Industry report signals urgent need for government intervention
London’s housing delivery is facing a severe crisis, with homebuilding targets now out of reach unless urgent steps are taken to improve the delivery of new homes.
A shortage of buyer support, complex bureaucracy, high affordable housing requirements, and significant delays in planning approvals—particularly involving the Building Safety Regulator—are all hindering efforts to provide much-needed housing in the capital, according to the Home Builders Federation (HBF).
The trade body’s report shows that while the capital is expected to provide 440,000 of the government’s planned 1.5 million new homes by 2030, both housing completions and planning permissions in the city have dropped sharply. In the year to June 2025, only 30,000 homes were completed in the capital, representing a 12% fall from the previous year and well below previous peaks. Planning approvals have also reached their lowest point since 2006, with just 966 projects given the green light. The number of new housing sites commencing construction has plummeted by 38%.
The HBF report warns that these trends put London’s contribution to national housing targets at risk. To meet the government’s Standard Method requirement of 88,000 homes annually, output would need to more than double, an increase of 175%. The HBF states that, at present, such a turnaround appears highly unlikely.
Affordability pressures are compounding the crisis. Londoners face the highest barriers to home ownership in the UK, with average deposits now nearly seven times annual income after bills. The house price-to-earnings ratio stands at 11 in the capital, compared to 7.7 nationally. First-time buyers in London must save half their discretionary income for more than 13 years to afford a deposit. As a result, the proportion of first-time buyers in the capital has dropped to 15%, down from 25% a decade ago, while the share of households renting privately has more than doubled.
The report identifies several factors behind the downturn. Lengthy planning delays, the complexity of the London Plan, and additional policy costs such as dual staircase requirements and the Building Safety and Mayoral Construction Infrastructure Levy have all increased financial pressure on developers. The Building Safety Regulator’s processes have also led to significant delays, with nearly 10,000 homes held up for over six months. London’s 35% affordable housing requirement is described as a further obstacle, with few developments able to meet the threshold and many forced into protracted viability negotiations.
The lack of government support for first-time buyers is also cited as a key issue, with only the highest earners now able to access home ownership. The HBF argues that a targeted equity loan scheme could unlock thousands of additional homes and help more Londoners onto the property ladder.
Brownfield development is under threat as well, with high remediation costs and new policy burdens such as Biodiversity Net Gain and changes to Landfill Tax making projects less viable.
A collapse in London housebuilding would reduce the supply of new homes, intensifying competition among buyers and pushing up prices. This could limit mortgage lending opportunities, especially for first-time buyers, and increase reliance on the private rental sector. Lenders may face reduced business volumes and heightened risk as affordability worsens, while brokers could see fewer new purchase applications and greater demand for remortgages.
The HBF is calling for the Mayor of London to accelerate the review of green belt land for development and reduce the affordable housing fast-track threshold to 25%. The report also urges a streamlined London Plan, alignment of local energy policies with national standards, and exemptions for smaller schemes.
The national government is urged to restore market confidence by reintroducing a home ownership scheme and cancelling the proposed Building Safety Levy, which the HBF warns would further undermine new housing delivery.
“The findings of Mind the Gap should be a major wake-up call for government and the Mayor of London,” said Neil Jefferson, chief executive of the Home Builders Federation. “The capital needs an urgent overhaul of housing policy if it is to support the housing needs of Londoners.
“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. Intervention is desperately needed to support first-time buyers, with Londoners facing the biggest barriers to home ownership in the country.
“If government is to stand a chance at making its aspirational 1.5 million homes target a reality, ministers must prioritise action to reverse the alarming decline in housing delivery across the capital.”
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