London delivered just 7 per cent of the new homes it needs over the past year, highlighting the growing strain on Sir Keir Starmer’s pledge to build 1.5 million homes across England by the end of the parliament, according to new analysis from property consultancy JLL.
The report shows that only 6,325 homes were completed in the capital in the 12 months to March 2026, far below the estimated annual requirement of 88,000. Property experts say the shortfall reflects structural issues in both demand and supply that are increasingly difficult to resolve without major policy changes.
Private-sector housing starts in London have fallen sharply, down 84 per cent since 2015. Analysts point to a combination of high borrowing costs, reduced investor activity and persistent planning delays as key factors behind the downturn.
Higher interest rates continue to weigh heavily on affordability, particularly for first-time buyers. Many prospective purchasers are struggling to meet mortgage requirements while rents continue to rise, making it harder to save for deposits. New-build homes are especially affected, with buyers now paying a 26 per cent premium compared with second-hand properties.
The withdrawal of Help to Buy in 2023 has further reduced support for entry-level buyers, leaving many unable to bridge the affordability gap.
Investor demand has also weakened significantly. Tax changes and the introduction of the Renters’ Rights Act have contributed to a sharp reduction in buy-to-let activity. Only 4 per cent of landlords surveyed said they were considering expanding their portfolios, while overseas investment in prime London developments has fallen by more than half compared with 2015 levels.
Developers are now facing a growing stockpile of unsold homes, with more than 22,000 properties across London sitting either empty or still under construction. The decline in off-plan sales has added pressure on project financing, reducing the viability of new schemes.
On the supply side, construction costs have risen sharply. The Home Builders Federation estimates that the cost of building a single home has increased by around £76,000 since 2020. New regulatory requirements, including safety and environmental standards, account for a significant portion of that rise, alongside ongoing material and labour inflation.
Service charges are also becoming a growing barrier for buyers. JLL found that average charges for developments with basic amenities have risen by 43 per cent since 2020, while premium developments have seen increases of nearly 90 per cent. Lenders are increasingly factoring these costs into affordability assessments, further restricting access to mortgages.
Industry experts warn that the combination of high costs, falling investment and weak demand is creating a persistent delivery gap. Calls are growing for reforms to property taxation and planning rules to revive development activity.
Without intervention, analysts say London’s housing shortage is likely to worsen, with wider consequences for affordability, labour mobility and economic growth across the capital.
