Boris Johnson at St Clements. Pic: Susi Luard

Boris Johnson has launched the construction of the UK’s first urban land trust at a site in Tower Hamlets, which aims to sell homes to at half the price of their open market value.

The Mayor of London initiated the construction on Thursday at the site of former St Clement’s psychiatric hospital, near Bow.

The project, which was approved in 2012 and is scheduled to finish in 2017, will see the construction of 253 new homes including 23 that will belong to the community land trust.

Community land trusts offer affordable housing by separating the value of a house from the land on which it stands – estimates are that half of the value of a house in London is its land.

Johnson said: “St Clement’s is part of a major land release the size of 290 football pitches to boost house building.

“This innovative housing scheme has the local community at the heart of it and is delivering permanently low cost homes and creating jobs. I hope this is the first of many such schemes that transforms empty sites and helps ease housing demand.”

The East London Community Land Trust (ELCLT), which owns the land on the St Clement’s site, will determine the cost of the homes by looking at local earnings.

The St Clement’s site, was originally home to Bow Workhouse in the 1850s, and now includes a historic Grade II listed building that is being restored. The site became a psychiatric hospital after the Second World War and operated until 2005.

ELCLT Director, Dave Smith, said: “Every year house prices go up by 15% and wages only by 2%. We are therefore working on a scheme that links housing to wages. The market rate is distorted and we have to start with local earnings.”

ELCLT will manage some of the properties and will work together with Linden Homes, which will build them, and Peabody housing trust, which will manage 58 social rented properties.

Smith added: “Our homes will be affordable not just in the beginning but also for next generations.”