Britain’s housebuilding collapse…

Add a Middle East war and a political crisis at home. What does all this mean for the rental market? 

The government’s promised 1.5 million new homes by 2029 looks ever more like a drain-pipe dream! Some events are outside Westminster’s control, but some are very much within it; both are making that ambition look highly remote.
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When Labour came to power in July 2024, its pledge that 1.5 million new homes would be built by the next general election was one of its most confident promises. 

This kind of round number sent out a strong message of intent to electors. But nearly two years on, with a stalling economy, a geopolitical crisis in the Middle East and an acute political one at home, the target looks increasingly impossible. 

For landlords and the construction industry, the consequences extend well beyond party politics. It means that struggling construction companies are facing a crisis of their own. Thin or non-existent development margins mean the supply gap will take years to close. The result is a booming rental market.  

Fewer new homes in the face of increasing population demand means continued pressure on an already over stretched private rented sector - rent prices remain high. 

What do the numbers tell us?

The latest data from the National House Building Council paints a doom-laden picture. New home registrations in the first quarter of 2026 fell six per cent compared with the same period a year earlier, with just under 27,000 plots registered across the UK. 

Private sector registrations were down seven per cent, and eight out of twelve regions recorded declines. London suffered the sharpest fall of all, down 37 per cent year on year. 

All this is a continuation of a growing trend driven by planning and building safety regulation delays and the deteriorating viability of building projects. 

The government’s own data, published by the Ministry of Housing in March 2026 doesn't sugarcoat the scale of the problem. Independent fact-checkers have calculated that around 340,000 net additional dwellings were added to England’s housing stock in the last two years – that’s only around 23 per cent of the target total. 

At this rate, hitting the 1.5 million house building target will take more than five and a half additional years after this parliamentary term. The verdict from most analysts: a diabolical result. 

What does it mean for landlords? 

The supply shortfall has a direct bearing on the private rented sector (PRS). Every home not built is another household that continues to compete for existing rental stock. 

Demand goes through the roof. The result is multiple applicants for every rental coming on the market and huge disappointment for those who fail to secure accommodation at a reasonable cost.

With the Renters’ Rights Bill having passed into law and the regulatory environment for landlords tightening considerably, some private investors are already reducing their portfolios, further constraining supply. 

A combination of constrained supply, increasing regulations and high borrowing costs is creating upward pressure on rents. This may be welcome to those landlords who remain in the market but it’s painful for those whose only option is to rent.

High build costs and low profits

For developers and investors evaluating new projects, build cost inflation is running at all-time highs across the sector. It’s driven partly by Britain’s high energy costs to start with but more recently by the added energy cost linked to the Middle East conflict. 

Add to all this the continuing increases in building materials and labour costs, combined with rising financing costs far higher than anticipated at the start of the year, and you have the proverbial perfect storm around house building.

Outside of the southeast, it’s been a little easier. The North and Midlands have seen significant increases in new home registrations in the first quarter of 2026; the Northeast was up 15 per cent, and Yorkshire and the Humber was up seven per cent. 

In the north, land values are lower, buyer affordability is less stretched and therefore a profit for developers is easier to achieve. 

Size doesn’t matter

The largest stock market listed housebuilders have not been above the fray – share prices have crashed as building projects have been put on hold. 

Share prices of leading developers are currently at a 15-year low: Vistry is down 55 per cent, Crest Nicholson 52 per cent, Barratt Redrow 34 per cent, Taylor Wimpey 27 per cent and Persimmon 22 per cent. 

The latest available monthly health check by RICS simply added to the gloom, with estate agents warning of lower sales and enquiries.

The NHBC’s own corporate strategy director, Daniel Pearce, has been blunt about the outlook. Commenting on the first quarter 2026 registrations, he described the situation as a “perfect storm” of subdued markets, rising mortgage rates, cost pressures and geopolitical uncertainty. 

Pearce calls for targeted buyer incentives, a new first-time buyer scheme in the mould of Help to Buy and he urges the government to ease regulatory requirements on smaller developers.

Mortgage price shock

In the weeks following the outbreak of hostilities in the Middle East, more than 1,500 mortgage products were withdrawn from the UK market. Two-year fixed-rate products moved from around 4.8 per cent to approximately 5.5 per cent.

This equates to an increase that adds roughly £90 per month to the cost of a £200,000 repayment mortgage. For first-time buyers already stretched by house price inflation, that shift has effectively pushed homeownership beyond reach for most people who had previously been close to affording a purchase.

The Bank of England voted to hold its base rate at 3.75 per cent at its April meeting but it signalled the possibility of what it described as “forceful” rises if inflation continues to climb. 

UK inflation reached 3.3 per cent in March 2026, well above the Bank’s two per cent target. JP Morgan is among others forecasting at least one rate increase before the end of this year. The prospect of lower borrowing costs, which had been expected as a near-certainty at the start of 2026, now looks highly unlikely. 

Another political crisis

Into this already gloomy picture steps Labour’s political crisis of its own making. The local council elections in early May 2026 produced results that were, by almost any measure, catastrophic for the governing party. 

Labour lost control of more than thirty councils and around 1,500 councillors, with voters defecting both to Reform UK on the right and the Greens on the left. The projected national vote share for Labour was 17 per cent – little more than half of what the party secured at the 2024 general election.

For house building policy, the implications have been significant. The ambitious planning reforms that were meant to unlock supply - a revised National Planning Policy Framework published in late 2024, mandatory local housing targets, and restrictions on councils’ ability to block development on green belt land - all require substantial political will to implement.

It would be misleading to blame the Middle East war and Labour’s internal troubles as the only obstacles to building. The UK construction sector entered 2026 with confidence at an historical low. The Development Index 2026, based on opinions from senior figures across the developers, housebuilders and asset managers, reported “low” or “very low” confidence. 

Skills shortages are getting worse; specialist roles in quantity surveying, land acquisition and planning policy compliance are among the hardest positions to fill. The construction workforce is shrinking as experienced workers retire faster than a new generation is trained.

The planning system, despite the government’s reform efforts, continues to move very slowly. The NHBC noted that in the first quarter of 2026 “the impact of the recent planning changes has yet to be felt." 

The gap between government policy announcements and on-the-ground delivery remains some distance apart. Persimmon, at its 2024 results presentation, suggested the true benefit of planning reform would not become visible until late 2026 and into 2027 at the earliest.

London presents a particular challenge. In the capital new home registrations fell 37 per cent year on year in the first quarter of 2026. This follows a 27 per cent decline in 2025. 

A more demanding building safety regime for high-rise developments and sluggish processing by the Building Safety Regulator, plus the chronic affordability gap between development costs and achievable sale prices and you have multiple housebuilders scaling back their London operations. 

The result: unaffordable housing delivery in the capital is creating the most acute shortage where supply is needed most. 

What happens next?

UK mortgage rates in the coming months will be the single most important variable for the housebuilding market, house buyers and buy-to-let investors. 

The Middle East ceasefire has already led to some modest interest rate cuts, and if the situation stabilises, lenders may begin to change products and ease pricing. 

Any resumption of hostilities, on the other hand, will further boost inflation, which would send borrowing costs higher.

In Westminster, the immediate political question is whether the government emerges from its leadership crisis with a revised programme that can get its housing commitments back on track. 

For the building industry a new buyer incentive scheme aimed at first-time buyers would help recovery, while private landlord investors who remain in the market will be guaranteed exceptional demand for their rentals for the foreseeable future.