The BBC has reported claims that the capital’s housing crisis cannot be solved simply by building more homes.
The argument runs that demand has outstripped anything supply could plausibly match anytime soon, so in the short run, the real issue is not just building more, but who owns existing homes.
The argument is more sophisticated than outright denial. It is also wrong.
The BBC’s article notes that London has had roughly 421 homes per 1,000 people in both 2002 and 2024, alongside a stable dwellings-to-households ratio. It implies that this is evidence that supply has kept pace.
It isn’t.
Household formation depends on housing costs. When rents are high, young adults stay with parents, share with flatmates and delay forming households. They do not appear as ‘unmet demand’; they disappear into someone else’s spare room.
The effect is large. The share of 25–34-year-olds living with parents rose from 13% in 2006 to 18% in 2024: around 450,000 more young adults than if the rate had stayed constant. What looks like equilibrium is simply scarcity suppressing demand.
Another argument is that London would have needed nearly a million additional homes to reduce price growth by 30%. Does that mean supply is too weak a lever to matter? Putting to one side the fact that those of us trying to get on the housing ladder would love 30% less house price growth. This answers the wrong question.
The studies this line of argument relies on measure what happens when new homes are added within a system that makes building extremely difficult. In such a system, increased demand produces little extra construction and mostly higher prices. Even a large addition of homes only takes the edge off.
That is not evidence that supply is ineffective. It is evidence that the system is constraining it.
It is like timing how long it takes to fill a bath with a thimble and concluding that baths cannot be filled. Of course the effect looks small. The real question is why we are using a thimble.
Where building can respond, rising demand brings forth new supply and moderates prices. Where it cannot, the same demand appears as higher rents and land values. The responsiveness of supply is not fixed; it is determined by policy.
London house prices have outpaced rents since 2002. On its face, this could look like evidence of asset demand rather than supply failure.
In fact, it suggests the opposite.
Housing is both a consumption good and an asset. Its price reflects expected future rents. If supply is constrained and demand rising, buyers expect rents to keep increasing because little will be built to absorb pressure. They bid up prices accordingly.
You do not need foreign capital or loose credit to explain the gap. According to LSE research, rising demand in a system that cannot build enough homes explains roughly two-thirds of the increase in London’s price-to-rent ratio since the late 1990s.
The same logic explains tenure shifts. When too few homes are built, higher-income households do not just bid up prices; they displace others. Each rung of the ladder presses down on the one below. Those who would have bought must rent; those who would have rented are pushed into smaller, poorer housing or out of the city altogether.
These outcomes are real, and they are not separate problems. They are how scarcity propagates. When supply cannot respond, those with the least purchasing power bear the cost.
If homes are owned by the wrong people and let too expensively, rent controls and buyer restrictions may look like solutions. But if the underlying problem is too few homes, both make it worse.
Rent controls, which politicians like Zack Polanski have proposed, cap returns. Faced with lower returns, landlords sell, repurpose or exit. In Berlin, rental supply fell far faster than rents for protected tenants. In Scotland, between-tenancy rents surged as landlords reset prices at each vacancy. Imposing controls in an already constrained market entrenches shortages.
The foreign-buyer argument, put forward by others again, is weaker still. For overseas purchases to drive the crisis, those homes would need to sit empty at scale. They do not. Most are lived in or rented out, and vacancy rates among foreign-owned properties are not materially higher than average.
The core error here is to mistake an effect for a cause. A stable homes-to-households ratio does not show that supply is sufficient; it shows that it is constrained.
In a system where planning acts as a thimble, the housing stock can only expand at the rate permitted. Observing that the water level is not rising fast enough does not mean baths cannot be filled. It means the thimble is the problem.
Until supply is allowed to respond to demand, policies that merely redistribute scarcity will deepen, not solve, the crisis.
An earlier version of this article incorrectly attributed the view that London does not need more housebuilding to the Centre for London and its research director Rob Anderson. The Centre for London says that building more homes is a non‑negotiable part of the solution to the capital’s housing challenges
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