Neil Jefferson is Chief Executive of the Home Builders Federation, having previously joined the organisation as Managing Director in January 2020. In addition, he is a Board Member of the Future Homes Hub, of which he was a founding director in 2021. Prior to joining HBF, Neil was Chief Operating Officer of new home warranty provider, NHBC. Between 2008 and 2016, he was seconded as Chief Executive of the Zero Carbon Hub, providing leadership in the government’s vision for zero carbon homes. Neil is also a Chartered Builder.
The latest changes at the top of government have renewed the focus on housing delivery, something that we very much welcome at HBF. But waiting in the new leadership’s in-tray is a long list of barriers that already threaten to throw ambition off course, and at the top of the list is the ever-growing viability crisis. While the previous government put housing front and centre of its priorities, many of the changes we needed to see to make that ambition a reality never materialised and the focus on housing never moved beyond planning.
HBF’s recently published Viability Crunch report demonstrates why the delivery challenge cannot be solved through planning reform or higher housing targets alone. The report estimates that a combination of inflation, taxation, regulation and new policy requirements has added around £76,000 to the cost of delivering an average new home since 2020 – equivalent to around 20% of the average new build value.
There is a danger that additional policy objectives, however well-intentioned individually, collectively undermine the Government’s housing ambitions. The Building Safety Levy, due to come into force in October, will add an average £2,320 per home, while requirements associated with the Future Homes Standard, Biodiversity Net Gain, nutrient neutrality and changes to building regulations add further costs. For high-rise development, additional building safety requirements are increasing costs even further, with the bill approaching £100,000 per unit for these schemes.
Viability ultimately determines whether sites come forward, whether land is transacted and whether homes are actually built. The assumption that rising development costs can simply be absorbed through lower land values, an assumption that policymakers have historically relied on, is increasingly reaching its limits. HBF’s report highlights that many marginal sites have already become unviable, particularly across parts of the Midlands and northern England, and a decline in the number of planning permissions being granted each year points to a shrinking future pipeline.
The implications extend beyond private housing. Additional costs reduce the amount of value that can be captured for Section 106 funding and Affordable Housing. In effect, they represent a significant transfer of resources from local government to national government, leaving fewer funds available for Affordable Housing and other important amenities for local communities.
The new ministerial team therefore faces a difficult balancing act. Steps to streamline planning and unlock land can all support delivery, but these measures need to be accompanied by a realistic assessment of development economics.
The central lesson from the Viability Crunch is that housing policy cannot be viewed in isolation. If Government wants more homes, it must ensure that the cumulative cost of delivering them remains compatible with viable development. A period of policy stability, a review of cumulative costs and a willingness to prioritise between competing policy objectives would give builders, local authorities and investors the certainty needed to bring forward the next generation of housing sites.
With housing once again high on the political agenda, the opportunity is significant, but the new administration must take the necessary steps to ensure that this ambition can be translated into delivery