Is development finance the key to fixing London’s housing crisis?
London’s housing crisis is certainly nothing new, but its consequences are becoming increasingly difficult to ignore.
Beyond the rising numbers of people locked out of homeownership and the growing strain on renters, new research confirms that the shortage of housing isn’t just a social issue—it’s an economic one. For property finance professionals, this presents both an urgent challenge and a significant opportunity.
Recent analysis by NERA, commissioned by City Hall, London Councils, Trust for London, and the G15, has put some hard numbers behind the problem. It found that for every 1% rise in housing costs, productivity takes a 0.14% hit. That might not sound like much, but across London’s economy, it adds up to a £7.3 billion loss over the next decade. If London wants to maintain its position as a global business hub, accelerating housebuilding is no longer optional—it’s essential.
Affordability and the development gap
Londoners are increasingly feeling the squeeze. According to the latest Ipsos survey, 42% of personal monthly income is now spent on rent or mortgage payments, with seven in ten renters seeing an increase in their housing costs over the past year. Demand for affordable housing is sky-high, but supply simply isn’t keeping pace. There are 320,000 households on social housing waiting lists, while the private rental market is becoming increasingly unaffordable for lower-income residents.
It’s not just about affordability—it’s about the knock-on effects. More than 183,000 Londoners—equivalent to one in every 50 residents—are currently homeless and living in temporary accommodation, with local boroughs allocating £4 million per day to provide shelter. Unless something changes, this crisis will only deepen, further reducing affordability, increasing pressure on public finances, and eroding the workforce that keeps London’s economy moving forward.
Where does development finance fit in?
Solving London’s housing crisis requires a multi-faceted approach, but increasing supply is non-negotiable. The Chancellor, Rachel Reeves, has placed economic growth at the heart of her agenda, making housebuilding a priority. The scale of housing provision required means that large-scale developers alone cannot meet demand. SME developers will need to step up to deliver schemes on small and medium-sized plots—and for that, they need access to the right funding.
The development finance market is evolving rapidly to support this effort—whether it’s funding the purchase of land, refinancing an existing property, or securing capital for a construction project.
At London Credit, we launched our own development finance pilot in October 2024 and are actively working with a number of developers to refine and enhance our proposition. We believe our entry into the development finance market has come at exactly the right time. With affordability pressures mounting and government policy shifting towards accelerating housebuilding, financial solutions must evolve. It’s not just about providing lending—it’s about delivering funding structures that help developers overcome hurdles, move quickly, and deliver projects that add real value to the housing stock.
London’s housing crisis isn’t going to resolve itself, but there are signs of change. Policy momentum is shifting towards housebuilding, and lenders are adapting to meet demand. The pieces are coming together—but it’s the availability of development finance that will determine how quickly progress is made. At London Credit, we are committed to ensuring things move in the right direction.
Jake Mccausland, Head of Development Finance at London Credit
