London, Oxford and Cambridge suffer steepest housing cost burden
Londoners spend more on rent and housing than anywhere else in the country, according to a new report which highlights the economic cost of the capital’s housing crisis.
The research found that residents of London spend 19 per cent of their outgoings on housing on average, although it noted that many renters and young homeowners will probably face “significantly higher proportional costs”.
Residents of Cambridge and Oxford also spent a major share of their outgoings on housing, making up 18 per cent and 16 per cent respectively. Meanwhile, in Milton Keynes the figure was 12 per cent, and just 11 per cent for those living in Warrington.
The figures were part of the Centre for Cities’ annual cities outlook, a report detailing the economic performance of the UK’s major urban areas.
Although the report noted that the country’s strongest performing cities will always have higher housing costs, it suggested the cost of shelter in London was a drag on living standards.
“As housing is the biggest component of household budgets and an essential spend, variation in housing costs has a big effect on local living standards,” the think tank said.
It argued that Britain’s “restrictive” planning system was preventing housing supply from increasing in line with demand, pushing up prices.
“Higher house prices should signal stronger demand and lead to more housing supply, but in practice this doesn’t happen,” the report said.
“In many places – especially successful cities like London, Oxford and Cambridge – high house prices are not matched by high levels of housing supply, with the planning system acting as a key constraint on building both upwards and outwards.
“The uncertainty and case-by-case nature of the process disconnects local housing supply from demand. This also limits cities’ economic potential, as fewer people can live and work locally, reducing the size of the urban labour market.”
Planning reforms fail to help
The government has attempted to kickstart housebuilding across the country with a swathe of planning reforms, including relaxing constraints on the green belt and the reintroduction of mandatory housing targets.
However, these have failed to significantly increase the pace of housebuilding. London has an annual target of 88,000, but last year just 4,170 homes were started in the capital, according to official figures, down 72 per cent on 2023/24.
Molior, a consultancy firm, estimates that only 4,550 homes a year will complete construction in both 2027 and 2028 due to the rapid fall in housing starts.