Housebuilding report reinforces calls to review development costs

A new report calling for a review of the costs imposed on housing development has reinforced concerns over the viability of schemes in England.

Recommendations in the report, published by Prosper UK Housing Commission⁽¹⁾ which is chaired by former housing minister Lord Gavin Barwell, include a freeze on new regulatory burdens on residential development for at least three years and limiting the use of Section 106 (S106) arrangements to genuine, site-specific mitigation. The latter proposal also suggests restricting S106 applications as a general funding mechanism for affordable housing, schools, healthcare or public services.

Applying a two-part test to every existing planning and regulatory obligation on new housing also feature among recommendations. This would assess whether it is reasonable to impose the related cost on new housing at all and whether the requirement is proportionate given the benefit it would deliver.

Dr David Crosthwaite, chief economist at BCIS, said the report reiterates the familiar concern that housebuilding is stuck in a rut, and unlikely to break free without policy or regulatory changes addressing both demand and supply-side constraints.

‘If the government wants to stimulate activity, particularly in the private sector, it will have to make concessions somewhere,’ he said. ‘Your First Home is a welcome first step that could unlock demand. However, its impact will depend on the eligibility criteria, and uncertainty over the details could delay buyers’ decisions.

‘Ultimately, viability remains the bigger challenge. If the government is serious about increasing housebuilding, it must review development costs holistically, decide which pressures it is prepared to ease, and explore solutions that don’t require further developer investment.

‘Support for materials and plant costs would be a start. While the government has committed to subsidising energy costs for certain manufacturers, conflict in the Middle East continues to add pressure. Bringing forward the British Industrial Competitiveness Scheme, or increasing its support, could help ease costs feeding through to housebuilders. Extending fuel duty relief at the Budget is another option.

‘More contentious measures, such as reviewing the Building Safety Levy and other developer contributions, should also be considered in consultation with the wider industry. While such interventions may seem drastic, temporary concessions of this kind could be necessary to get housebuilding activity back on track.’

The commission’s recommendations arrived ahead of further details on the government’s Your First Home scheme, which are expected to be confirmed at the Budget later this month.

Announced in September, the scheme is expected to enable eligible first-time buyers in England to purchase new build homes with deposits as low as 2.5%, supported by government-backed equity loans of up to 20%.

Prosper UK Housing Commission advocates a similarly targeted, time-limited shared-equity scheme, but stresses that support for buyers must be accompanied by measures to increase housing supply.

The need for intervention is underscored by the Home Builders Federation’s latest Housing Pipeline report. It revealed that planning approvals for new homes in England fell to their lowest quarterly level since 2012 in 2Q2026.

Meanwhile, the latest BCIS Private Housing Construction Price Index shows that cost pressures continue to weigh on housebuilders. Annual housebuilding cost inflation increased to 3.3% in 2Q2026, up from 2.3% in the previous quarter. Among survey respondents reporting changes in costs, 56% identified increases in materials costs, while 28% cited higher subcontractor costs and 11% reported rising labour costs.

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^{(1) Nation Builder – Solving the Housing Crisis – here}