Calls for City Hall to do more to incentivise housebuilding in London as slowdown continues

Research suggests that developers are hesitant to build in the current market due to a proliferation of unsold stock, reports Kumail Jaffer, Local Democracy Reporter

Just 6,325 private sector homes broke ground in London in the first three months of 2026, new data has revealed – equivalent to 7% of City Hall’s 88,000 overall annual target.

Research from Real Estate consultants JLL suggests that developers are hesitant to build in the current market due to a proliferation of unsold stock.

New data shows that 22,000 properties across the capital sit unsold or under construction, with all types of buyers unwilling to invest in the present circumstances.

This is down to the newbuild premium – new homes cost 26% more per square foot than existing properties – soaring service charges, and an absence of incentives for potential purchasers.

The issue is accentuated in London, according to Marcus Dixon, JLL’s head of UK living and residential research, who says that steps taken by the government and City Hall to address the housing supply crisis need to be supplemented by “demand-side reform”.

He claimed developers now have less certainty that any properties built will be purchased on the market.

Dixon told the Local Democracy Reporting Service (LDRS) : “The government and mayor have done some really positive things on the supply side and putting more money into the planning process – but we are expecting private developers to deliver the vast majority of homes and the rate of sale for those homes isn’t sufficiently high to convince them to deliver more.

“There’s nothing really in place on the demand side, and so we won’t get the step change in the number of houses needed until that changes.

“To deliver more homes, we need to encourage people to buy more homes. Those costs are significantly higher in London than the rest in the country due to higher levels of stamp duty.

“Something in place to reward people for buying more energy-efficient, new homes just isn’t in place at the moment.

“There are some conversations to be had around the additional levies in place – the community infrastructure levy, the mayoral infrastructure levy in London – they have a role to play in terms of funding other infrastructure, but the challenge we have is that it’s much more expensive to deliver flats. This hits London, with a much higher proportion of high-rises, much harder.

“It’s far easier to deliver houses in the suburbs, where you can stop if needed – if you build a block of flats, you have to finish the whole thing before anyone moves in.

“Some of these additional levies and planning restrictions in London are the straw that broke the camel’s back in terms of delivering. From the mayor’s perspective, there’s some flexibility around delivery and acknowledging the challenges of doing so, and looking at ways in which they can help do so. City Hall should be working alongside developers. They can also look at having conversations with ministers around stamp duty reform.”

Nationally, the Conservative Party has pledged to fully abolish stamp duty land tax on all primary residences in England and Northern Ireland if they form the next government.

The Ministry for Housing, Communities and Local Government did not respond to a request for comment on the matter.

The JLL figure is an improvement on last year’s total 5,547 starts – but in 2015, the private sector number was 33,782, according to Molior.

Lord Bailey, the City Hall Conservatives housing spokesman, told the LDRS: “The latest figures on London’s collapsing housing market should alarm everyone who cares about the future of our city.

“This is not merely disappointing, it is a catastrophic political failure.

“Londoners should not accept the endless excuses coming from City Hall. For years, the mayor has blamed everyone and everything else: the previous government, interest rates, developers, planning rules, Brexit, global markets, even ‘the system itself’.

“Of course, national policy matters. Of course, economic conditions matter. But leadership is about delivering despite difficult conditions — not using them as permanent cover for failure. Other cities and countries facing similar pressures have still managed to build homes at scale.”

City Hall has agreed to take a number of measures to boost housebuilding in the capital, including agreeing a controversial package with the Ministry for Housing, Communities and Local Government (MHCLG) to slash affordability requirements for developers from 35 per cent to 20 per cent.

Last month deputy mayor for housing Tom Copley told the LDRS that Londoners will finally see these policies start to bear fruit in 2026 after a difficult period for housebuilding.

A spokesperson for Khan said: “Tackling London’s urgent housing crisis is one of the mayor’s top priorities and he is doing everything he can to deliver more homes of all tenures. Sadiq has been warning for some time that the impact of Brexit, the pandemic, high interest rates and the economic shocks caused by global instability mean that we are amid the most difficult period for housebuilding since the global financial crash.

“We are confident that new time-limited emergency housebuilding measures will ramp up housebuilding in London and bring forward thousands of homes more quickly. By reducing the bureaucratic burden on developers in the short-term, the measures will result in more home – including affordable homes – being provided to those who need them most.

“The mayor is also backing housing associations and councils with a record £11.7billion London Social and Affordable Homes Programme over the next decade. The new City Hall Developer Investment Fund adds £322million in grants and £1.5bn in ultra-low-interest loans for housing associations, unblocking stalled sites and speeding up affordable and social housing across the capital. He’s also delivering 6,000 new rent-controlled homes for key workers.”

A government spokesperson said: “Our emergency measures in London will unblock dozens of stalled sites and help to build thousands more homes in the capital so we can restore the dream of homeownership.

“First-time buyers pay no stamp duty on homes worth up to £300,000 and can claim relief on purchases up to £500,000. Stamp duty also raises around £14bn a year to help fund essential public services.”

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