It’s hardly breaking news that the UK is in a housing crisis.
The gap between average income and typical house price is widening.
In other words, people now need a significantly larger deposit to get onto the housing ladder.
This creates a chasm that the British government is struggling to fill.
It’s not just house-buying that’s been affected, either.
Rental prices in England went up 6.7% this year – far beyond the rate of inflation. And Wales suffered even more, with 8.2% growth.
Politicians promise to fix housing at every election, but it’s rare that they suggest anything beyond ‘building more’.
Many industry experts agree that this will make absolutely no difference at all.
So, what is the real solution to the UK housing crisis? And what were the initial causes that must be avoided moving forwards?
Let’s break it down.
The myth of “just build more houses”
Ask most people what’s gone wrong and they’ll answer: Britain just hasn’t built enough homes.
It’s a simple, comforting answer. But it’s also misleading.
Keir Starmer’s election manifesto promised to build 1.5 million new houses by 2028. And this approach is popular with the Greens, Liberal Democrats, and Conservatives.
Unfortunately, many housing experts think that this doesn’t even scratch the surface of the real problem.
They point out that the UK has more dwellings than households. In fact, government data indicates a surplus of 1.12 million homes and rising.
(Dwellings can refer to empty properties, second homes, holiday rentals, and homes on the market waiting to be sold or let.)
Yet, prices keep soaring. Why?
Because property, like any other asset, doesn’t exist in a vacuum. Prices are pushed up faster than bricks can be laid, via:
- Rising incomes
- Cheap credit
- Stamp duty incentives
- Speculative investment.
Perspective on new builds
Take last year: 250,000 new homes were built.
This sounds like a lot, but when you set it against Britain’s total stock of 26 million homes, it’s not even 1% growth.
Supply is always playing catch-up with demand inflation.
And here’s the kicker: new builds are often 15 to 20% more expensive than existing homes.
Buyers love that ‘new home’ feel, but as soon as they walk in the door, value falls by 20% and takes years to recover.
So, while ‘build, build, build’ makes a good slogan, the evidence suggests it’s not the silver bullet many think it is.
Supply needs demand
A supply of 1.5 million new-build homes is one thing.
But if there are no initiatives to stimulate demand, then there will be no-one to buy those homes.
The last government, in power between 2010 – 2025, ended the popular Help to Buy scheme in 2023.
To date, there has been nothing substantial to replace it and support first-time buyers getting onto the housing ladder.
Who are the “winners” and “losers” in the current system?
Property players
To understand today’s housing market, you need to follow the money.
It’s been a long time since the purpose of a property was just shelter. These days, it’s:
- An asset
- A pension plan
- A source of income.
So, almost all landlords want house prices to keep rising – even if renters suffer.
Lenders
Banks and lenders love big mortgages, too.
The more they lend, the more interest they collect. And mortgages are assets on their books.
If homeowners today must borrow more to afford a house, lenders will not have complaints.
But they might complain that as fewer people can afford homes, they will have fewer customers. And restrictions on lending will limit what they can offer potential buyers.
Since the Global Financial Crisis (GFC) in 2008, lenders have had to implement stricter affordability tests and lower loan-to-income ratios.
In layman’s terms, this means that people often need larger deposits to buy a home.
Deposit trends
Between 1974 – 2004, the average house deposit was around 19% of two people’s annual income.
Today, it stands at 86.65%.
If this trend continues, it’s easy to see how even fewer people will be able to become first-time buyers without some kind of radical change.
Overseas buyers
Over 70% of property transactions in central London involve overseas buyers.
Although it’s easy to blame them for pricing locals out, there’s an uncomfortable truth here: without that foreign capital, many large developments wouldn’t get built at all.
Solutions that bring problems
Hiking taxes to scare away investors will slow down property developments all over the country.
Housing supply will fall, pushing prices up even further. Renters and the working class will get hit the hardest.
In this vacuum arises the possibility for state-built housing.
Unfortunately, the government hasn’t covered itself in glory on this front.
By selling off council housing without properly replacing it, they hollowed out the only supply of homes that sat outside the asset bubble.
Today, 1.2 million people are stuck on housing waiting lists, costing councils £4 million a day on temporary accommodation.
Is it time for a social housing resurgence?
Red tape, red tape, and more red tape
Many economists and housing experts agree that the crisis can only be solved through a combination of both the public and private sector.
More social housing, yes. But also removing red tape and fixing the planning system, to truly unleash private developers.
At a glance, 90% of planning applications get approved.
But in reality, before development can begin, it takes years of:
- Appeals
- Negotiations
- Consultations
- Reports.
Big developers can afford to navigate this. They’ve got teams of consultants, lawyers, and lobbyists.
But SME builders, that once built a third of Britain’s housing, have been driven out entirely.
Consider this: Grainger Plc (one of the UK’s largest residential developers) employs 50 consultants on a single scheme.
How can an SME builder possibly compete with that?
Red tape and long-winded planning processes means that the SME construction market has collapsed.
Everyone loses from this.
SME builders are nimble, flexible, and far more adaptable to changing circumstances.
Instead, we’re left with a handful of volume housebuilders who drip-feed supply to keep prices buoyant.
It’s not their fault they’ve been handed a monopoly. It’s the red tape that’s done it.
NIMBYism and the culture of “no”
No one enjoys complaining more than the British!
And in this vein, NIMBYism (“not in my back yard”) has arisen around the development of new properties.
Many people who advocate for new homes, insist that they must be built elsewhere in the country. They don’t want it on their doorstep.
For private sector thinktanks and developers, this is a source of frustration. After all, insistent complaints, without alternative solutions, irritate everyone!
What’s worse, local councils – ever mindful of re-election – often cave to the pressure.
Here’s the hard truth: Britain cannot solve its housing crisis if every community believes houses should be built somewhere else.
At some point, we need to confront the hypocrisy of saying “yes, build homes – just not here.”
The UK government must consider a new communications policy around development. This will make developments more digestible and ensure concerns are addressed, including those around:
- Infrastructure
- Amenities
- The environment.
New-build properties – a broken dream?
A huge percentage of new houses in the UK are ‘new build’ estates.
On the surface, these are an attractive proposition because owners get:
- Modern design
- Energy efficiency
- The security of being the very first inhabitant.
Unfortunately for buyers, the reality rarely lives up to the dream.
New build properties often drop in value as soon as they move in. It can take around 5 years for the price to then return to its original sum.
This means that unless they’re living there for 10 years or more, the profit is negligible.
And let’s not forget quality.
Many new build flats are sold as ‘luxury’ – especially in London – but turn out to be shoddy. Common issues include:
- Broken lifts
- Faulty wiring
- Unreliable property management companies.
Demand driving declining standards?
There’s a desperate need for housing, and developers – who aim to maximise their margins – know it.
This has led to a widespread public perception that poor-quality builds often get waved through regardless of standards.
Some evidence suggests there might be some truth in this notion.
For example, the Competition and Markets Authority (CMA) found that reports of snagging issues have increased over the past decade.
And the National New Home Customer Satisfaction Survey 2025 found that 93.7% of new build buyers found problems with their properties.
(However, it’s worth noting that an equal percentage in the survey also stated that they would recommend their builder to a friend.)
Misleading marketing
One of the main issues is how the private developers describe developments to potential residents.
Overstating how gorgeous it’ll be gives people expectations that aren’t fulfilled
Again, local government could monitor the way that these estates are communicated to potential buyers. Anything deliberately misleading must be classed as a violation.
The global picture
To better understand the UK housing crisis, you consider the global picture.
It’s tempting to think that this is a uniquely British problem. But that couldn’t be further from the truth!
Canada, Australia, and the USA are all grappling with the same crisis.
Property is more expensive everywhere.
In Fact, all asset classes have seen a huge growth in recent years.
Even in India, one of the world’s fastest developing nations, the supply-to-demand ratio of affordable housing has dropped.
In the wealthiest cities, developers have shifted toward luxury projects and has dropped from 1.05 (2019) to just 0.36 in early 2025.
In other words, in 2019, for every 100 families that needed homes there were 105 properties available (and in 2025, only 36 properties).
Does immigration play a part in the problem?
Net migration currently adds 100,000s of new residents to the UK population every year.
With more people living in the country, there’s greater competition for a limited housing stock.
Immigration has now grown at a faster rate than new houses have been built.
And while newbuilds occur all over the UK, migrants disproportionately live in cities like London and Birmingham, which feel the strain the most.
Yet, even if migration fell to zero tomorrow, the historic housing undersupply would remain.
Plus, there would be a knock-on effect to the other industries that rely heavily on migration, including development.
For those with one eye on growing the social housing sector, lower immigration would challenge that, too. Slower tax growth creates less fiscal room to fund social infrastructure.
It’s a difficult balancing act to maintain.
So, how do we fix the housing crisis?
This is where the real debate begins.
Everyone has strong opinions and over-simple solutions on this matter.
‘Tax the rich’
Simply raising taxes won’t help. If anything, it risks driving away the private capital that makes development possible.
And landlords will increase their rents to compensate for extra taxes, and who gets hit by this?
Renters, and those on lower incomes.
The real answer lies in unleashing both the private and public sector – but in the right way.
Cutting red tape and streamlining planning is a crucial first step. Stop drowning developers in paperwork and appeals. Give them certainty, speed, and clarity.
The SME construction sector has almost entirely collapsed in recent decades. But it doesn’t need to be that way!
SME developers will only return if the system is affordable and navigable.
The government could offer incentives and grants to companies below a certain size.
It must also commit to more social housing, i.e., properties that lie outside the housing bubble and thus offer a truly affordable place to live.
Balance this with lower immigration, and the ratio between humans and homes may become more manageable.
Certain limitations may be introduced for overseas investors. But, at the same time, these people can’t be demonised or scared away. It’ll destroy funding for future developments.
A compromise is key.
The goal isn’t to turn British housing into a free-for-all. It’s simply about:
- Removing bureaucracy
- Encouraging SMEs to re-enter the game
- Avoiding short-term solutions to a long-term problem.
These measures can then be complimented with incentives and schemes for first-time buyers, which will keep demand high.
A capitalist solution to a capitalist problem
Scaring away the wealthy hurts the low-income households more than anyone.
Would-be developers will invest in foreign housing, meaning less taxes are paid in the UK, and there’s less housing supply.
Data shows that rising taxes often results in less actual tax being collected. These investors must be treated as partners: not pariahs.
The problem can be solved by making it easier, faster, and more viable for people to build. That means:
- Reforming planning
- Cutting red tape
- Giving SMEs a fighting chance.
As Michael Keaveney, Director of Land and Development at Grainger, puts it:
“More housing would come forward if you allowed the SME development sector the freedom to do so.”
And he’s right.
Yes, we need social housing. Yes, we need better quality control. But above all, we need to stop treating the private sector as the enemy and start seeing it as the solution.
After all, without private capital – domestic and foreign – Britain won’t build its way out of this mess.
Business as usual is not the answer
And if we don’t change course? The crisis will only get worse:
- More young people locked out of ownership
- More families in unaffordable rentals
- More councils bankrupted by temporary housing costs.
The housing crisis isn’t unsolvable.
But solving it means being brave enough to face an uncomfortable truth: business as usual must be turned on its head before we can see any real change.
