere, actually want a provision of social housing in every development.

But it is this kind of approach that Ken Livingstone is determined to stamp out. And it seems housebuilders and local authorities alike will have little choice but to face up to the issue. As Alan Cherry, chairman of Countryside Properties, puts it, it is time for the industry to "face up to reality".