Seven in ten small and medium-sized housebuilders say market conditions are limiting their appetite to invest in new sites – threatening the government’s target of 1.5 million new homes.
The Home Builders Federation survey found that just 41% of SME builders expect to increase the number of homes they start in the next three months, despite planning reforms designed to boost housing supply.
Regional confidence varies sharply
The data reveals a stark divide in builder confidence across the country. London reports the weakest outlook, with 57% of developers expressing a negative view and just 14% positive.
The South West (52% negative) and South East (51% negative) also show subdued sentiment. In contrast, Wales stands out as the most optimistic region – two-thirds of developers there report a positive outlook.
Builders delivering up to 75 homes a year are the least optimistic, with almost a third expecting housing starts to decline in the next three months.
This follows Residential Landlord’s March coverage of falling private housing output, which showed new home delivery already trailing government targets. The HBF data suggests conditions may worsen before they improve.
Higher deposits, stricter lending criteria and elevated interest rates have all constrained buyer demand – with knock-on effects for builder confidence.
Rising costs compound the problem
Viability pressures are identified by 57% of SME builders as a key barrier to delivery. Rising build costs, additional policy requirements and new taxes are making projects increasingly difficult to stack up financially.
The industry faces a doubling of Landfill Tax rates, a 500% increase over the Parliament, a new £340m per year levy on new homes, and the Future Homes Standard – expected to add 3-8% to build costs.
The HBF is calling for a moratorium on new regulatory costs, taxes and levies – and a comprehensive review of cost increases imposed across government in recent years. Full details are available from the Home Builders Federation.
For landlords, a prolonged slowdown in new supply would intensify existing rental market pressures – supporting rents but limiting opportunities to expand portfolios.
Opinion
The government’s housing targets rest on small builders doing the heavy lifting in areas where volume housebuilders won’t go. Yet policy after policy adds cost and complexity that hits SMEs hardest. Ministers can reform planning all they want – if sites don’t stack up financially, nothing gets built. The industry wants a pause on new costs. Whether anyone in government is listening is another matter.
