London’s reduced housebuilding plan could shrink broker pipelines, push prices higher, and price out a generation of buyers
New analysis by multidisciplinary development consultancy Pegasus Group, published in response to the draft London Plan released for consultation in July, found that the proposed target of 558,000 homes over ten years — compared to the Government’s original target of 880,000 — could strip the capital’s economy of £41 billion in annual output.
According to the research, the 300,000 homes removed from the plan could have housed approximately 762,000 residents, a population equivalent to Leeds or Glasgow. Of those, an estimated 412,136 would have been economically active, with the potential to generate £41 billion in economic output per year — reducing the pool of creditworthy, mortgage-ready borrowers that lenders and brokers depend on to sustain business volumes.
Commenting on the findings, Chris Wheaton, senior director in the Economics team at Pegasus Group noted that while the Mayor of London had leaned towards realistic delivery targets, the potential consequences carries serious implications for mortgage brokers, lenders, and their clients operating in one of the world’s most pressurised property markets.
He added: “The consequences will be felt across a broad range of economic and social indicators, from labour supply and healthcare provision to tax revenues, local authority finances and wider societal outcomes. Existing homeowners and London residents will also feel the effects, as persistent supply shortages continue to place upward pressure on house prices and borrowing costs.”
Fewer homes, fewer transactions
For mortgage professionals, the most direct consequence is supply. Fewer homes built means fewer purchase transactions, constrained remortgage pipelines as movement within the market slows, and intensified competition among lenders for a shrinking pool of active buyers.
Pegasus estimates that the proposed reduction would forfeit £69.6 billion in construction investment over ten years — investment that, had it proceeded, would have supported approximately 25,400 direct construction jobs and a further 52,800 roles through supply chain and wider economic activity. A contracting workforce pipeline reduces the number of first-time buyers and relocating workers entering the market who would otherwise be seeking mortgage advice.
The consultancy also calculated that the construction phase of the 300,000 additional homes could have contributed £8 billion of Gross Value Added (GVA) per year — or £80.6 billion across the decade — economic activity that would have filtered through to consumer confidence and borrowing appetite.
Price pressure mounts for borrowers
Perhaps the sharpest concern for brokers is what the housing shortfall does to affordability. Pegasus estimates that the absence of the additional 300,000 homes could see London house prices rise by almost 16% more than they would have under a fully delivered target — compounding an affordability crisis that already stretches the limits of lending criteria for many buyers.
Higher prices mean larger loan-to-value ratios for first-time buyers, greater pressure on serviceability assessments, and a growing cohort of prospective borrowers priced out of ownership entirely. The Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) have consistently highlighted affordability as a systemic concern; sustained price growth driven by chronic undersupply would further complicate the regulatory environment lenders navigate.
Talent and key worker pressures
The implications extend into lenders’ own operational challenges. Pegasus highlighted that the number of London residents moving elsewhere in the UK increased by 28% between 2014 and 2024, driven in part by the inability to access affordable housing.
A separate survey by the National Health Service (NHS) Homes Alliance found that 68% of NHS staff cited a lack of affordable housing as a key factor in deciding to leave their London employment — a dynamic that applies equally across financial services, where proximity to affordable accommodation is a recurring retention issue.
For broker firms and lenders with London operations, the talent pipeline concern is real. A capital that cannot house its workforce is one that will struggle to grow the professional services sector that mortgage businesses depend on.
What brokers should watch
The draft London Plan remains in consultation. Mortgage professionals would be well advised to monitor how the final targets are set and what policy levers are deployed to narrow the gap between ambition and delivery.
For brokers advising clients in London and the surrounding regions, the cost of underbuilding is not abstract. It shows up in valuations, in loan sizes, in the number of clients who can genuinely proceed — and, ultimately, in the health of the broker market itself.
Wheaton added: “It is positive to see the Great London Authority’s campaign for better infrastructure and more affordable homes, and we welcome the added clarity that the draft London Plan has brought developers. But to boost housing delivery policymakers will need to consider alternative solutions. These range from increased investment in transport infrastructure to unlock development opportunities, utilising grey belt land, and considering greater density of dwellings in appropriate suburban areas.”
