London Housebuilding Crisis Deepens as Brexit Fallout Hits Mayors Targets

The Mayor of London, Sir Sadiq Khan, has directly linked the failure to meet his ambitious housebuilding targets to the ongoing effects of Brexit, as the capital grapples with a sharp downturn in construction activity. In response to this crisis, Khan has secured a £300 million emergency funding package from the Government, aimed at reviving his pledge to deliver 88,000 new homes annually.

Latest data show that housebuilding in London has slumped to its lowest rate since the global financial crash, with only 40,000 homes under construction by the end of this year. Sir Sadiq attributes this decline to what he describes as a ‘perfect storm’ of challenges. These include high interest rates, surging costs of construction materials, the long tail of the Covid-19 pandemic, and disrupted supply chains following Brexit. The loss of skilled EU construction workers, a factor the Mayor has repeatedly emphasised, remains a major obstacle to meeting housing demand.

To offset the downturn, Khan has agreed a set of drastic new measures with Housing Secretary Steve Reed. A £322 million funding pot will help developers clear land ready for building, while developers who are able to deliver projects immediately will benefit from targeted tax breaks. The threshold for affordable housing requirements will also be temporarily cut, with developers now required to allocate just 20 percent—down from 35 percent—of new builds as affordable homes. This represents a significant victory for developers, who have argued that higher quotas were rendering projects uneconomic.

Sir Sadiq Khan will gain expanded powers over planning decisions for large green belt projects, and the Greater London Authority will launch a six-week consultation period, with these emergency measures to remain in place until 2028. The Mayor expressed confidence that these reforms, together with the injection of government cash, will reignite construction and help deliver the affordable homes that Londoners need.

Industry groups, however, have levelled criticism at City Hall, suggesting that the prior level of affordability requirements contributed to the slowdown. They maintain that, in combination with external pressures such as Brexit and the pandemic, stringent local policies exacerbated the crisis.

The impact of Brexit on the wider UK economy has been underscored by recent comments from Bank of England officials. Swati Dhingra, a member of the Bank’s Monetary Policy Committee, noted in a recent speech that Brexit has led to stagnant investment and productivity, as well as profound changes in migration patterns. Where 60 percent of arrivals to the UK once came from the EU, this has shifted dramatically, with 90 percent now arriving from outside the bloc. This shift continues to transform the labour market, complicating the outlook for housing and wages in Britain’s capital.