Why has housing delivery in London fallen so dramatically over the past decade?

Private housing is hardest hit

The decline, outlined in a report compiled by Savills Research, is starkest in the private sector, where housing starts have fallen to their lowest levels since 2009. Investor confidence has declined, with sales of new homes to investors down 90% since 2014. This has stripped £6.4 billion in annual capital from the market, leaving developers without the off-plan sales needed to sustain cash flow during construction. Overseas investment has also waned as a result of tax reforms and global competition.

Institutional investors are now favouring suburban developments in cities like Birmingham and Manchester. Investment outside the capital has increased from £200 million in 2015 to over £4 billion, while London has seen a 40% decline. Registered Providers are also pulling back, with 66% reducing their requirements for new affordable homes under Section 106 agreements.

Viability and the economics of development

The economics of development in London have become increasingly unviable. Build costs have outpaced house price growth, and forecasts suggest this gap will widen. Between 2025 and 2029, London’s tender price inflation is expected to rise by up to 27%, while house prices are projected to grow by just 15%. Meanwhile policy-driven costs – such as CIL, MCIL, carbon offset levies, and the upcoming Building Safety Levy – continue to mount, making schemes harder to deliver.

A decade ago, affordable housing delivery was broadly cost-neutral. Today, it requires significant cross-subsidy from private sales, which is often no longer feasible. London-specific design standards, while aimed at improving user experience, add further cost burdens – up to 11% higher than similar schemes outside the GLA boundary.

Tax and policy changes have also made residential development less attractive. Stamp duty increases, corporation tax hikes, and new levies like the Residential Property Developers Tax have affected profitability. Late-stage viability reviews add further uncertainty, making residential development riskier and less appealing compared to other sectors.

Land values have also declined, and current viability assessment mechanisms discourage landowners from releasing sites for housing. With residential land now often valued below alternative uses such as logistics or hospitality, many landowners are opting to hold or repurpose their assets.

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Further information

Contact Katy Warrick, Rob Pollock or Sophie Rosier