Housing supply indicators expose extent of capital’s housing crisis as investment in new housing sites nosedive, undermining Government’s housing ambition
A new report from the Home Builders Federation reveals that housing delivery in London is in a major crisis and warns that home building targets will be unachievable without intervention to improve the deliverability of homes in the capital. A lack of support for buyers; excessive bureaucracy; unrealistic affordable housing demands and huge delays getting applications approved, not least with the Building Safety Regulator, are all strangling attempts to deliver desperately-needed new homes.
With the capital expected to deliver 440,000 of the Government’s 1.5 million new homes target by 2030, housing delivery indicators continue to head in the wrong direction with both housing completions and planning permission approvals falling year-on-year, putting this at significant risk.
The Mind the Gap report highlights that only 30,000 homes were completed in London in the year to June 2025, as measured by the number of new properties issued with Energy Performance Certificates, down 12% from the previous year and significantly below the 2019/20 peak. Planning permissions have also taken a nosedive, dropping to their lowest level since records began in 2006, with just 966 projects approved in the 12 months to June 2025. Adding to the crisis, the overall share of national housing delivery in London has also continued to shrink from 20% a decade ago to just 15% today.
Meanwhile the number of new home building sites starting has plummeted by 38%. With the Government’s Standard Method setting a requirement for London to deliver 88,000 homes a year, output would need to more than double, increasing by 175%, to meet that goal, casting serious doubt on the city’s ability to meet future needs and make the required contribution to Government’s 1.5 million homes target.
The housing affordability crisis is affecting the entire country, with a lack of affordable mortgage lending available and it being the first time in decades that there is no Government support in place for buyers. But nowhere is it more acute than in the capital. Londoners face the highest barriers to home ownership in the country, and a first-time buyer would need to save 50% 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. The house price-to-earnings ratio stands at 11 in London, compared to 7.7 nationally, and the average cost of a first home is now 17 times the net annual salary of a 22– to 29-year-old.
This crisis is pushing more Londoners out of home ownership and into the private rented sector. Only 15% of first-time buyers purchased a home in the capital in 2023/24, a sharp drop from 25% 10 years ago. At the same time, the proportion of households renting privately has more than doubled over the past two decades, while those with a mortgage have fallen from 39% to just 25%. This suppressed buyer demand for new homes is undermining industry confidence and its ability to invest in new sites and get projects started.
The report identifies several further factors behind the capital’s declining housing delivery. Lengthy planning delays remain a key barrier, exacerbated by the complexity of the current London Plan, which includes 88 separate residential policies on top of local and national rules. This makes the process more costly and time-consuming, with many developments rendered unviable.
The Building Safety Regulator is also having a disproportionate impact in London, with the capital’s reliance on higher-rise development. As of mid-2025, almost 10,000 homes have been stuck in the Gateway Two process for more than six months. When combined with other policy costs, such as dual staircase requirements, carbon offset charges, and per-square-metre levies under the Building Safety and Mayoral Construction Infrastructure Levy, the financial burden on developers, particularly those building apartment schemes, has become unsustainable.
London’s 35% Affordable Housing requirement is another major constraint. Few schemes can meet the threshold, as the lack of Registered Providers willing to take on Section 106 units compounds the problem. As a result, most developments are forced into viability negotiations, delaying progress.
The lack of dedicated support to address first-time buyer affordability constraints has further weakened demand. With only the top 30% of earners now able to afford to buy, developer confidence has been shaken. A tailored equity loan scheme could, the report argues, unlock 17,500 additional homes and help over 90,000 people into homeownership in the next five years.
Brownfield development, essential to London’s pipeline, is also under threat due to high remediation costs and new policy burdens such as Biodiversity Net Gain and Landfill Tax changes.
The report urges the Mayor of London to accelerate the pledge to assess green belt land for development review and lower the affordable housing fast-track threshold to 25% to unlock stalled developments. It also calls for a streamlined and more practical London Plan, with local energy policies brought into line with national regulations, and exemptions introduced for smaller schemes to reduce unnecessary burdens.
Additionally, HBF calls for Government to help restore market confidence by reintroducing a targeted home ownership scheme and cancelling the introduction of the Building Safety Levy, which Will further impact builders’ ability to delivery new homes, and Affordable Housing in particular. Addressing delays in the Section 106 market and resolving electrical capacity constraints are also identified as critical to increasing housing delivery across the capital.
Neil Jefferson, Chief Executive of the Home Builders Federation, said: “The findings of Mind the Gap should be a major wake-up call for Government and the Mayor of London.
“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.”