London mayor Boris Johnson has set out plans for the regeneration of the Nine Elms area between Vauxhall and Battersea Power Station, which is to be transformed into a major new district.

A new planning framework for the development of the area has proposed the creation of pedestrian and cycle networks, a new park for residents – including allotments linked to the New Covent Garden food economy – and 16,000 new homes. Nearly 200 hectares (494.2 acres) of unused and derelict land is poised to undergo redevelopment as part of the mayor's plans, which will also allow the construction of tall buildings on the site provided the setting of the Palace of Westminster is not compromised.

However, the mayor's framework accepts that the proposed relocation of the US Embassy to Nine Elms and the redevelopment of Battersea Power Station and New Covent Garden Market will be crucial to the plans. Johnson said: "The regeneration of Vauxhall and Nine Elms now is hugely significant in allowing us to support the economic growth of the whole of the capital, and with the other major regeneration projects like the Olympic Park and Kings Cross taking shape, the prosperity and the role of our great city in the world is assured.

"More than that, this neglected area, which for years has failed to fulfil its potential and is disconnected from surrounding neighbourhoods, will become a thriving new quarter for living, leisure and business and an easily accessible destination for Londoners and visitors." It is expected that the developers will be offered a 20 per cent discount on the Crossrail levy in order to help fund the extension of the Northern Line to the Nine Elms area.

Treasury Holdings UK - the developer behind the proposed regeneration of Battersea Power Station – has welcomed the plans to exempt firms from the Crossrail levy to pay for the Northern Line extension. Rob Tincknell, managing director of Treasury Holdings UK, said: "The mayor has given such a strong affirmation of the importance of the Nine Elms regeneration to the future of London.

"The Northern Line extension is a vital public transport link that will open up the area, delivering new shops, offices and homes."