Completion levels are also short of housing need. In London, completions have averaged around 40,000 a year since 2016 but they now sit at circa 36,000 according to EPC data. With continuing falling starts, completions will follow this downward trajectory. The level of housing need in London according to the current Standard Method is c. 88,000 homes per annum, meaning delivery is less than 59% of where it needs to be. Of all regions in England, London is the furthest from meeting its housing need.
There are various reasons why delivery in London is more challenged than anywhere else. Many of these are often referenced and lamented – land is even more scarce, viability more stretched, and the regulatory hurdles even more complex. One key issue which is less widely discussed however is this. Flats. Flats make up the vast majority of new homes in London in a way that they don’t anywhere else in the country. In 2023-24, 96% of new homes built in London were flats, compared to between 4-5% of new homes delivered in the Midlands or North.
Because there is limited space to expand outwards in the capital, developers are forced to build up. These tall buildings are inherently more complicated and expensive to build. They require more complex engineering and are subject to additional safety requirements and planning regulation. Additionally, once a tall building starts construction, it cannot be phased, unlike a typical housing development.
And at the same time sales values have been, well, flat. Since January 2016, tender price inflation – a proxy for build costs - has increased by 44%. Prices for London flats meanwhile have only increased by 9%. As this gap continues to widen, viability becomes impossible, meaning that developers’ options are increasingly compressed.