New taxes and policy costs add £76,000 to the cost of building a new home, HBF finds
New research by the Home Builders Federation has found that £76,000 has been added to the cost of building a home since 2020, which it says raises serious concerns about the viability of new housing developments across the UK.
The HBF’s report, ‘The Viability Crunch’, examines the cumulative impact of policy, taxation and regulatory pressures on housebuilding, which in some cases have resulted in it being so costly to build that 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 consists 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 from inflationary 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, such as 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.
The HBF says that, for many years, it has been assumed by policymakers that all rising development costs can be offset by adjustments to land values, with landowners ultimately bearing 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 report finds that the scale of cost increases over the past five years has pushed this assumption to its limit and that land values can only fall so far before the supply of land for housing is compromised. With taxes and payments to the 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.
The HBF says that new taxes, levies and regulations imposed from across Whitehall have created the crisis. The Building Safety Levy, due to be introduced in October 2026, will apply to all new homes and aims to raise £3.4 billion, despite the industry already committing £7billion, while proposed changes to Landfill Tax will introduce additional cost burdens.
In addition to this, the introduction of Biodiversity Net Gain has proved more expensive than expected for housebuilders to implement, which the HBF chalks up to limited guidance, varying local requirements and a shortage of suitably sized offsite credits available.
The recently introduced Future Homes Standard, alongside an interim change of building regulations in 2021, will also result in more than £10,000 in additional costs per home for housebuilders, as they work to the new requirements to implement higher sustainability standards.
The HBF is calling on the government to implement a moratorium on new policy costs, taxes, and levies affecting housebuilding 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 £2.5billion remaining unallocated in the existing Building Safety Fund.
The organisation also says that the government should 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 HBF says that 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, said: “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 the 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 from increasing housing supply and putting the government’s housing ambitions increasingly out of reach.”
Source: Showhouse
