Mayor of London Sadiq Khan has launched a major new housing initiative aimed at easing the cost-of-living pressures facing thousands of key workers across the capital.

The new programme will deliver at least 6,000 rent-controlled homes by 2030, reserved for essential workers such as teachers, nurses, carers and bus drivers. Branded as ‘Key Worker Living Rent’, the homes will be let at rents linked directly to income, rather than the open market, offering long-term affordability in one of the world’s most expensive cities.

Under the scheme, rents will be set at around 40 per cent of average net household income for key workers, meaning significant savings compared with private renting. City Hall estimates that a key worker renting a two-bedroom home could save around £7,000 a year, while those in one-bedroom properties could save close to £4,500 annually.

The Mayor said the initiative delivers on a key 2024 manifesto pledge and forms part of a wider push to tackle London’s housing crisis, which has increasingly priced out people who keep the city running.

The announcement builds on what City Hall says is a strong record on housebuilding. More council homes have been started in London under Sadiq Khan than at any point since the 1970s, and before the pandemic the capital saw its highest rate of overall home completions since the 1930s. Since 2018, more than 25,000 council homes have been built or are under construction with support from City Hall, while London is currently delivering around 10,000 more homes a year than under the previous mayoralty.

The Key Worker Living Rent model is designed for people who earn too much to qualify for social housing but struggle to compete in the private rental market. Key workers make up roughly a third of London’s workforce, spanning both public and private sector roles, and many are at the early stages of their careers.

Unlike shared ownership schemes, tenants will not be expected to buy a stake in their home either initially or later on. Rent setting and increases will be simpler and more transparent, a move the Mayor believes will appeal to both tenants and developers while providing stability for those who want to rent long term.

The programme will also include homes designed for sharers, offering a more realistic option for single workers who may not be able to afford a home alone even at discounted rents.

To make the plan a reality, Sadiq Khan is calling on housing associations, local councils, private developers and investors to partner with City Hall and bring forward schemes. Funding will be available through the Mayor’s ‘Affordable Homes Programme’, backed by a record £11.7 billion of government investment over the next decade – the largest and longest affordable housing settlement London has ever received.

The Mayor said the investment is critical to ensuring the capital can continue to attract and retain the workers it depends on, adding that affordable housing is not just a social issue but an economic necessity for London’s future.

The Mayor of London, Sadiq Khan, said: “Key workers, including teachers, nurses and bus drivers, play a critical role in keeping our city moving, working around the clock to deliver vital public services for millions of Londoners. It is only right that these hardworking Londoners can afford to live in a decent, safe home in the city they are serving.

“That’s why I’m proud to launch my innovative ‘Key Worker Living Rent’ scheme, which will help NHS staff, police, firefighters and others into thousands of affordable homes for long-term rent, saving potentially thousands of pounds each year.

“I will continue to work closely with Government and partners to do everything I can to accelerate the delivery of affordable homes, as we build a better and fairer London for everyone.”

Haringey Council Leader, Cllr Peray Ahmet, said: “We welcome the announcement from the Mayor of London to deliver thousands of rent-controlled affordable homes for key workers. This is a major step forward in the mission to build genuinely affordable housing in Haringey and London.

“Our nurses, carers, teachers, council workers, firefighters, police officers and other key workers are the backbone of our community.

“We are building thousands of council homes in Haringey – 1,000 already and at least 3,000 by 2031 – which provide council rents to those in the greatest need.

“We want to build genuinely affordable homes for key workers in Haringey too, with rents that are tied to real wages. The Mayor’s plan for Key Worker Living Rent homes will be essential for us to drive this forward.”

Cllr Helen Dennis, Cabinet Member for New Homes and Sustainable Development, at Southwark Council said: “Keyworkers are the backbone of any community and ensuring that their work is recognised and that local public services are well supported is absolutely vital. That is why Southwark is 100% committed to the Mayor’s pledge on affordable, rent-capped homes for keyworkers, and is at the forefront of delivery, with our pilot plans for over 150 Keyworker Homes in Bermondsey making excellent progress.

“Creating affordable housing in London at the moment is certainly a challenge but we are dedicated to meeting this challenge head-on with support from the Mayor of London.”

Oliver Campbell, Managing Director, Bouygues UK, said: “Providing keyworkers with affordable homes is a vital step in supporting those who are indispensable to our communities. Bouygues Development, the property development arm of Bouygues UK, Funding Affordable Homes Housing Association, and the London Borough of Southwark are working in partnership on an anticipated grant funding bid to the GLA to help provide key worker accommodation in the Borough. Bouygues UK is proud to have submitted a planning application for a pilot scheme of 152 new key worker homes in Bermondsey. All the partners fully support the GLA’s objective to provide more affordable homes that will keep key workers in our city, and afford them a better quality of life close to where they work.”

Olivia Harris, Chief Executive Dolphin Living, said: “Key workers are the backbone of London yet too many face rising housing costs that push them further from their communities and into long commutes. Providing genuinely affordable, high quality homes close to where people work is essential to retaining this workforce, protecting the social fabric of our neighbourhoods and safeguarding the capital’s long-term competitiveness. Dolphin Living has long championed the delivery of affordable housing for critical workers in the Capital and we welcome the Mayor's announcement today.”

Ben Twomey, Chief Executive of Generation Rent, said: “Soaring rents have made London the most expensive place to live in Europe. Key workers are the backbone of our communities. They care for us when we are sick, build the homes we live in, keep essential services running and educate our children. Yet many are being priced out of the very city they serve.

“It’s right that the Mayor of London is exploring new ways to protect key workers from sky high rents and to provide more stable, genuinely affordable homes. Controlling the rents of key workers is a positive first step towards a fairer approach for all of London’s renters.”