Ten big reasons why not enough homes are being built in London

After last year’s general election, with the help of top drawer experts, I wrote about why no work had started on building the 300,000 homes across Greater London for which planning consents had been given.

Close to one year later, construction and development are still deeper in the doldrums and the same passage of time has seen the government set the capital the target of getting new homes built at a rate of 88,000 a year. It forms a large part of it five-year target of 1.5 million homes nationally and is a gigantic task. If anyone in the in the capital thinks it can be achieved, I have yet to encounter them.

Next week, the government will announce its long-awaited spending review, sometimes called the comprehensive spending review, because it sets the budgets for all departments and does so for a few years to come. It will cover both the funding of public services and investment in everything from energy, to research, to defence, to transport and, yes, to housing.

It therefore seems a good moment to bring together in one place ten of the biggest reasons why nothing like enough homes have been built in London lately, and consider what must be done about it. Other reasons could be added. Some of them overlap. But I think, taken together, they give a pretty good idea of why the city isn’t doing nearly as well as it needs to – and some clues about how that might change.

One: Not Enough Government Money

This might seem obvious. It might also seem daft. Obvious, because the supply of “affordable” homes of every kind, from social rent to shared ownership, depends greatly on the Mayor getting money from the government’s Affordable Homes Programme (AHP) to allocate to housing associations and councils. Daft, because the current programme has fallen far off the pace. But there are reasons for that failure that aren’t confined to London. And none of them mean more money wouldn’t help.

Speaking to On London in July, former Southwark Council leader and London Councils chair Peter John said some of those many dormant schemes could be awakened with more public funding help. The other week, National Housing Federation chief executive Kate Henderson said: “To build the social and affordable homes the country needs and help deliver the government’s ambitious targets it is vital the upcoming Spending Review includes a significant boost in funding for social rented homes.” Eighteen months ago, think tank Centre for London called for a big boost to AHP to fund 90,000 social rent homes a year in England, of which 30,000 should be for the capital, where need is so acute.

It’s clear that Chancellor Reeves and Deputy Prime Minister Rayner, who is also the housing secretary, have been arguing about how much the latter is going to get from the former. Please, Rachel. Cough up.

Two: Not Enough New Transport Infrastructure

Last Tuesday, I was shown round Thamesmead, where housing association Peabody is engaged in a large regeneration and upgrade of the estate built there by the Greater London Council in the late 1960s. It is also poised to build a lot more Thamesmead homes if and when Transport for London gets the billion or so it needs to extend the Docklands Light Railway south of the river to a new station in the north of the area.

The extension would begin on the other side of the water, where a Beckton Riverside station would be built too. TfL says the scheme as a whole would facilitate as many as 30,000 new homes being built along the route. The link between transport and housing is, very simply, that there’s no point building homes unless people can travel to and from them easily. After all, if they can’t, they won’t want to buy or rent them, which undermines the point of building them, which means they won’t get built.

Fingers are anxiously crossed at TfL for a long-term funding settlement that also gives hope for an extension to the Bakerloo line to eventually be built, leading to more housing from Elephant and Castle to Lewisham. Will London be that lucky, or will the city fall victim to the baleful politics of “north-south divide” and miss out, with other cities being favoured?

Three: Not Enough Construction Workers

Last year, the London Homes Coalition, a partnership of housing associations, building contractors and others, worked out that over the coming years they could be 2,600 short of the workers they need to look after existing properties, retrofit them to meet new safety and environmental standards, and build new homes.

Its Skills for the Future report found that workforce to be ageing, shrinking and increasingly lacking the knowledge it needs. That’s been a problem since before Brexit, but leaving the EU and the legacy of Covid-19 have made it worse. It’s a national problem, too: last month, the Federation of Master Builders called for urgent action.

The government-funded London Local Skills Improvement Plan identified construction as a key sector for action. The London Growth Plan, put together by the Mayor and London Councils, lays great emphasis on training up more Londoners. But there’s a great deal to be done and the government’s proposed immigration curbs aren’t going to help.

Four: Materials Have Become More Expensive

The price of building materials such as steel, timber and concrete rose by 23 per cent during 2021, hampering new homebuilding (and every other kind of building). More recently, there has been some stabilisation, but a construction industry national forecast published in March said building costs will increase by 17 per cent over the next five years and this year will be another difficult one. And I haven’t even mentioned energy costs.

Five: New Building Safety Regulations

The Building Safety Act 2022 was passed in the wake of the Grenfell Tower fire, with a special focus on high-rise structures. The problem is that the approval process, run by the Building Safety Regulator, that housing schemes must pass before work can begin is moving very, very slowly in the capital.

Construction Inquirer recently reported that starts on new homes in London had fallen by 38 per cent in the first quarter of 2025 compared with the same period the previous year because of delays at the stringent Gateway 2 stage. For example, an approved phase of the Woodberry Down estate regeneration in Hackney is becalmed because of it.

Before that, following Sir Sadiq Khan saying in February 2023 that a government proposal to require two staircases to be included in all buildings 30 metres or more tall would apply in London straight away, many projects went back to the drawing board.

Six: The Green Belt 

Making it easier to build on Green Belt land within Greater London that isn’t very green – “grey belt”, as Sir Keir Starmer and others call it – won’t magically loosen London’s constipated housing supply, but it should make a helpful difference.

For too long, politicians have got away with inflammatory claims that any slackening of protections that were put in place decades ago will result in England’s verdant countryside, so integral to the nation’s identity in some minds, being “concreted over”. Arguments raging in Enfield at the moment make the point. They need to be defeated.

Seven: Small Sites Aren’t Getting Built Out

Architect Russell Curtis, who has made several important interventions in the housing policy debate, has for years been calling for more small sites across the capital to have homes built on them. Writing for On London in 2020, he described as “a betrayal” the removal from Sadiq Khan’s proposed new London Plan by the government’s planning inspector of policies to encourage development on small sites, especially in the suburbs. Planning rules and the finances of smaller companies who might develop smaller sites can cause problems – problems that need to be solved.

Eight: Price Stagnation

“The capital still has by far and away the most expensive homes in the country,” wrote residential property expert Neal Hudson for the Financial Times in December. However, he continued: “This masks something you rarely read about – London’s property market has been stagnating for years.” Over the past decade, he went on, London house prices have risen by 13 per cent, but in “real terms” – that is, adjusting for inflation during that period – they have fallen by 16 per cent.

That’s not much comfort for would-be first time buyers when the average London house price is about £680,000 and the average deposit needed, close to £150,000. But the problem is that housing supply in London – including of all forms of sub-market priced homes – depends, whether we like it or not, on a rising market and private financial investment. If individuals or institutions that fund residential developments don’t think they can get good enough returns on investing in London, they won’t make those investments. Such reticence goes a long way to explaining why those 300,000 homes that could be built aren’t being built.

Result? Fewer options for existing homeowners who might want to upsize or downsize locally, meaning fewer homes on the market generally; more interest in purpose-built student accommodation and build-to-rent instead; fewer “affordable” homes generated through Section 106 agreements with boroughs, which is how a lot of those in London come about. A large and sometime loud body of opinion can’t or won’t believe it. But the way things are, with all their limitations, if you want more “affordable” homes you need more so-called “luxury” homes as well.

Nine: Too Much “Planning Gain” Required

Following on from reason eight, comes an unpopular question: is the Mayor insisting on private developers providing too much in terms of “affordable” homes and other forms of “planning gain“, such as public realm and health facilities, as a condition of giving their schemes a green light? Your answer will  depend on what you mean by “too much”. But what counts in the end is what developers – and, crucially, those putting money into their schemes – think “too much” is.

Soon after he was first elected in 2016 the Mayor introduced supplementary planning guidance that gave a fast track route to mayoral approval for large planning applications on privately-owned land whose housing included 35 per cent “genuinely affordable” homes and a much tougher time for those that didn’t.

This was broadly accepted as reasonable at the time, largely because it was clear and consistent and had the goal of holding down the price at which land was sold – a key factor in the overall cost of property development. However, circumstances have changed, including for housing associations, which, as Savills has explained, are finding it difficult to buy the affordable homes provided for them through these private schemes. The sector has changed, has had to change, and has been committing a lot of resources in recent years to repairing and remediating its stock, rather than adding to its stock.

It may be that “planning gain” conditions will have to be relaxed so that stalled projects can go ahead and at least some social rent and other affordable homes are built rather than, as at present, none. Annoying, yes. But also true.

Ten: Not Enough Yimby

Cries of Yes In My Back Yard need to be heard more loudly, more clearly and from as many Londoners as possible, including its politicians of all persuasions. An extraordinary position has been reached where the Conservatives, who used to see theirs as the party of home ownership, have become the party of Nimbyism, the Liberal Democrats are the same and the Greens, for different reasons, are pretty ambivalent about new housing developments too.

London is, then, fortunate that Labour is in power nationally, has made greatly increasing housebuilding a priority and has London’s Labour Mayor moving in the same direction. But only so much can be done through changes to the planning framework and setting big, bold targets. All the issues above need to be addressed in one way or another.

Along with that, and vitally important, public support for more housing needs to be nurtured and fought for by politicians and others who recognise that unless London makes a better job of getting more of its people into better homes, the consequences are going to be more and more serious – and that the rewards of succeeding can be huge.

OnLondon.co.uk provides unique, no-advertising and no-paywall coverage of the capital’s politics, development and culture. Support the website and its writers for just £5 a month or £50 a year and get things that other people won’t. Details HERE. Follow Dave Hill on Bluesky. Photo: New homes at Brent Cross.