"If I am elected mayor, my single biggest priority will be to build thousands more homes every year," Sadiq Khan wrote in his 2016 election manifesto to run the UK capital.
A decade since he won the role, London is on track to build the fewest homes per year since the aftermath of the second world war. It's an unhelpful slump for the Labour Party that Khan represents, ahead of high-stakes local elections in which its track record on housing and the wider cost of living are on the agenda for voters.
Elevated interest rates, economic uncertainty and creaking consumer confidence have clobbered housebuilding across the country. But in Labour-run London, where councilors across the 32 boroughs are up for reelection but the mayor is not, the situation is particularly dire.
Labour is expected to lose a slew of council seats in London, with both the Greens and Nigel Farage's Reform UK party forecast to make gains. An MRP poll conducted by YouGov for Sky News and Politico showed Labour on course to win the highest vote share in 15 of the city's 32 boroughs, down from 21 at the previous election. That would spell the party's worst performance in 44 years, the last time it won fewer than 15 London councils.
Housing output -- and its role in supporting economic growth -- was a key issue at the general election in 2024, shortly after Khan had secured a fresh four-year mandate as mayor. This time, though, other parties are focusing on the maintenance of existing social housing as a battleground issue.
The Green Party, Labour's main rival in several boroughs, has put this at the top of its housing agenda. "Housing comes up all the time with residents," Zoe Garbett, Green candidate for mayor of Hackney, said in an interview with Bloomberg News. "The first way it comes up is damp and mold and people's housing repairs. Like people having five contractors coming to look at the same issue and it's not getting resolved."
Building Freeze
Construction in the city has been showing signs of further stress in recent weeks. Berkeley Group Holdings Plc, far and away London's largest residential developer, said this month the economics of building homes in the capital have become so unfavorable it will not be buying any more land for the foreseeable future.
It's a major blow for London. The company accounts for one in nine affordable homes and one in six private homes currently under construction in the capital, according to data compiled by residential research company Molior. This represents about a 15% market share.
"In this environment, Berkeley does not believe it can make its required rate of return on investment in new land acquisitions," the company told investors at the start of this month."This is due to the continuous increase in the tax and regulatory burden on residential development."
Berkeley isn't alone. Crest Nicholson Holdings Plc warned this week that it was in talks with lenders after issuing a profit warning that caused the biggest drop in its share price on record. Analysts now expect other homebuilders to pull back too.
To be sure, much of the tax and regulatory burden that's blighted London homebuilding has been set by central government, which for most of Khan's decade in power has been controlled by the Conservative Party. Still, Khan's own signature housing policy had its fair share of critics among developers.
At the start of his first term he unveiled a flagship policy that came into effect in the 2017 iteration of the London Plan, the key framework that sets the rules for development in the city. Developers would get fast-track planning for projects where at least 35% of the homes were designated as affordable.
"While the policy is well-intentioned, in practice, it is a major barrier to delivery and contributes to a situation in which few homes of any tenure are being delivered,"the Home Builders Federation wrote in a 2025 report, calling for a reduction.
After four years of steadily dwindling completions and with Labour now also in charge of central government, Housing Secretary Steve Reed and Khan jointly announced emergency measures to kick start house building in the capital in March.
And at their heart is an apparent abandonment of the mayor's central housebuilding policy.
There's a new fast-track planning route for sites that deliver at least 20% affordable housing, as well as temporary cuts to the Community Infrastructure Levy, a charge paid by developers building in the capital.
"We face a perfect storm and I think you have got to be dexterous and pragmatic,"Khan said in an interview with the Zero podcast from Bloomberg Green this week.
"Never allow best to be the enemy of the good."
That storm has included Brexit, the impact of the pandemic and Russia's invasion of Ukraine, as well as the spike in UK borrowing costs that followed short-lived Prime Minister Liz Truss' so-called mini-budget in September 2022, according to Khan. Developers might also add the regulations that followed the 2017 Grenfell fire, introducing tougher rules on the number of staircases that must be provided in taller buildings and requiring them to pass three inspections before regulators can sign off.
"What the developers were saying to us -- and we tested this -- our schemes aren't viable, the cost of the land, steel inflation up by 50%, concrete inflation up by 44%, we can't get the staff, we’re having to have two staircases now rather than one, you are asking us to have carbon efficient buildings, you are asking us to put in heat pumps, it is really hard Mr. Mayor," Khan said.
While the new measures were only announced in March, there are signs that things were starting to turn in the first quarter. Sales of new build London apartments rose 30% from an extremely low base, according to Molior. Work also started on 2,103 new private apartments in the first quarter, a 50% jump.
Still, that’s less than 10% of the 22,000 quarterly starts required for London to achieve its target of 88,000 homes annually. And since then, war in the Middle East has caused a rapid deterioration in both buyer and developer sentiment.
"Yes, things were looking up,"Molior director Tim Craine said as he unveiled the first-quarter stats.
"But because the cost of capital got a punching from the war in Iran, the really telling story is what happens next. Without a meaningful return of demand -- especially from first-time buyers and off-plan investors -- the industry risks winding down surprisingly quickly."
Such demand side measures are largely beyond the control of Khan and rest instead with his Labour colleagues sitting inside the Treasury.