Despite ambitious government targets, the UK is facing significant challenges in meeting its housing delivery goals, with London—a critical market due to its high prices and demand—experiencing some of the most severe blockages. To fulfil the pledge of 1.5 million new homes over the current parliamentary term, an unprecedented pace of construction averaging 300,000 homes annually is needed. Yet, current build rates project that the 1.5 millionth home will not be completed until March 2032, nearly three years behind schedule. This shortfall is largely driven by a stark lack of financial viability in many regions, with housing development considered viable in less than half of the country. London and the South East remain relative exceptions due to higher property values, yet even here, construction rates have dropped to their lowest in a decade, with just 31,000 new homes completed in 2024-25 against an annual target of 88,000.

A major cause of the slowdown is the difficulty and high cost associated with developing brownfield sites, which dominate available land supply in London. Although the city has the potential to supply upwards of 400,000 new homes through brownfield redevelopment, the extensive costs attached to site remediation, alongside stringent biodiversity net gain (BNG) obligations and affordable housing targets, often render projects financially unviable. Remediation costs have risen sharply due to escalating contractor fees, while biodiversity requirements impose costly upfront assessments, habitat creation obligations, and long-term maintenance, particularly onerous in already densely developed areas with limited space for ecological enhancement. These cumulative burdens push many projects from marginal viability into infeasibility.

Affordable housing requirements in London mandate that 35% of new developments must be affordable, an aspirational policy increasingly at odds with the economic realities facing developers. With build costs rising by 18% over the past five years and affordable units sold below market value, the margin to absorb these costs is slim. Though government grants provide some support, funding is limited and heavily skewed towards rental homes that generate less upfront income. The stringent Building Safety Regulator (BSR) approvals introduced post-Grenfell have further exacerbated delays. High-rise projects in particular are held up by protracted Gateway 2 approval processes, which often exceed the regulatory 12-week timeline, causing costly hold-ups for roughly 10,000 homes in construction limbo across the capital. These bureaucratic hurdles compound the existing viability challenges and deter developers from initiating new projects.

Efforts to stimulate housing delivery have been made on several fronts. The Mayor of London has reported progress through the Land Fund, which has unlocked over 8,000 homes ahead of schedule, including thousands of affordable units. Nationally, the government has pledged substantial investment in affordable housing, including a £2 billion fund targeting 18,000 new affordable homes in England by 2029, and aims to support the broader 1.5 million home target via planning system reforms aimed at reducing red tape and speeding approvals. Prime Minister Keir Starmer has called for adjustments to planning laws to cut legal challenges and empower local decisions more effectively, with modifications to the Planning and Infrastructure Bill expected to accommodate these changes. Simultaneously, housing industry leaders stress the need to reduce burdensome regulations such as the 35% affordable housing target and biodiversity net gain mandates, which some argue could be scaled back to 15-20% and 5% respectively to reinvigorate smaller schemes and overall viability.

Calls have also emerged for more direct government intervention to relieve demand-side pressures, particularly for first-time buyers. Bellway’s CEO, Jason Honeyman, advocates the elimination of stamp duty for first-time purchasers and the introduction of long-term deposit assistance schemes to counteract affordability constraints and invigorate market activity, especially for younger buyers lacking familial financial support. While competing political voices debate the best approach, it is clear that without addressing both financial viability and procedural barriers holistically, London’s—and by extension the UK’s—housing supply crisis will deepen.

In sum, London’s housing strategy remains stuck amid an intricate web of economic, regulatory, and environmental challenges. The brownfield-first approach, though environmentally commendable, is currently hindered by prohibitive costs and delays. Experts agree that only a multifaceted reform package combining targeted financial support, planning simplification, and regulatory adjustments will unlock the city’s potential. Without such changes, achieving the government’s housing targets while maintaining ambitious social and environmental standards appears increasingly unlikely.

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Source: Noah Wire Services