Housebuilding: we need more homes, but the numbers still have to add up

Britain needs more homes. The latest figures show how difficult the environment for housebuilding remains. ONS data recorded a 4.9% fall in private housing new work in July 2026 alone. Residential planning applications granted in England in April to June 2026 were 2% lower than in the same quarter a year earlier.

Working with developers and investors, that picture is not a surprise. There is demand for new homes and an appetite to build them. The issue we hear about repeatedly is viability. Once the cost of land, construction, finance, planning delays and the requirements attached to a scheme are added together, some developments are becoming increasingly difficult to make work.

Housing is high on the agenda for government, and the Budget is approaching. How those costs sit together should be part of that conversation.

The cost of building starts long before construction

Planning remains a significant part of the problem. Government figures show that only 19% of major planning applications were decided within the statutory 13-week period in the three months to June 2026.

Those delays have a real financial impact. Land may already have been acquired. Architects and other advisers still need to be paid. Interest continues to accrue on finance. A project that takes months longer than expected can look quite different by the time approval comes through.

The pressure does not end when permission is granted. Alongside labour, materials and finance, developers can be required to make Section 106 contributions - agreements with local authorities that may require affordable housing or funding for local infrastructure such as roads, schools and public spaces. Depending on the project and location, Community Infrastructure Levy payments and other conditions may also apply.

Biodiversity Net Gain generally requires developments in England to deliver at least a 10% increase in biodiversity. From October, qualifying residential developments will also be subject to the Building Safety Levy. Each of these requirements has its own purpose. For developers, it is the cumulative effect that matters.

When we work through a scheme with a client, everything goes into the same appraisal: the land price, construction costs, finance, planning contributions and what the finished homes can realistically be sold for. If the margin between those numbers becomes too narrow, the development does not happen.

Helping buyers could help get schemes moving

The other part of the equation is demand. This is where the proposed Your First Home scheme could make a difference.

The scheme is intended to make it easier for first-time buyers to purchase a new-build home, tackling one of the biggest hurdles for many prospective buyers: saving for a deposit. For developers building with first-time buyers in mind, better access to home ownership should strengthen demand. It could also give them greater confidence to bring forward schemes that are currently on hold.

The detail announced at the Budget will be important, including what developers will be expected to contribute to the scheme.

Affordability also goes beyond the deposit. Financing conditions have improved as interest rates have eased, but borrowing remains more expensive than buyers and developers became accustomed to during the previous decade. Buyers need to be able to afford monthly mortgage payments. Developers may be financing land and construction for several years before seeing a return.

The Budget needs to look at the whole picture

There will be plenty of focus on individual housing and tax measures at the Budget. For developers, it is how those measures work together that matters.

Support for first-time buyers can strengthen demand. Planning reform can help sites move more quickly. Neither will deliver the homes the country needs if developments do not make financial sense once all the costs are added together.

That is particularly important for smaller and medium-sized developers. They do not have the same balance sheets or access to finance as the largest housebuilders, and they have less room to absorb delays and unexpected costs.

We know Britain needs more homes, and we know there are people who want to buy them. The challenge is making sure enough developments remain viable to connect the two. That is what will turn housing ambition into homes.

How we can help

Our Property & Construction team works with housebuilders, developers and investors on project appraisals, funding, tax and accounting throughout the development cycle. If you would like to discuss how these issues are affecting your schemes, please get in touch.

Giuseppe Scozzaro is a Partner at Goodman Jones and a member of the firm’s Property & Construction group. He can be reached on 020 7874 8882.