Developers left furious as building programme aimed at driving down house prices in Greater London ends

The government’s much-hailed low cost housing programme, the London-Wide Initiative, has been scrapped – a move that will infuriate developers who have signed up to the scheme.

The initiative, established two years ago, was a pilot project aimed at building more affordable homes in Greater London. It was intended to produce 4500 homes over five years, of which 1000 would be affordable. It is now likely that it will be replaced by development agency English Partnerships’ First Time Buyers’ Initiative.

The news means that the three consortiums involved in the programme will not receive any more guaranteed work. They are headed by Countryside, First Base Homes with Stanhope, and the Key London Alliance, which including Willmott Dixon and Barratt.

One senior housing figure said: “The big issue here is about continuity of work and whether the developers’ shortlisted status will transfer into a new procurement route for housing in London.”

The source added that all the firms involved had put a lot of effort into bidding for the work in the hope of securing long-term deals. He said: “That doesn’t look to be the case now and there is likely to be an angry backlash – unless they can get guarantees from EP.”

Although the homes will be built, the main benefit of the initiative – to drive down costs by producing thousands more homes – is now more uncertain. On its website, EP states: “The long-term aim of the initiative is to create a development mechanism capable of delivering more than 15,000 homes for sale.”

David Higgins, EP chief executive, said the programme had only ever been intended as a pilot.

He said: “The Official Journal tender only ever applied to the first 4000 homes and didn’t apply to any further work.”

Higgins added that EP would be happy to work with shortlisted bidders on other programmes such as the First Time Buyers’ Initiative, announced by the ODPM in January this year.

There is likely to be an angry backlash – unless they can get guarantees from EP

Senior housing figure

John Lewis, the EP director who headed up the initiative, said that the London-Wide Initiative would evolve into the First Time Buyers’ Initiative.

He said: “The programme was itself only a pilot. It’s going to be replaced by the First Time Buyers’ Initiative [details of which have yet to be announced].”

However, a source close to the scheme said:

“We have been advised that the schemes at the moment may be the total of what we have. It was always going to be a phased process and the later stages were never guaranteed.”

The source said that EP had a difficult job to balance its own initiatives with those of the government.

The source said: “EP has got a very difficult balancing job because it has to be very flexible.

I suspect that quite a lot of the initiatives that come out of the ODPM come as a surprise to it and when the £60,000 house competition came along they had to move the sites around. The Olympics has also made everyone aware that there are a lot of other issues that have to be dealt with.”