London’s Missing Billions: Why Delivering More Homes is Critical for the Capital
London has the highest housing need target of any UK region, with the 88,000 homes required annually, making up almost a quarter of the England total. Yet, London also experiences the widest gap between this ambitious target and actual delivery.
The latest net additions figures for London - the most generous of any housing delivery measure and therefore the one most cited by government - show just 32,000 net additions of all tenures in the year to March 2024, 56,000 homes short.
Recent housing starts figures indicate an even more significant shortfall this year, ONS figures for the year to March 2025 suggest just 4,000 homes started across London, 10,880 fewer than in the previous 12 months period. Widely quoted Molior London figures, while not directly comparable with the ONS, show H1 starts this year dropping to an all-time low of 2,158 – less than 5% of the 44,000 half-year target.
More Than Just Homes: The Broader Economic Impact
Residential development provides far more for Londoners than just new homes, with developer contributions enabling the city to invest in infrastructure and community facilities, as well supporting the delivery of affordable homes. These contributions, mostly in the form of various Community Infrastructure Levy’s (CIL) and Section 106 (S106) payments have brought in between £3million and £90million per borough in the latest 12-month period.
Analysis of developer contributions by London Borough shows contributions totalling £702.5m in the year to March 2024. This equates to an average of just under £22,000 per home (taking into account net additions of all tenures) to £53,000 per private start.
The Cost of Under-Delivery
While a broader debate exists regarding the extent to which existing CIL and S106 might hamper delivery, especially given reports of unspent receipts, the core message remains undeniable. Increasing housing delivery has multiple benefits. Not only would it help the capital inch closer to its critical new homes target, but it would also unlock substantial additional revenue for London boroughs through CIL and S106 contributions.
If London had successfully met its current target of 88,000 homes annually over the past three years, rather than experiencing an average shortfall of 52,500 homes per year, the capital would have generated nearly £3.5 billion in additional developer contributions.
With just 4,000 starts in the year to March 2025 developer contributions could potentially fall by up to £500 million compared to the 2023/24 figures. Funds that could have been invested in schools, healthcare, public transport, and green spaces.
A Call to Action
Increasing housing delivery in London is vital in both providing homes for Londoners and strengthening public finances to support growth. However, at a time when developer margins are increasingly constrained and new hurdles frequently emerge, more decisive action is needed.
The removal of barriers to development and implementing change to fast-track housing delivery must be at the forefront of politicians’ agendas as we approach the Budget on 26 November. Prioritising housing is not just about bricks and mortar, it's about investing in London's future, ensuring its continued vibrancy, and securing billions in vital funding for the capital's essential services and infrastructure.
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