Housebuilding in London is in “crisis,” which has led “investment in new housing sites to nosedive,” according to a report from the Home Builders Federation.     

The housebuilding lobby group says 30,000 homes were completed in London in the year to June, 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.   

Its report, Mind the Gap, points out that the capital is expected to deliver 440,000 of the government’s 1.5 million new homes target by 2030. 

It blames a lack of support for buyers, “excessive bureaucracy”, unrealistic affordable housing demands and delayed planning application approvals among the causes for the crisis. 

The body adds: “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 study says that planning permissions have fallen to their lowest level since records began in 2006, with just 966 projects approved in the 12 months to June 2025.  

And adds that the national housing delivery in London has also continued to shrink from 20% a decade ago to just 15% today. 

The number of new home building sites starting has tumbled by 38%. However, the government has set a requirement for London to deliver 88,000 homes a year, output would need to more than double, increasing by 175%. 

The report points out that this lack of housebuilding affects home affordability in London.

It says: “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.”  

It adds that 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. 

The study says this crisis has pushed Londoners out of home ownership and into the private rented sector. 

It points out: “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%.” 

The report urges the Mayor of London Sadiq Khan (pictured) to speed up his pledge to allow green belt land for development review and lower the affordable housing fast-track threshold to 25% from 35%, to unlock stalled developments. 

It also calls for a more streamlined London housing plan, “with local energy policies brought into line with national regulations, and exemptions introduced for smaller schemes to reduce unnecessary burdens”. 

The report also calls on the government to reintroduce a targeted home ownership scheme and cancel the introduction of the Building Safety Levy. 

This charge, passed in 2022, requires developers to pay for the remediation of building safety defects where responsible parties cannot be found, rather than taxpayers or leaseholders. 

It is intended to raise around £3.4bn over ten years, and is due to come into force in the autumn of 2026. 

Home Builders Federation chief executive Neil Jefferson says: “The capital needs an urgent overhaul of housing policy if it is to support the housing needs of Londoners.  

“London plan housing 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.” 

The report comes after new housing Secretary Steve Reed met developers on Friday and promised “a blitz of new measures” over the coming weeks and months, including new towns across the country and the landmark Planning and Infrastructure Bill passing into law”.  

This Bill, introduced by the department and currently in the committee stage of the House of Lords, is central to Labour’s plan to build 1.5 million new homes by the next election. 

The government says this legislation will sweep aside planning objections, allowing it to kick-start the building of new home developments and major infrastructure projects in the final three years of this parliament. 

Last month, the Mayor of London said that more than 8000 new homes have been started via his Land Fund, five years ahead of schedule. 

The Land Fund holds over £736m, including £486m from the housing department.

However, the Mayor’s office admitted that “the huge scale of London’s housing crisis remains significant, and London still needs 88,000 new homes a year over the next decade to meet demand – close to a million homes. 

“The capital has never built this number of homes before, and earlier this year, the Mayor announced that City Hall will actively explore releasing parts of London’s green belt to help end the housing crisis.”