Housebuilding Collapses in UK Towns Amid Rising Costs and Low Buyer Demand

Housebuilding has experienced a dramatic decline in numerous English towns and cities, with high construction costs and a shrinking pool of buyers contributing to a significant "new-build drought." According to an analysis of government data by Keyzy, a rent-to-buy provider, over half of local authorities in England are now completing fewer homes than they were in the 2020-21 period, and one in three have seen completions fall by at least a third.

Some areas have seen particularly steep declines. Lincoln, for instance, has experienced a 97.5% drop in new home completions over the last five years, falling from 400 homes in 2020-21 to just ten completed per year in the subsequent two years. Crawley in West Sussex saw a 93.8% decrease, and Reigate & Banstead in Surrey reported an 89.8% fall, from 490 homes to 50.

"New-build droughts are cropping up across the country," said Jeremy Matallah, co-founder of Keyzy. "These are areas that might have been doing quite well five years ago in terms of solving the housing crisis, but have since seen their pace of home creation collapse."

The data indicates that this downturn is not limited to smaller towns, with major cities also affected. Sheffield has seen an 82% drop in completions, from 1,070 to 190 homes. Liverpool experienced a 66% decrease to 160 homes, and Manchester recorded a similar 66% fall, with completions dropping to 1,100 in a city of 600,000 people. Across Greater Manchester as a whole, completions fell from 8,620 in 2020-21 to 4,920 in the latest reporting year.

Even London, while still building a substantial number of homes, has seen an overall decline of 12.9%, with 17,760 homes built last year compared to 20,380 five years prior. Certain London boroughs have seen more drastic reductions; Kensington & Chelsea reported an 80% fall, while Kingston upon Thames and Sutton each saw a 77.8% decrease. However, Tower Hamlets accounts for the largest absolute decline, with a 73.9% drop representing 2,120 fewer homes annually.

Conversely, some areas are bucking the trend. Fareham in Hampshire has seen a 457% rise in completions, reaching 390 homes. Uttlesford in Essex reported a 378% increase to 860 homes, and Torridge in Devon saw a 358% rise to 550 homes. In London, the borough of Brent has recorded a 661% increase, more than doubling its building rate to 1,750 homes.

Property experts attribute the slowdown to a combination of falling property prices and escalating build costs. The Home Builders Federation reports that building a home now costs approximately £76,000 more than in 2020. Data from the Building Cost Information Service shows a 50% increase in average building costs over the last decade. In London, the cost to build a typical two-bedroom flat has risen by an estimated 75%, from £245,000 in 2016 to around £430,000 today. This increase in cost contrasts sharply with a modest 6% rise in the average value of London flats over the same period.

Roughly half of the increased cost is attributed to materials and labor, with the other half stemming from regulations, levies, and taxes. The issue has led to work being halted on thousands of homes across the capital, with development schemes paused due to contractor insolvency or weak sales markets. Industry figures indicate that annual planning consents for new homes dropped by 39% in the three years to the end of 2025, with construction starts down 31% during the same timeframe.

In response to the housing crisis, Greater Manchester Mayor Andy Burnham has pledged to initiate the largest council house-building program since the post-war era. However, industry bodies like Propertymark emphasize the need to ensure that all types of housing – social, council, private ownership, and private rental – are developed to meet diverse market needs.