The cost of delivering a new home has increased by an average of £76,000 over the past five years, according to new research from the Home Builders Federation (HBF), adding fresh concerns about development viability and the industry’s ability to increase housing supply.
The findings, published in HBF’s latest report, The Viability Crunch, suggest that a combination of inflation, regulatory requirements, taxation and policy costs is making a growing number of residential developments financially challenging to deliver. The trade body argues that the cumulative impact of these measures is contributing to a slowdown in housebuilding activity across England.
According to the report, housing completions fell to around 208,000 homes in 2024/25, representing a 16% decline from the 2020 peak. HBF says worsening viability is a significant factor behind the reduction in output.
The largest contributor to the increase in costs has been construction inflation, with labour and material price rises accounting for approximately £37,000 per home. Material costs alone have risen by more than 40% since 2020, while labour costs have increased by around 23%, according to the analysis.
Beyond inflationary pressures, the report estimates that more than £23,000 per home can be attributed to regulatory requirements, including building regulations, Biodiversity Net Gain (BNG) obligations and forthcoming Future Homes Standard measures. A further £7,000 relates to taxes and levies, while site-specific requirements such as nutrient neutrality mitigation can add around £7,000 more.
Among the measures highlighted by HBF is the Building Safety Levy, due to be introduced in October 2026, which the organisation estimates will add more than £2,300 per home. The federation also points to rising landfill tax costs and increasing compliance requirements as additional pressures on project viability.
The report argues that the industry’s ability to absorb further cost increases is becoming increasingly limited. While it has traditionally been assumed that rising development costs can be offset through lower land values, HBF suggests that approach is reaching its limits, particularly where landowners are unwilling to accept reduced returns.
As viability margins tighten, developers are increasingly being forced to revisit affordable housing provision, Section 106 obligations and other planning contributions to ensure schemes remain deliverable. The challenge is particularly acute in lower-value markets, where additional policy costs can quickly undermine project economics.
The federation is calling for a review of cumulative policy costs affecting residential development, including a pause on additional taxes and levies impacting housebuilders. It argues that planning reform alone will not be sufficient to increase housing delivery if development viability continues to deteriorate.
For developers, contractors and land promoters, the findings provide further evidence of the growing tension between rising regulatory expectations and the commercial realities of delivering new homes. With build costs remaining elevated and additional compliance requirements on the horizon, viability is expected to remain a key issue across the sector throughout 2026.
