It now costs £76,000 more to build an average home than it did in 2020, according to new research from the Home Builders Federation (HBF).
The report says a wave of new taxes, levies and regulations introduced over recent years is behind the rise, affecting multiple stages of the building process from planning through to completion.
We look at what government mandates specifically are being blamed on the rising homebuilding costs and what recommendations are made to reduce the burden on homebuilders.
How much have homebuilding costs risen?
The HBF’s The Viability Crunch report estimates that £76,000 has been added to the cost of building an average new home since 2020.
It says this is equivalent to more than 20% of the average new home value of £365,000.
The increase is made up of:
- Over £37,000 from materials and labour inflation
- Around £23,000 from regulatory costs
- Over £7,000 from taxes and levies
- Around £7,000 from site-specific requirements such as environmental mitigation measures
What taxes, levies and regulations are being blamed?
The report points to a series of policy changes introduced since 2020 as key drivers of higher costs.
These include the Building Safety Levy, due to come into force in 2026, which will apply to all new homes. It also highlights the rising Landfill Tax, higher Section 106 contributions for local infrastructure, and the introduction of Biodiversity Net Gain rules that require developers to deliver environmental improvements or purchase credits.
It further points to the Future Homes Standard, which will require higher energy-efficiency standards, including low-carbon heating systems, alongside wider building regulation changes covering water efficiency, accessibility, digital connectivity and EV charging infrastructure.
The report says these measures are adding substantial new cost layers on top of construction inflation.
How are these changes affecting delivery?
The report says the combined impact of rising costs and regulation is making more housing schemes difficult to deliver.
It highlights that environmental requirements can be difficult to meet on-site, while off-site solutions such as biodiversity credits are often limited and expensive. It also points to increasing regulatory complexity across multiple standards, which adds both cost and delay to projects.
As a result, it warns more sites are failing viability assessments, reducing the number of homes that can realistically be built.
Industry warning for the government
The Home Builders Federation is calling for a review of the combined impact of taxes, levies and regulations introduced since 2020.
It is urging Government to pause further cost-adding measures and reassess existing policies, including the Building Safety Levy and Landfill Tax increases.
HBF chief executive Neil Jefferson said: “While the industry supports the ambition behind some of these policies, there has been little consideration of their combined impact. The fact that house completions have remained slow clearly shows that planning reform alone is not enough and that other pressures are at play.”
He added: “If Government wants the private sector to deliver, it must create the right conditions for it to do so. Without urgent action to review and reduce the overall cost burden, the delivery of both private and affordable homes will remain at risk.”
