Store staff to live over the shop to beat crisis

Boots and Tesco's could build flats for their workers in London in a bid to hire and retain staff who cannot afford to buy into the capital's housing stock.

The idea is one of a number of radical housing measures planned by London Mayor Ken Livingstone to cope with an anticipated increase in the population over the next 20 years. The London Plan will encourage leading retailers to build affordable flats above stores and on petrol station sites for their own staff.

Tesco's has estimated, in a survey for the Mayor, that London's shopkeepers could provide an extra 10,000 homes on retail sites in the capital. Private builders will be ordered to ensure that 50 per cent of any housing is "affordable", in return for being allowed to build luxury homes in upmarket areas. If they fail, they could be forced to pay millions to the Greater London Authority to fund social housing.

To pay for the housing expansion, the Mayor will demand an extra £500m-£600m a year from the Treasury. Mr Livingstone estimates that 21,000 homes a year are needed to cope with the demand, but an extra 10,000 a year must be added to clear a backlog of 110,000 people living in substandard accommodation.

The London Plan – to be published by the Mayor next month – will draw a radically different picture of the capital in 2016. It will show a population of 8.1 million, compared to 7.4 million now.

The biggest expansion of housing is planned for the riverside area in the east of the capital, which is already being described as the "Chiswick in the east". The equivalent of a new town may also be built on the north bank of the Thames. It would be linked by extensions to the Docklands Light Railway and the Hammersmith and City line. In addition, more housing could be built along the south side of the Thames from Greenwich to Thamesmead.

There are plans for three new river crossings across the Thames, including a new road bridge from Barking to Thamesmead. At the same time, the West End would get a facelift to protect it from financial collapse as a result of competition from out-of-town rivals such as Bluewater.

High-rise offices would be allowed in the City, at Canary Wharf and at railway stations such as London Bridge, where the Plaza Tower plan is awaiting approval. The Mayor's plan for more skyscrapers hinges on a planning appeal for the Heron Tower in the City to be decided in weeks .

* Nicky Gavron, the Mayor's deputy, called for the Prime Minister to readmit Mr Livingstone to the Labour party. She said Labour headquarters should drop attempts to find another candidate.

"A Labour Mayor would be hard-pressed to deliver the main Labour agenda more than Ken," she said. "I have watched ministers work constructively with him; now it's time for the party to look hard at forging a new relationship. Remarks by Labour chairman Charles Clarke that "splits on the left have to be avoided" suggest that Mr Livingstone should be the official Labour candidate for Mayor in 2004, she said.