London First, whose members account for 26 per cent of the capital's gross domestic product, said the government's proposal will allow Ken Livingstone to intervene in too many applications, clogging up the planning system.
Instead, it proposes allowing the mayor to take over applications after a borough has resolved to grant or refuse permission. Livingstone would have to show why the decision would be contrary to strategic planning and the London Plan before the borough would lose its lead role in section 106 negotiations.
London First planning director Judith Salomon said: "The original proposal will lead to the mayor taking over too many cases, which will drain resources from boroughs and will be more likely to face legal challenge. Our model leaves it to when the decision is made, with all the information and understanding of the borough. This is less adversarial and less likely to be challenged."
The move comes as a poll of Londoners, commissioned by the mayor's office, revealed that 50 per cent back the new powers for Livingstone while 60 per cent of respondents said they would back him intervening where a council turns down an application that would provide 50 per cent affordable housing.
Meanwhile, the London Assembly has demanded that any new planning powers for the mayor are used accountably. Deputy chair Sally Hamwee said: "The government must ensure that the definition of strategic applications is sufficiently robust to withstand any mission creep by a mayor attempting expansion of planning responsibilities into areas controlled by boroughs."