Bridging the gap: how to solve the world’s housing shortages

Housing affordability has emerged as a defining policy challenge across advanced economies and is increasingly shaping political debate.

While housing systems vary significantly between countries – reflecting different financing models, regulatory frameworks, demographic trends and labour market conditions – the cost of housing is a challenge across much of the world. Housing is the largest financial commitment for many households; as such, declining affordability has significant implications for socio-economic mobility and long-term GDP growth.

The scale of the problem is clear in the widening gap between house prices and incomes. Across many developed economies, the house price to income ratio has risen sharply over the past three decades, with the greatest pressures concentrated in major urban centres. Since 2000, this ratio has increased by 63.4%, including a rise of 32.9% since 2015 alone, highlighting the growing barriers facing prospective homeowners.

House price-to-income ratio, OECD average

Source: Savills Research using OECD

As governments’ provision of social housing has receded, the private sector has increasingly provided funding for affordable housing. At the same time, restrictive zoning and planning systems have constrained new supply, allowing house price growth to outpace income growth in many markets.

In response, governments have adopted housing targets designed to boost supply, improve affordability and support economic growth through increased construction activity. In theory, they should help align housing provision with demographic and economic growth, directing new supply towards areas of greatest need.

Translating targets into completed homes, however, remains challenging. Construction cost inflation, labour shortages, higher borrowing costs and expanding regulatory requirements continue to constrain development viability. Broader economic and geopolitical uncertainty has also weighed on consumer and investor confidence.

Higher finance costs have become a further barrier for both developers and home buyers. Since the pandemic, interest rates have rebased at a structurally higher level, making financing for new development more expensive and reducing affordability for purchasers.

Annual housing requirement and delivery, selected markets

Source: Savills Research using national sources, 2025 delivery compared to annualised target

Note: Requirement refers to either a stated government target, or a government or market statement of housing need. Target and delivery figures were annualised where data was only available over an extended period.

Share of annual housing requirement met, selected markets (2025)

Source: Savills Research using national sources, 2025 delivery compared to annualised target

Governments around the world have implemented housebuilding targets, with mixed success. Of the 14 markets Savills analysed, only two – Singapore and Japan – delivered above requirement in 2025. Conversely, four markets, including Portugal and California, met less than 50% of their requirement. The difference often lies in structural conditions.

Why have countries missed their housing targets?

Markets falling short of their housing targets tend to share a common set of structural constraints: restrictive regulation, lengthy planning processes, elevated demand and weaker project viability.

For example, Portugal is experiencing acute viability bottlenecks, with more than 50,000 licensed homes remaining undeveloped due to project feasibility issues, according to the Portuguese Association of Property Developers and Investors.

The market is also grappling with labour shortages, high construction costs relative to achievable sales values and rents, and a small, fragmented developer base. At the same time, elevated demand is widening the gap between housing need and delivery.

The UK has also struggled with housing delivery in recent years. Complex planning processes have limited supply (although there have been recent efforts to reform them), while the end of the Help to Buy scheme removed a major demand-side support for new-build sales. Falling planning consents are now squeezing the construction pipeline and developer viability is being pressured by rising build costs against a backdrop of softer house price growth.

New home completions in England fell by 4.1% to 190,602 in the year to March 2025. In the two years since Help to Buy ended, completions have fallen by 10.2%. “We are forecasting housebuilding completions to fall further over 2026,” says Emily Williams, Director, Savills UK Residential Research. “We are also expecting house price declines over the rest of this year, before a recovery in the coming years. As a result, the delivery gap is likely to widen before it narrows.”

Meanwhile in the United States, California is also struggling with a housing shortfall as a result of deeply embedded structural barriers. Environmental reviews under the California Environmental Quality Act, a state law that requires public agencies to identify and disclose the environmental impacts of proposed projects, can enable lengthy legal challenges to construction. Restrictive local zoning, including the dominance of single-family zoning across much of the state’s residential land where commercial or multifamily construction is prohibited, also continues to limit development capacity.

High construction and labour costs add further pressure, as does local political resistance to higher-density housing. The Regional Housing Needs Assessment was designed to counter these constraints, but its success in accelerating delivery has so far been limited.

Hitting the target

There are, however, bright spots for housing delivery. In markets exceeding their housing targets, a range of models is boosting delivery, each shaped by local institutional structures, policy frameworks and market conditions.

Singapore stands out: the state is effectively the country’s principal housing developer. Backed by government funding, the Housing and Development Board builds directly to its published commitments. Since the pandemic, it has stepped up construction to clear backlogs. Insulated from private developer viability constraints and short-term market conditions, output is far easier to control than in more market-led systems.

“By analysing population demographics and income trends, the provision of public housing in Singapore has become a well-oiled machine,” says Alan Cheong, Executive Director of Research and Consultancy, Savills Singapore. “Thanks to the government’s encouragement of home ownership, public housing today serves not only as a shelter but also as a store of wealth for Singaporeans. For other governments to replicate this model, they must understand that success depends on political will, not just institutions.”

Japan is another outlier. Permissive, nationally standardised zoning, a shrinking population that keeps land relatively available and a culture of demolishing and rebuilding homes every 20 to 30 years all support high and relatively stable construction volumes.

Rather than aiming to hit a target, Japan’s liberal planning system produces a naturally high and steady build rate that is less dependent on demand signals than many other markets. However, housing delivery in Japan is forecast to fall as interest rates and construction costs rise and house prices outpace income growth. This will require a reassessment of the country’s delivery model.

Routes to housing delivery: what works

Countries that have seen success in housing delivery tend to benefit from more supportive delivery models. This includes both market-led systems with fewer supply constraints and support for all property types and tenures, such as Japan’s more permissive zoning, and Singapore’s strong state-led provision.

However, there is no one-size-fits-all solution for housing delivery. Programmes and targets need to consider local dynamics, overall housing need and regulatory requirements to bring housing to the people and places that need it most.