London housebuilding has fallen to levels described by industry figures as having “collapsed,” with reported starts at just 5,891 in 2025 – around 94% below the city’s housing target.
Senior industry voices argue this reflects a structural breakdown rather than a cyclical slowdown, with one describing the situation as a “systemic failure.”
The combination of weak demand, regulatory friction, and viability constraints is increasingly being cited as the core driver of the shortfall in the number of houses built.
Article continues belowIndustry warning – 'collapsed' delivery
Senior construction and policy figures have issued stark warnings about the scale of London’s housing slowdown.
As Saul Humphrey, Senior Vice President at the Chartered Institute of Building, put it: “London housebuilding has collapsed. Not slowed. Not softened. Collapsed.”
He added that reported starts of 5,891 homes in 2025 represent a 94% shortfall against target, arguing: “This isn’t a demand problem. It’s a systemic failure.”
His assessment frames the issue as structural, where projects fail to proceed because they no longer “stack up” financially, leading to stalled supply and worsening affordability pressures.
Delivery collapse and structural pressures
Industry commentary increasingly links the slowdown to a breakdown in viability conditions across the capital.
As Saul Humphrey warned: “When schemes don’t stack up, they don’t get built. When they don’t get built, supply collapses. When supply collapses, affordability becomes fiction.”
He described London as a “canary in the coal mine” for urban housing delivery, questioning whether high-density, low-carbon development remains viable under current conditions.
Jon Neale, Director at Montagu Evans, noted that: “The main issue is the lack of buyer demand or confidence… this is backed up by analysis which shows that 25% of all homes built over the past year remain unsold, the highest since the GFC.”
The broader concern is that even as policy demands higher standards in safety, embodied carbon reduction, and affordability, the economics of delivery are weakening to the point where fewer schemes proceed at all.
Building safety, planning friction and market stress
Recent analysis from Montagu Evans’ Residential Land Survey highlights multiple overlapping constraints, such as the Building Safety Act, affecting London development.
The report notes that in 2025: “Work started on just 7,480 homes in the capital… well below both the 10-year average of around 15,000 and the London Plan estimate of annual housing need of 80,000 units.”
It also identifies shifting constraints, including affordability pressures, planning delays, and regulatory costs, with developers previously citing: “Many high-rise projects were held up at ‘Gateway 2’, unable to start work until the Building Safety Executive had given the nod.”
However, the report suggests the binding constraint has shifted more recently toward weak buyer demand and affordability, with unsold stock reaching elevated levels.
Market shift and falling confidence
Industry data also points to changing demand patterns and developer behaviour.
The Montagu Evans survey highlights that:
- Around 25% of homes built over the past year remain unsold, the highest level since the global financial crisis
- Developers are increasingly pivoting away from high-rise schemes toward lower-rise and suburban development
- Flat values have underperformed compared with houses, with long-term divergence in pricing trends
This has reinforced concerns that London’s traditional high-density development model is becoming harder to sustain financially, even as overall housing need remains acute.
Taken together, industry voices and recent research suggest London’s housing slowdown is not driven by a single factor, but by a combination of weak demand, viability constraints, and regulatory friction - producing a system where fewer schemes proceed from planning to construction, and fewer homes are ultimately delivered.
