The UK Housing Paradox – Why Demand Doesn’t Equal Delivery
The UK’s housing market is caught in a deep and persistent paradox. Talk to anyone about the shortage of homes and the conversation will likely revolve around soaring demand and never-ending waiting lists. Over 1.3 million households in England are currently waiting for social housing. More than 160,000 children live in temporary accommodation. The urgency is real.
And yet, despite these staggering figures, new homes are not being built or bought at the scale they should be. It’s a riddle that leaves policymakers, developers, and those in finance scratching their heads: if the appetite for housing is so strong, why is delivery so weak?
Understanding this contradiction requires a closer look at both sides of the market—demand and supply—and the complex web of factors that influence them. For professionals in accountancy and financial services, particularly those supporting clients in property and construction, appreciating the forces at play is increasingly vital.
The Numbers Are Not Adding Up
To meet the national need for affordable housing, studies suggest that roughly 145,000 new affordable homes should be built annually in England for the next ten years. Contrast that with the current delivery pace—only around 52,200 affordable homes have been completed each year on average over the past decade. We’re building just over a third of what is required.
London faces even greater challenges. The government has set a target for 1.5 million new homes to be delivered nationwide in the next five years, with 440,000 expected to come from the capital. But London’s delivery fell by 9 percent year-on-year in 2023-24, bringing output down to 32,000 homes. This is 30 percent below the peak figure seen in 2019-20. Worse still, permissions for new developments in the capital are at historic lows. Between July 2024 and June 2025, fewer than 1,000 major residential schemes were approved—the lowest on record since 2006.
So we can see clearly: demand is not enough. The machinery that should convert that demand into homes has become increasingly bogged down in complications.
Major Blockages in the System
Safety Regulation and Delays
Following the Grenfell tragedy, the construction of higher-risk buildings became subject to new rules under the Building Safety Regulator. While these measures are crucial to ensure public safety, their current implementation has introduced major hold-ups. At present, over 10,000 homes have been stuck in ‘Gateway Two’ approval for more than half a year. This delay deters developers from investing in high-rise schemes, particularly in dense city centres like London, where vertical construction is often the only viable way to increase housing stock.
Planning Logjams
Beyond safety regulation, the broader planning system is buckling under pressure. Applications pile up, and processes drag out due to resourcing issues, unclear policy guidance, and competing priorities at a local level. Developers face a maze of obligations—from the London Plan to brownfield remediation costs and compliance with unpredictable new levies. The resulting uncertainty undermines confidence and weakens the incentive to move forward with new builds.
The Building Safety Levy is a clear example. Its cost is calculated in such a way that urban development—especially in London—is disproportionately affected. The result is fewer viable schemes and less capital attracted to housing projects.
What Happens When First-Time Buyers Leave the Market
The government’s decision to end the Help to Buy equity loan scheme in 2022 removed a key tool that had supported tens of thousands of first-time buyers onto the property ladder. The result? A steep decline in buyer activity among younger and lower-income households.
Across the UK, house price affordability has worsened. In increasingly large parts of the country, only the highest-earning 30 percent can now hope to afford a first home. This significantly narrows the buyer base for entry-level homes, even in areas of high demand. In the capital, the absence of government-backed schemes has had a pronounced impact on new development. When Help to Buy was active, the resulting demand prompted a 50 percent surge in planning approvals. London accounted for over 43,000 Help to Buy transactions across its operation—second only to the South East.
Experts estimate that reviving a similar equity loan programme, adapted for current conditions in London, could help 91,000 additional buyers and unlock 17,500 extra homes over five years. That’s the scale of support this segment of the market needs.
The Evolving Market – Some Signs of Life
Recent weeks have brought some cautiously positive developments. Interest rates are beginning to fall. The Chancellor’s changes to stamp duty, introduced in April 2025, have already helped boost market activity. Across the UK, home sales rose by 17 percent in the first half of the year compared to the same period in 2024.
Different regions are reacting differently to this changing environment. Northern Ireland and the North of England have seen stronger price growth, while London’s rebound is still uneven. Outer boroughs in the capital are showing signs of revival, but central London continues to lag.
Looking ahead, price increases for 2025 are expected to range between 1 and 2 percent nationwide. By 2029, UK-wide house price growth is projected at around 24.5 percent—but in London, the figure may be closer to 15 percent.
These are far from boom conditions. Affordability and confidence remain barriers that cannot be easily swept aside by interest rate changes alone.
Why Developers Are Holding Back
Behind many slow-moving developments lies a critical calculation: viability. It is not enough for demand to exist in theory—projects need to make financial sense. Developers need certainty on costs, timelines, policy requirements, and buyer demand before committing major capital. The current environment makes these factors difficult to predict.
Every new levy, delay, or policy adjustment can tip the balance from viable to unworkable. Developers and investors are pulling back and waiting for clarity. Without decisive reform, this hesitation will continue, and the housing gap will grow.
What Could Help – And What We Should Watch
There is a great deal riding on what governments—both national and local—do next. The recent proposal for a National Housing Bank suggests a shift in the right direction. So too does the renewed focus on planning reform and land supply calculations.
But change must come quickly and consistently. Policy inconsistencies are among the greatest risks to investor confidence. Closer collaboration between central government and local authorities could enable targeted delivery in the areas that need it most. But if promised reforms face continued delays, ground-level progress will remain elusive.
For financial professionals advising clients in construction and property, these developments are highly relevant. Modelling the financial effects of policy changes, mapping out risk exposure, and helping clients manage funding challenges can make a meaningful difference to their strategic decisions.
Final Thoughts
The UK’s housing shortage is not just a story of unmet demand. It is a story about a large, complex system in which too many parts are misaligned. Development is hampered by regulation delays, shifting policies, cost burdens, and shrinking pools of ready buyers.
This is not a new problem—but it is one that can be solved. With smart policy intervention, a focus on affordability, and an infrastructure that supports sustainable development, the sector can return to health.
Until then, finance professionals and property experts alike must stay sharply attuned to the shifting landscape. The opportunities remain—as do the risks. Understanding the forces behind the UK’s housing paradox is essential for navigating the future with confidence.
And at Cutts & Co, helping you do that is what we aim to do best.
