Rising costs making development unviable across swathes of the country as home building continues to fall
New research from the Home Builders Federation (HBF) reveals that £76,000 has been added to the cost of building a home since 2020, raising serious concerns about the viability of new housing developments across the UK.
The report, The Viability Crunch, examines the cumulative impact of policy, taxation and regulatory pressures on home building that have resulted in it being so costly to build it no longer makes economic sense for companies to do so. The research highlights the sharp downturn in recent housing delivery, with just 208,000 new homes completed in 2024/25, down 16% from the 2020 peak, driven in large part by worsening development viability.
The estimated additional £76,000 cost to build per home is made up of:
- More than £7,000 in taxes and levies, including £2,000 in Landfill Tax, £2,320 from the forthcoming Building Safety Levy, £2,055 in other taxes and £985 frominflationary increases on existing charges such as Section 106 agreements
- Over £23,000 in regulatory costs, including £7,770 for building regulations, £5,700 for Biodiversity Net Gain (BNG) and £10,200 in costs linked to the Future Homes Standard
- £37,000 in increased material and labour costs due to high levels of inflation
- £7,000 in additional potential site-specific costs like nutrient mitigation requirements
The increase represents over 20% of the average new home value of £365,000 (as of June 2025).
Viability refers to the financial feasibility of a residential project, determining whether the total revenue generated from selling the finished homes exceeds the total cost of developing them. These costs include construction, regulatory compliance, taxation, marketing, Affordable Housing contributions, financing, and a reasonable return on investment. There must also be sufficient incentive for a landowner to sell.
For many years, it has been assumed by policymakers that all rising development costs can be offset by adjustments to land values. The adage has been that landowners would ultimately bear the costs of new policy requirements, taxes or cost increases by accepting a smaller receipt in exchange for the transfer of their land.
However, the scale of cost increases over the past five years has pushed this assumption to its limit. Land values can only fall so far before the supply of land for housing is compromised. With taxes and payments to central Government fixed developers are increasingly having to try to re-negotiate the levels of local Affordable Housing and Section 106 contributions to ensure development can still come forward.
New taxes, levies, and regulations imposed from across Whitehall have created the crisis. The Building Safety Levy, due to come into force in October 2026, will apply to all new homes and aims to raise £3.4 billion, despite the industry already committing £7 billion to building safety, including a 4% Corporation Tax surcharge and £4.1 billion for voluntary remediation. Notably, the vast majority of home builders who will be subject to the new levy will be SMEs who have never constructed buildings taller than the average family home.
Proposed changes to Landfill Tax will introduce additional cost burdens, further undermining already tight project viability. Although the government chose not to introduce a single rate of Landfill Tax, the tax is still set to rise significantly, by around 500% by the end of the Parliament, adding further pressure.
Recent regulations that have come into force have significantly increased the cost of delivering new homes. Biodiversity Net Gain, while supported by the house building industry, has proved far more expensive than expected due to limited guidance, varying local requirements and, when it is impossible to meet the requirements on a site, a shortage of suitably sized off-site ‘credits’ available, often forcing developers to over-purchase.
Additionally, the Future Homes Standard, published in early Spring and expected to take effect from 2027, will, through an updated Part L of building regulations, require all new homes to meet higher sustainability standards, including the provision of heat pumps on all new homes and solar PV roof coverage on 40% of the home footprint, even though this requirement will not be deliverable on the majority of homes. Taken together with an interim change of building regulations in 2021, results in more than £10,000 in additional costs.
Wider building regulations covering areas such as water efficiency, accessibility, digital connectivity and electric vehicle infrastructure are estimated to add around £7,800 per home. For developers of apartment buildings, the uplift has risen further and faster with specific costs associated with Building Regulation changes and Building Safety Regulator processes adding a further £22,000 per home. This provides further insight into the collapse in housing supply across London which resulted in an ‘emergency package’ of measures being brought forward by the government last autumn. The research finds that the benefits of that intervention are likely to be wiped out by the introduction of the Building Safety Levy in October which, because of its links to local house prices, will significantly affect the capital’s housing delivery.
Elsewhere, the data revealed that high inflation, driven by geopolitical disruption including Covid, Brexit and the war in Ukraine and resultant supply chain pressures, has significantly increased costs, with materials rising over 40% (£28,500 per home) and labour up 23% (£8,500 per home), alongside higher Section 106 contributions for local infrastructure. With no capacity left to absorb any further cost increases, the conflict in Iran has the potential to make even more sites unviable to develop, further reducing the supply of new homes.
Government has made positive strides in reforming the National Planning Policy Framework and other supporting planning policy reforms. However, improving the planning system and associated processes cannot, in isolation, fix the challenges impacting the housing industry.
HBF is calling on the Government to implement a moratorium on new policy costs, taxes, and levies affecting home building and to conduct a comprehensive review of cumulative regulatory impacts. This should include a cancellation of the Building Safety Levy currently scheduled for October 2026, given billions already contributed to building safety and more than £2.5 billion remaining unallocated in the existing Building Safety Fund.
The Government should also suspend further increases to Landfill Tax which doubled in April 2026 - and is planned to rise every year until 2030.
Without urgent intervention to address these cumulative pressures, the financial viability of new housing developments will continue to erode, putting the delivery of private and affordable homes across England at serious risk.
Neil Jefferson, Chief Executive at the Home Builders Federation, says, “The Government’s ambition for new homes relies heavily on private home builders to deliver, yet it is not providing the conditions for these businesses to operate.
“While the industry supports the ambition behind some of these policies, there has been little consideration of their combined impact. The fact that house completions have remained slow clearly shows that planning reform alone is not enough and that other pressures are at play.
“Reforming the planning system and reintroducing housing targets for local authorities was a vital first step in boosting supply but doing so while layering on more taxes, levies and policy costs is akin to having one foot on the accelerator and the other on the brake.
“If Government wants the private sector to deliver, it must create the right conditions for it to do so. Without urgent action to review and reduce the overall cost burden, the delivery of both private and affordable homes will remain at risk, and people will continue to miss out on the homes they need.
“Increased taxes and policy costs, alongside suppressed demand due to a lack of affordable mortgage lending and no Government support for buyers, are preventing builders increasing housing supply and putting the Government’s housing ambitions increasingly out of reach.”