Boris Johnson, with developers Mace, has confirmed work is to begin on one of London’s largest long-term rental developments in Elephant and Castle that will build hundreds of homes and create new jobs.

Over the last decade the number of households privately renting has increased to around two million Londoners, but the capital has few purpose built rented schemes in comparison to North America and Europe.

Harnessing the benefits of long term institutional investment, work in Elephant and Castle is set to begin in January with 457 high quality new homes. This includes 278 homes for private rent with a fantastic range of amenities, due to be completed by 2018.

The Mayor has set a number of policies in his housing strategy to encourage institutional investors, such as pension funds and insurance companies, in the long-term rented market, to support longer term leases and more stability for tenants as well as top quality, well designed, new developments.

The Newington Butts site, in London’s zone 1, was among 670 hectares of surplus public land taken on by the Mayor in 2012, more than 85 per cent of which has now been moved into the development pipeline.

The new development will include 179 low cost homes for rent and shared ownership, being delivered by social housing provider Peabody.

The Mayor of London, Boris Johnson, said: “With London’s unprecedented population growth, housing supply and affordability is now our biggest challenge and we need to double the number of homes being built.

“This requires a radical rethink and it is time for new approaches like this, which not only help build more homes in the heart of the city, but also improve choice and quality for Londoners.

“Capitalising on London’s undeveloped public land I want to entice more institutional investors to come forward and invest in quality homes for Londoners, boosting the economy and creating thousands of new jobs.”

Chief Operating Officer of Mace Investment, David Grover, said: “I am delighted to be partnering with Ryan Prince and his team at Realstar, who have a wealth of experience delivering PRS housing that can be applied here and there is a real synergy in our vision for the development.

“Since Mace was selected as the GLA’s partner for Newington Butts, we have been working through the options for this complex project to deliver much needed housing for the capital.

“With our other housing partner, Peabody, we are now able to move forward and deliver an iconic piece of real estate, which will be a strong addition to the London skyline, reinforcing the capital’s position as a major city in the world to live in and work.”

The Mayor and Southwark Council are currently overseeing a £3 billion transformation of the Elephant and Castle area, the southern gateway to central London, which will see around 5,000 new homes delivered, 1650 of them affordable.

The plans, including an overhaul of the transport interchange and the creation of more open spaces, will also create around 5,000 new jobs.