A new analysis from Public First, commissioned by leading developers Berkeley Group, British Land, and Landsec, posits that a significant surge in London homebuilding could inject an estimated £40 billion annually into the UK economy by 2034. The report highlights a stark contrast between the current construction output and the potential economic gains, warning of a decade of lost growth if action is not taken.
The Crisis in London’s Housing Pipeline
The report paints a concerning picture of London’s housing market, noting that construction starts have plummeted to historic lows. For the year ending Q1 2025, only 3,990 new homes began construction. This figure is drastically below the levels required to meet demand and unlock substantial economic benefits. The analysis underscores that this shortfall threatens not only the availability of housing but also the nation’s broader economic competitiveness.
The Economic Prize: Unlocking Prosperity
Meeting a target of 88,000 new homes built annually in London is presented as a key lever for economic growth. The Public First study suggests that achieving this ambitious goal would significantly enhance London’s productivity, projecting a rise of 5.6%. Furthermore, it could lead to an average increase of £3,700 in the take-home pay for Londoners. The economic impact from increased construction output alone is forecast to generate over £14 billion in Gross Value Added (GVA) per year from 2028 onwards, a scale comparable to London’s entire hospitality sector. Combined with wider benefits from increased construction activity and consumer spending due to lower housing costs, these economic benefits are projected to peak at £40 billion in 2034, equivalent to 6.5% of London’s GDP and 1.6% of the UK’s GDP. This economic boost is comparable to adding almost the entire economy of Manchester to the UK GDP.
Addressing the Barriers to Building
To realize these projected benefits, the report urges policymakers to confront the deep-seated challenges hindering new home construction. High building costs and complex viability issues are identified as major impediments. Other reported barriers include lengthy planning delays, exacerbated by the complexity of the London Plan, which features 88 separate residential policies alongside national and local rules. The Building Safety Regulator’s processes are also impacting London, with many homes stalled under its Gateway Two approval process. Furthermore, London’s 35% Affordable Housing requirement is seen as a constraint, with few schemes able to meet this threshold, often leading to viability negotiations that delay progress. A challenging economic context and a shortage of skilled workers in planning and construction have also been cited as obstacles.
Industry Collaboration and Future Outlook
The report’s sponsorship by prominent property developers – Berkeley Group, British Land, and Landsec – lends significant weight to its findings and recommendations. These companies are major stakeholders in the housing market and advocate for a more conducive environment for development. Their backing signifies a unified call from the industry for governmental intervention and policy adjustments. The overarching message is clear: a sustained period of under-building in London risks a decade of diminished economic growth and eroding international competitiveness for the UK. The news from the Home Builders Federation also indicates that London’s housing delivery is in crisis, with targets likely unachievable without intervention.
The Path Forward
The analysis serves as critical news for urban planners, economists, and government officials. It offers a clear roadmap, highlighting not just the problem but also the significant economic upside of addressing London’s housing crisis. By strategically tackling the barriers to homebuilding, the report argues, the UK can secure substantial economic dividends, improve living standards for its citizens, and bolster its position on the global economic stage. The projected £40 billion annual boost by 2034 represents a tangible opportunity for national prosperity, contingent on decisive policy action today. This featured news story underscores the critical link between housing supply and economic vitality in london.
