Government warned that London housebuilding is on the edge of collapse
Housing delivery in the capital is in a major crisis and urgent measures must be taken to prevent collapse, according to a new report.
Lack of buyer support, as well as excessive bureaucracy and significant planning delays, are “strangling” attempted to deliver desperately-needed new homes, a Home Builders Federation report has found.
Neil Jefferson, Chief Executive of HBF, said that the report should be a “major wake up call” for the government.
“The capital needs an urgent overhaul of housing policy if it is to support the housing needs of Londoners,” he said.
Planning approvals in the capital have fallen two per cent year on year, and only four boroughs have met or exceeded their housing targets laid out in the 2021 London Plan, which aimed for 52,000 homes.
“London Plan policies combined with additional government taxes on new homes, onerous processes to get higher-rise schemes approved and challenging market conditions have effectively made London a no-go zone for housing investment,” Jefferson said.
The Building Safety Regulator was meant to make houses safer post-Grenfell, but developers say it has caused housing sites to becomes ‘stuck’ in the system, with proposals meant to take weeks to pass check taking over a year.
As of mid-2025, almost 10,000 homes have been stuck in the Gateway Two process for more than six months.
A community Infrastructure Levy, Section 106 agreements and planning fees, plus still-high interest rates, have also pushed many developments past the point of viability, and Labour’s changes to the planning system are not likely to solve these issues in the capital – particularly when you take the land prices into account.
London is “by some accounts” the most expensive city in the world to build in, according to the GLA.
Affordability worsens in London
Private renters on a median household income in the capital paid 41.6 per cent of their earnings on rent last year, up from 38 per cent in 2023 and the highest figure since 2021.
The cost of London’s housing pushed England’s affordability ratio above the 30 per cent affordability threshold in 2024, despite most English regions being below the figure, according to the Office for National Statistics.
Londoners face the highest barriers to home ownership in the country, and a first-time buyer would need to save 50 per cent of their discretionary income for more than 13 years to afford a deposit, with average deposits now amounting to nearly seven times annual income after bills.
“Intervention is desperately needed to support first-time buyers, with Londoners facing the biggest barriers to home ownership in the country,” Jefferson said.
“If Government is to stand a chance at making its aspirational 1.5m homes target a reality, ministers must prioritise action to reverse the alarming decline in housing delivery across the capital.”
HBF has called for Government to help restore market confidence by reintroducing a targeted home ownership scheme, as well as addressing delays in the Section 106 market and resolving electrical capacity constraints.