Deal to build 50,000 cut-price homes

Thousands of low-paid Londoners are to be granted the dream of owning their first home.

It could mean a two-bedroom flat being available for about £120,000 - 50 per cent cheaper than a typical London home.

Mayor Ken Livingstone says he has struck a deal with Deputy Prime Minister John Prescott to "transform the nature of housebuilding in this city" and provide "homes that Londoners can afford to buy".

Full details of the initiative will be unveiled by Mr Prescott at a conference next month. But the Standard has learned that 15 sites are already earmarked for rapid development. These include vast areas of land purchased by the government agency English Partnerships, plus sites owned by the London Development Agency and Transport for London - both controlled by the Mayor.

They include land at East India Docks and Gallions Reach in the East End, plus Catford, Newington Green and even a car park near Arnos Grove Tube station.

The properties will be sold to key workers and other lowpaid groups alongside other homes at market value. They will be built by private developers but the "freehold" in the land will remain in the public sector. This prevents sites being bought cheaply and then sold off at a premium. The homes can also be retained for future generations.

Mr Livingstone used a speech at Mansion House last night to hint at the breakthrough he hoped to make in tackling London's housing crisis.

Housebuilding is at its highest level since 1982, but the most recent figures show only slightly more than two-thirds of the Mayor's target of 30,000 homes a year is being met.

His advisers estimate 25,000 to 50,000 homes could be built under the deal which was struck last month after Mr Prescott, previously an adversary of Mr Livingstone, invited the Mayor to dine with him following his readmission into the Labour party. Mr Livingstone said of the scheme: "It's going to transform the volume of houses we produce and the quality of that housing, and give Londoners who have been left behind the chance to move into the property market."

Prospective homeowners will only be able to purchase the leasehold on new properties, allowing the public sector to retain the freehold, effectively becoming a "landlord" and claiming a small amount of ground rent each year.

The property would revert to the public sector when the lease runs out after 99 or 125 years. The aim is to do cutprice deals with developers in return for construction risks being borne by public bodies.