Why Britain's 1.5M Home Target is Unachievable – and What Must Change

Government's Housing Target Faces Reality Check

The government's widely publicised target to build 1.5 million new homes before the next election has become increasingly difficult to achieve. According to property industry analysis, the ambitious goal now appears unattainable due to fundamental economic and regulatory barriers facing developers across the UK.

Whilst new home construction may seem peripheral to many estate agents' core business, the knock-on effects are substantial. Second-hand property transactions are heavily dependent on a healthy new homes market. An elderly couple downsizing, for example, requires suitable new accommodation to unlock the sale of their existing property – which typically triggers sales further down the chain. Without adequate new supply, this entire transaction cycle stalls.

The £76,000 Cost Problem

Developers are simply unable to build at profitable margins under current conditions. According to the Home Builders Federation, the cost of constructing a new home has increased by £76,000 since 2020. This staggering figure comprises multiple cumulative pressures:

Regulatory and tax burdens: The landfill tax has significantly increased construction costs, whilst community infrastructure levy requirements have escalated. High-rise developments face particularly acute challenges, including mandatory second staircases and stringent fire regulations introduced post-Grenfell – changes that reduce floor-space efficiency and dramatically impact gross development value.

Labour and material costs: Sharply rising building material prices, combined with minimum wage increases and elevated employers' National Insurance contributions, have substantially pushed up labour expenses.

Environmental compliance: The cost of meeting environmental regulations has become significant, adding further pressure to project economics.

Social housing requirements: Many developments require 50% social housing content, substantially reducing overall profitability and making some schemes unviable entirely.

Land costs remain stubbornly high, whilst property price falls in many regions have compressed developer margins from both directions.

Policy Solutions Within Reach

Whilst some cost pressures may ease naturally as economic confidence returns and land prices adjust, numerous barriers require deliberate government intervention. Several policy levers could immediately improve developer viability:

• Abolishing or reducing the landfill tax would eliminate a major cost component
• Reducing community infrastructure levy requirements would lower development charges
• Relaxing fire safety regulations – specifically reconsidering mandatory second staircases where main stairs have robust fire protection
• Moderating social housing percentages – accepting 40-45% affordable units rather than insisting on 50% and delivering zero homes at all
• Addressing National Insurance contributions that have inflated labour costs

Industry observers note that accepting pragmatic compromises on social housing could prove more beneficial than maintaining rigid requirements that render schemes commercially impossible. Delivering 80-90 homes with 40% affordable content arguably serves the nation better than zero homes under stricter mandates.

What Comes Next?

The acute shortage of new homes across the UK creates significant pressure on government to act. Property professionals expect meaningful policy adjustments sooner rather than later, driven by the simple economic reality that current conditions make residential development largely unviable.

Investors monitoring planning alert tools and tracking BTL investment hotspots should remain alert to emerging policy shifts that could unlock development feasibility in key markets. Once regulatory barriers ease, pent-up developer activity could reshape local supply dynamics significantly.

The question now is whether policymakers will embrace the common-sense reforms necessary to unlock housing supply before electoral pressure becomes overwhelming.

Source: Property Industry Eye.