Another valve blocking housing delivery in the capital?

New home starts in London have plummeted. In the first half of 2025, just 2,148 homes began construction on sites with more than 20 private units – just 5% of the government’s annual target of 88,000 homes. This marks a historic low, even compared with the post-financial crisis era.

The latest contributor to this decline is the Building Safety Act (2022), which introduced three regulatory checkpoints known as Gateways. Gateway 2, in particular, requires approval before construction begins on buildings over 18m, creating a bottleneck in housing delivery. In H1 2025, fewer than half of starts were on schemes over 18m, compared with 71% of starts in H1 2019. Meanwhile, 61% of permissions granted in the same period were for buildings over 18m, highlighting the disconnect between planning and delivery.

Outer London has been hit hardest, with an 87% drop in starts on taller buildings. Building at height is essential to meet housing targets but it’s increasingly unviable due to higher costs (17% more per sq m for flats of six storeys and above), fewer off-plan sales, reduced market confidence and the end of Help to Buy.

Beyond the immediate slowdown, a larger wave of disruption looms. Molior data shows 210,000 homes across 700 developments have received planning permission since 2019 but haven’t started. Of these, 86% are in high-rise blocks, many requiring redesigns for second stair cores and facing Gateway 2 delays. Some 25% of these await section 106 agreements and many face viability challenges due to market conditions. Some permissions may have even lapsed.

Two-thirds of these unstarted homes are in blocks over 18m with affordable housing agreements. If unlocked, they could deliver 1.6 times London’s annual housing target and 2.4 times the affordable housing starts target. Yet affordable housing delivery – largely reliant on private developers through s106 – has stalled due to sector-wide challenges.

Savills estimates that 75% of these homes could eventually come forward, as many are part of larger masterplans. However, 41,000 homes are estimated as stalled for the next five years, with 87% in blocks over 18m. Nearly 60% of these undeliverable homes are in outer London, particularly Croydon, Haringey and Barnet. These homes are priced at around 30% below the London average, aligning with demand for homes under £700 per sq ft. In 2019, lower build costs, cheaper development debt, and Help to Buy made these schemes viable. Today, rising costs, stricter fire regulations and reduced market support have rendered them unfeasible.

What’s being done to unblock delivery?

In June, the government allocated £2.1m to improve the Building Safety Regulator’s service, aiming to reduce Gateway 2 delays, with approvals for new-build applications taking on average 36 weeks – three times the 12-week target. It remains to be seen if this funding will accelerate approvals.

In July, £11.7bn was committed to London’s affordable housing over the next decade, alongside a 10-year rent settlement. This gives housing providers greater confidence in future income, potentially improving appetite for s106 agreements. However, many housing associations are scaling back development teams and focusing on retrofitting existing stock, limiting their ability to deliver new homes.

Despite these interventions, complex viability issues remain unresolved. The residential land market is quiet, with adjusted values and cautious landowners. Terms have become more complex, often contingent on planning and Gateway 2 approval.

Yet with a shrinking pipeline and improving buyer demand – driven by better mortgage rates, relaxed lending regulations, and a stronger economic outlook – developers who act now may benefit from less competition and stronger sales in the future.