The London Housing Supply Crisis 2026–2028: Why Rent Will Remain High

London’s rental market is brutal — and the biggest reason isn’t demand. It’s supply. As we move into 2026, the City is facing what may be one of its most serious supply squeezes in decades. With build-to-rent (BTR) slowing, affordable home starts behind target, and planning approvals bottlenecked, rents are likely to stay elevated or even rise further.

This deep-dive explores why London is unlikely to build itself out of its crisis by 2028, what that means for renters and landlords, and where the biggest risks and opportunities lie.

📉 What the Data Really Shows: A Growing Supply Gap

According to the London Assembly’s Affordable Housing Monitor 2025, delivery under the Affordable Homes Programme (AHP) 2021–26 is falling short:

Only **5,188 starts** by March 2025, against a target of 17,800–19,000. :contentReference[oaicite:4]{index=4}
The programme aims for **23,900–27,100 starts** by March 2026, making this shortfall particularly risky. :contentReference[oaicite:5]{index=5}
GLA data also shows planning approvals concentrated on fewer, large sites, reducing small-site development — which historically helped with housing density. :contentReference[oaicite:6]{index=6}

On the private rental side, research by Savills / London Councils shows that many landlords are selling their rental stock to owner-occupiers, reducing the number of PRS homes in the most affordable outer boroughs. :contentReference[oaicite:7]{index=7}

🏗️ Build-to-Rent: Slowed Momentum Despite High Demand

Build-to-Rent (BTR) was once seen as the key to solving London’s rental shortage — but growth is cooling:

A BusinessLDN report found BTR construction in London fell by **11%** between Q3 2023 and Q3 2024. :contentReference[oaicite:8]{index=8}
According to the British Property Federation’s Q1 2025 report, the BTR pipeline is large (over **286,000 homes** nationally), but many are at risk due to financing and planning barriers. :contentReference[oaicite:9]{index=9}
A CBRE / London New Build report indicates that construction starts in Q1 2025 are at their lowest since 2010. :contentReference[oaicite:10]{index=10}

With fewer new BTR starts, supply may not keep up with rental demand — especially among young professionals and families seeking quality rental homes.

🏛️ Planning & Regeneration: Good Intent, But Slow Delivery

The London Assembly’s Unlocking Development report outlines the major barriers to rapid delivery:

Planning delays and regulatory cost escalations
A need for more small-site development to boost supply :contentReference[oaicite:11]{index=11}
Funding issues for affordable housing in boroughs under financial strain

Even with new planning routes and incentives, the pace of construction may struggle to match demand in the short-to-medium term.

💼 Implications for Renters (2026–2028)

Here’s what the supply crisis means for those renting in London:

Rents likely stay high or increase: With limited new supply, rental growth of 3–6% or more is possible through 2028.
Competition will intensify: Especially for BTR, newer homes, and affordable units.
More pressure on outer boroughs: As inner London remains unaffordable, people will look outward — but supply there is shrinking too.
Longer tenant chains: Because fewer homes will turn over quickly, renters might need to commit longer or act earlier.

📈 Opportunities for Landlords

While the supply gap is bad for renters, it also presents strong opportunities — especially for well-located BTR and private landlords:

Properties in regeneration zones could command **premium rents**.
Older PRS units with good EPC ratings may see increased demand.
Landlords who operate professionally (good management, low void periods) will have a competitive edge.

🔮 Looking Ahead: What Could Change Supply Dynamics

Some factors could help ease the supply shortage — but risks remain:

The Government’s £2 billion investment for affordable homes could help, though it's lower than previous averages. :contentReference[oaicite:12]{index=12}
Policy reforms: New planning routes aim to speed up approvals for developments that promise at least 20% affordable housing. :contentReference[oaicite:13]{index=13}
BTR innovation: If financing improves, Build-to-Rent could accelerate again.
Green-belt releases and densification may be part of long-term supply solutions.

✅ Renter Action Plan: How to Navigate the Crisis

Start your search early: Especially for areas expected to see supply constraints.
Be open to BTR: These may offer better long-term value and fewer void risks.
Negotiate smartly: In high-demand areas, a longer lease or pre-payment might help.
Track EPC ratings: Efficient homes will save you more on bills.
Consider outer-London regeneration zones: These may be your best bet for value + growth.