Soaring construction costs are exacerbating London’s housing crisis, according to independent think tank Centre for London (CfL).

London’s housing crisis continues to escalate. The government wants to see 88,000 new homes built in the capital every year until 2030, but CfL’s analysis reveals that this will become increasingly challenging.

It has revealed that the upfront cost to developers of constructing these new homes will be at least £2.2bn.

That is roughly 43 times higher than the equivalent target in the West Midlands (£50.6m), and 36 times higher than in Greater Manchester (£61.3m).

This estimate was reached by combining the costs associated with the Building Safety Levy, section 106 agreements, the Community Infrastructure Levy and planning fees for local councils.

It also found that 60% of Londoners whose housing costs have increased in the last 12 months said they have considered moving out of the capital.

This data was shared at the London Housing Summit 2025 this week, at which the rapid delivery of genuinely affordable homes was the main topic of discussion. 

Speaking at the event, Sem Moema, chair of the London Assembly’s housing committee and a Labour member representing Hackney, Islington and Waltham Forest at City Hall, said: “If we don’t fix the housing crisis, the character of the city will be extinguished. I see in my own constituency the hollowing out that occurs and continues to occur, when the failure to fix the housing crisis for a decade and a half changes the character of our city, and not for the better.

“In all three boroughs, we're being forced to consider closing schools, because there are basically no children left in north-east London. Families can no longer afford to own or even rent properties in my boroughs.”

Antonia Jennings, CEO of CfL, said: "We've seen increased investment in the Affordable Homes Programme, planning reform which allow building on low-quality sections of the green belt and the new Renters (Reform) Bill. But these are only the very first steps.

“We urgently need ambitious solutions that respond to the scale of the challenges facing the capital. The government must get behind London's leaders and invest in the capital to finally turn the corner on the housing crisis.”

Other issues discussed at the summit included the number of Londoners living in poor-quality homes. Some 31% reported living with damp or mould, 27% said they were not able to keep their home warm even with the heating on, and 23% claimed to have encountered invasive pests such as rats, mice and bed bugs.

There is also the problem of short-term lets in the city, with one in 32 London homes listed on platforms such as Airbnb. This is growing substantially year on year. Just in the central borough of Westminster, an area that is about 8.29 square miles (13 sq km), there are 16,000 properties available for short lets.

Westminster Council leader Adam Hug told the summit that what began as a way for Londoners to make some extra money by occasionally letting out a spare room or flat has become a professionalised and commercial operation, with larger landlords owning almost 25% of all listings.

Attendees at the summit suggested that, with no effective regulation in place, the under-regulated short-term let market is putting pressure on local housing availability and affordability.

Jennings said: “We urgently need ambitious solutions. The government must get behind London’s leaders and invest in the capital to finally turn the corner on the housing crisis.”