Inflation and new rules have raised the cost of every home
About half of the HBF’s figure comes from higher prices for materials and labour. Most of the rest comes from rules and taxes added since 2020. The Future Homes Standard, which requires better insulation and low-carbon heating, adds about £10,200 per home. Biodiversity net gain, which requires developers to improve local habitats by 10%, adds £5,700. Safety rules introduced after the Grenfell Tower fire, along with new levies, add several thousand pounds more.
Each rule addresses a real concern, but their combined cost is rarely weighed. Former housing minister Gavin Barwell told Reuters that governments have repeatedly missed how several worthy demands add up to “very significant” costs. Prosper UK, the pro-growth group he leads, attributes half of the £76,000 to government decisions on regulation, policy and tax.
When the numbers do not add up, building stops
Developers build when they expect sale prices to cover their costs. With costs higher and buyers stretched by interest rates, that sum often fails.
In Purfleet-on-Thames in Essex, a £1bn plan for about 3,000 homes was announced 17 years ago, but just 34 have been built. Council documents say the previous developer could not raise enough to fund upfront land preparation, roads and services. A KPMG review found a new first phase would need £118m in public funding and fewer affordable homes than usual to be viable.
The same pressure is visible nationally. Taylor Wimpey has said it will not start new projects in London, and S&P Global’s survey shows housebuilding has shrunk for almost all of the past two years. The government has pledged 1.5 million homes in England between 2024 and 2029, but by September 2026 about 437,900 had been delivered, roughly 29%. The HBF says planning approvals are running at only 58% of the level the target requires.
Faster planning tackles delay, not cost
Large infrastructure has a different problem: the time and money spent before construction begins. Work has only now started on the £10bn Lower Thames Crossing, a road tunnel near Purfleet first proposed in the 1980s, after a planning application of more than 359,000 pages. Boston Consulting Group found the UK slowest among the countries it studied for this pre-construction stage.
Recent reforms target that delay by limiting legal challenges, cutting some consultation steps and giving ministers more say over decisions. The Office for Budget Responsibility expects them to raise the economy’s potential output by 0.2% by 2029 and 0.4% by the mid-2030s. Wednesday’s Budget will show whether Healey addresses the cost of building as well as the speed of approvals.