Government's 'Build, Baby, Build' Ambition Stalls as Housebuilding Plummets
Housing Secretary Steve Reed's rallying cry of 'build, baby, build' is facing a harsh reality check. New official figures reveal that housebuilding in England has slowed to its lowest level in nine years, dealing a significant blow to the government's flagship target of constructing 1.5 million new homes by the next election.
The number of new homes completed fell by 6% to just 208,600 in the year to March 2025. This leaves the government's ambitious plan in a precarious position, with only 275,000 homes delivered since the election, far short of the 400,000 that would have been needed to stay on track.
The 'Jaws of Death' Squeezing Developers
Industry leaders describe a perfect storm of financial pressures crippling development. Steve Turner, Executive Director of the Home Builders Federation (HBF), told Sky News that a combination of soaring building costs and weakening house prices has left 'half of the country unviable for development projects and the other half of the country unaffordable'.
This trap, dubbed the 'jaws of death' by developers, is a result of several factors:
- The cost of building homes has surged by just under 13% on average since September 2022.
- House prices across Britain have increased by less than 3% on average, with flat prices in London falling by 0.5%.
- The cost of bricks and clay products alone skyrocketed by over 26% in the year to August 2023.
- Higher interest rates have increased financing costs and weakened buyer demand as mortgage rates soar.
Nick Cuff, Managing Director of Urban Sketch, warned that site viability is 'very, very strained', effectively 'snuffing out general supply of new homes from the UK's housing pipeline'.
London's Construction Cliff-Edge and the Regulatory Burden
The crisis is most acute in the capital. The number of new homes starting construction in London plummeted to a mere 4,000 in the year to June 2025, a tiny fraction of the area's 81,000 target. In response, the government is consulting on emergency measures to 'get spades in the ground', including a funding package and a temporary reduction in affordable housing targets from 35% to 20%.
Developers point to a mounting regulatory burden that has significantly increased costs, particularly for high-rise buildings common in London. New requirements introduced from 2022 onwards include:
- Fire safety rules mandating a second stairwell for tall buildings.
- Regulations to improve energy efficiency, ventilation, and electric vehicle infrastructure.
- Greater London Authority rules requiring more affordable housing and 'dual aspect' designs.
A report by Savills and Ballymore estimates these requirements make delivering homes in Greater London 10-15% more expensive than elsewhere. Property developers detailed to Sky News that new regulations add costs of around £21,500 per two-bedroom flat in London, with community infrastructure levies adding a further £12,000 on average.
Further costs are on the horizon, with a 4% residential development tax and a building safety levy of between £1,500 and £3,500 per home expected soon.
A Nationwide Problem and Calls for Long-Term Certainty
While London faces the most severe challenges, the rest of England is not immune. Analysis by Zoopla finds that it is now not viable to build in just under half of England, as the sales value of homes is less than the total cost of delivery.
Research firm Molior found that even if all housing and infrastructure contribution requirements were removed, housebuilding in half of London would remain unviable. This creates a stark mismatch: building is only viable in areas where many people cannot afford to buy.
The industry is calling for more than short-term fixes. A spokesperson for Barratt Redrow emphasised the need for long-term certainty, stating, 'We're not against the right sort of regulation, but it's important we've got long-term certainty because the process of buying land and building houses is so long and involves such risk.'
While the government maintains that its planning reforms and record investment will 'bring about the change we need', the dramatic drop in construction starts suggests the housing crisis is deepening, with the dream of affordable, secure homes for many slipping further out of reach.
