Developers are increasingly turning away from traditional leasehold flats in London and opting for build-to-rent, co-living and student housing schemes as buyer demand weakens, the London Assembly has been told.
Housing experts told a City Hall committee that a combination of soaring property prices, rising service charges and ongoing concerns over building safety has left parts of the capital's leasehold market struggling.
Luke Ward, Barnet Council's director for housing, economy and placemaking, said developers were responding by shifting towards alternative forms of housing that do not rely on individual flat sales.
Speaking to the London Assembly Housing Committee, Mr Ward said housing schemes that would once have been sold as leasehold developments are increasingly being delivered under different ownership models.
"Five or six years ago there would have been lots of leasehold flats," he said. "Now they'd be five or six different tenures."
Developments that previously would have been marketed to owner-occupiers are instead becoming build-to-rent blocks, co-living developments, student accommodation, housing for older people or affordable housing schemes, he added.
The shift comes despite continued demand for homes in the capital.
More than a third of London's housing stock is leasehold, with Londoners more than twice as likely as people elsewhere in England to own a leasehold property. Last year a London Assembly report found households in the capital were paying average service charges of £3,912 a year, prompting calls for tighter regulation.
The Government has pledged to abolish leasehold for new developments, but ministers have warned the transition will take time.
Mr Ward said affordability remained the biggest obstacle for buyers, with London continuing to have the highest house price-to-earnings ratio in the country. He also pointed to "reputational challenges" surrounding leasehold flats, including concerns about cladding remediation and rising service charges.
Campaigners argued the evidence showed a market under severe strain.
Harry Scoffin, founder of campaign group Free Leaseholders, said the committee hearing amounted to an admission that the leasehold flat market had "collapsed".
He claimed growing reliance on build-to-rent developments risked creating more long-term tenants rather than helping Londoners onto the property ladder.
The warning comes as the capital continues to struggle to deliver enough new homes.
Neil Davis, development delivery director at housing association L&Q, told the committee that building costs had "never been higher", citing inflation, higher borrowing costs, supply chain pressures and a shortage of construction workers.
Those pressures have contributed to London's worsening housing shortfall, particularly in the affordable sector.
Under the Mayor's Affordable Homes Programme, City Hall had delivered 14,335 affordable housing starts by March against a reduced target of 17,800.
Meanwhile, new analysis from think tank Centre for Cities warned London could fall further behind other parts of England in tackling housing waiting lists.
The organisation said current government funding plans would result in enough affordable homes being built to meet just 18 per cent of London's priority housing need by 2036, compared with 46 per cent in rural areas.
Its researchers called for a larger share of affordable housing funding to be directed towards the capital, arguing that London's housing pressures remain the most acute in the country.
