History shows this is wrong
There have been long periods in British history when housing was built at scale and remained affordable relative to incomes. These were not accidents — they were the predictable result of high supply meeting demand.
In 1968, the UK built 425,000 new homes. That year, the average house cost around 3.5 times the average annual wage. In 2023, around 235,000 homes were built — and the average house cost around 8.5 times the average annual wage. The direction of causation is clear: fewer homes built, higher prices relative to incomes.
Developers build to make a return on each scheme, not to maintain a market price
The argument goes like this: if we build enough homes to lower house prices, developers will lose their profit motive and stop building. This sounds plausible but does not hold up to scrutiny.
Developers make money by building and selling homes at a profit above their costs — land, construction, finance, and overheads. If sale prices fall, land prices adjust downward too, because land is priced as a residual: what's left after costs and a normal profit margin. In a market with lower house prices, land is cheaper. A developer can still make a return. In competitive markets everywhere in the world, firms make profits while selling at prices consumers can afford.
The claim also assumes developers can act collectively to restrict supply and maintain prices. As we address in the landbanking myth, the UK housebuilding market is too fragmented for this — 61% of homes are built outside the top 11 firms, and no developer has the market share to set prices.
Even if some developers pause, the homes already built remain
Supply does not disappear when prices moderate. The homes that have been built stay built. Renters and buyers benefit from them regardless of what developers do next. In cities like Austin and Minneapolis, where supply increased significantly and rents fell, the existing stock continued to house people — at lower cost. Developers in those cities did not all go out of business.
The fear that lower prices would cause a total halt to housebuilding has no historical precedent in a market economy. Builders in Germany, Japan, and other countries with more affordable housing continue to build and make profits. The difference is that land is cheaper because planning is less restrictive — not that developers have given up.
Where we stand
Britain has a backlog of 4.3 million missing homes. The idea that we might build so much that developers stop is not a serious concern — it is a fantasy. We could build millions of homes before supply even began to approach demand. YIMBY Glasgow endorses the planning reforms that would let that happen, and will worry about the problem of having too many homes if and when it arises.