Shocking figures reveal that London housebuilding sector is on life support. Output is “94 per cent below target, a 75% year-on-year decline, the steepest drop in the country, the lowest tally since records began.
An eye opening report in the FT highlights the severity of the decline. In 2025 just 5,891 homes were built. The lowest figure for any major city in the developed world this century.
The London housebuilding crisis is often framed as a planning problem. In reality, it looks far more like a delivery and viability problem. London has been set a target of 88,000 new homes a year, yet recent starts have fallen dramatically, with City Hall itself acknowledging the scale of the gap and the need for emergency action.
That matters because housing shortages do not just affect first-time buyers or tenants scanning Rightmove at midnight. They affect landlords, developers, local authorities and the wider property ecosystem. When fewer schemes get out of the ground, pressure builds elsewhere. Existing stock carries more weight. Older buildings stay in use for longer. And every delay in delivery pushes affordability further in the wrong direction.
Safety rules are necessary, but delays are costly
A big part of the recent slowdown sits in the post-Grenfell building safety regime. The principle behind tighter checks is hard to argue with. Safer buildings should not be up for debate. The trouble is that tougher oversight has come with a slower and more complex route to site start, especially for taller schemes in London that fall into the higher-risk category. The government itself announced reforms to the Building Safety Regulator in June 2025 to reduce delays and add capacity, which tells you the bottleneck is now well recognised.
The latest published BSR data also shows the scale of the workload. As of 23 January 2026, there were 170 live new-build cases covering 37,065 units, while approval rates on Innovation Unit applications remained modest and many applications were being ruled invalid at first pass because information was missing. None of that means the rules are wrong. It does mean the process is still absorbing a huge amount of time, money and patience.
Plan Insurance Brokers can accommodate your Property Owners & Landlord Insurance needs. Just fill in our short call back form, and our professional brokers will be in contact to arrange your insurance.
Viability is now doing as much damage as planning
This is where the London housebuilding crisis becomes especially frustrating. London does not simply have a shortage of permissions. It has a shortage of viable projects. Research cited across recent reporting points to a huge pipeline of homes with consent that still are not moving because costs, delays and weaker sales conditions no longer stack up. In one of the clearest signs of that, industry reporting has highlighted 281,000 approved but unbuilt homes across the capital.
For many schemes, higher financing costs, environmental requirements, infrastructure levies and slower approvals all pile up at once. That is before you get to softer demand from investors and more competition for brownfield sites from uses such as logistics and self-storage. On paper, each individual policy may be defensible. In combination, they can turn a housing scheme from marginal into impossible.
What this means for landlords and property owners
For landlords, the message is not that fewer new homes are somehow good news. Yes, restricted supply can put upward pressure on rents, but it also increases scrutiny, tenant pressure, political intervention and operational strain across the sector. Older homes may remain occupied for longer, maintenance expectations rise and refurbishment decisions become more important where replacement stock is not arriving. That can raise the importance of having the right cover, good documentation and a realistic view of rebuild, compliance and project timelines. Those points depend on the property and policy wording, so they need case-by-case consideration rather than blanket assumptions.
For the market more broadly, this is a warning light. If London cannot build at a viable pace in one of the world’s strongest property markets, the problem is bigger than one planning committee or one developer spreadsheet. The challenge is not choosing between safety and supply. It is building a system that can deliver both.
