The Government’s ambition to deliver 1.5 million new homes this Parliament is under growing pressure.

Rising build costs, complex planning requirements and new tax burdens are eroding profitability and slowing delivery according to Heather Powell, Partner, targeted tax reliefs and renewed support for first-time buyers are essential if the Chancellor is to meet her housing goals.

Rising Costs and Tax Pressures

Construction costs have surged in recent years, outpacing house price growth and squeezing margins for developers.

Heather said:

House Builders need to know they will make a profit to want to build. The housebuilding industry estimates that the cost of building a home has increased by 40% in the last 5 years, while average house prices have only increased by 20%. The rise in Employers National Insurance Contributions (NICs) is only adding to the cost of construction. Rachel Reeves must consider targeted employment tax relief for builders if the Government is to reach it’s 1.5m housing goal.

The British Property Federation and Home Builders Federation have also warned that tax changes and higher levies are undermining project viability. One key issue is the increase in landfill tax, which adds significant cost to redevelopment projects.

The huge increase in landfill tax, which is paid on waste disposal at landfill sites, was ‘hidden’ in Treasury announcements at the last Budget. It makes building on brownfield sites and redevelopment harder as it increases costs when builders need to dispose of rubble. This increase should be reversed, or house builders should pay a reduced rate.

Planning Delays and Regulatory Bottlenecks

Even where projects are financially viable, planning and regulatory delays are slowing delivery.

Heather commented:

Rachel Reeves should include more investment in the planning system at the Autumn Budget. Included in the 1.5m target is delivery of 88,000 new homes a year in London, but the stats for the first 6 months of 2025 report just 2,158 homes have begun construction in London and only 3,950 have been sold. This is linked to delays on the approval of flat schemes due to the new planning regime, and in particular the requirement for the Building Safety Regulator to approve schemes where the development is more than 18 m high.”

This requirement was introduced without sufficient investment in the regulator team … An increase of 100 staff is promised, but it may not be sufficient. When new regulations are introduced, the team implementing the rules should already have the resources and numbers to process applications in place!

Supporting First-Time Buyers

Demand from first-time buyers has also weakened following the withdrawal of Help to Buy. Without renewed support, developers face slower sales and reduced confidence to build.

Finally more support for first time buyers is needed. The withdrawal of the Help to Buy scheme has had a significant impact on demand from first time buyers, this scheme should be re-introduced. Measures that reduce interest rates would also be very welcome as this makes everything easier for buyers.

What This Means for the Market

Developers face rising costs, regulatory complexity and falling margins, discouraging new projects, particularly on brownfield land.

Investors are reassessing viability, with tax, planning and approval risks now central to decision-making.

House-buyers could face further supply shortages and affordability pressures unless more homes come to market.

Key Takeaways

• Targeted employment and landfill tax reliefs could help restore profitability for housebuilders
• Investment in planning and regulatory capacity is critical to unlock stalled projects
• Renewed support for first-time buyers would boost demand and confidence in the sector
• Unless the Autumn Budget delivers decisive action, the Government’s 1.5 million homes target

Would you like to know more?

If you’d like to discuss the above, please speak to your usual Blick Rothenberg contact or Heather Powell using the form below.