The planning system is the greatest challenge the housebuilding industry faces because if you cannot get planning permission in a timely fashion, your business model is broken. 

This was acutely felt by the volumetric offsite housing sector as in recent years, annual losses have seen more than ten companies close.

Planning permission delays decrease working capital, particularly since interest rates have risen and debt servicing has shot up to eye watering levels; something also impacting buyers who are in slow and short supply. Delays also expose projects to worker and material cost inflation, all while the policy environment shifts to ask more and more from a project. And it is the ‘more and more’ which needs to be discussed, not just in cash terms but in increasing delays.

Planning is not just a permission

People think planning is just a planning permission, it is not. It is a local policy which may supersede Building Regulations and introduce financial penalties, such as on energy efficiency or embodied carbon, if you do not meet an arbitrary local requirement. It is the plethora of validation requirements when submitting a planning application, or tens of planning conditions which need signing off to start work or even occupy houses.

It is the local policies which dictate who you can sell to and why, the bedroom mix of the homes on your site, the affordable housing you need to deliver and the plethora of busy body influences, such as dog walking packs, landscaping disagreements between consultees and whatever hobbyhorse a local politician may want to implement that week.

It is the site allocation in Local Plans, whether minimum local housing targets are being met, how the location dictates design, consultation or hoops and the administrative burden of submitting a site for analysis.

You’re out £150,000 on a site of 20 before you start the inevitable fight for a planning permission which you’ve already done due diligence on. How much flesh have you got left for the consultants you need to get on site so you can actually start building?!

Love housebuilding, hate planning

In 2024, a HBA member from the East Midlands decided to stop building houses because he couldn’t make projects, primarily priced for local people, viable. A company building just thirty homes a year, who in 2026 will be 180 years old, deciding housebuilding wasn’t for them. It was slowly going this way for them and they didn’t want to keep battling with the hope things would change because making profit shouldn’t have been such a challenge. 

In 2019, the MD told me that four years ago he used to have 86 members of staff. He was now down to six. Why? “Planning. It’s not viable to employ staff to do nothing.” His other pained comment was that he used to spend ten percent of his time on planning and ninety percent on designing and building, but it’s now 10% of design and building and 90% on planning. He didn’t see the point of continuing, the joy of building homes has gone.

He sent over an assessment of a site he was appraising and with only a third of the costs. The assessment showed a 4% loss. While the smaller site market in the region he was looking at was very competitive, causing many people to overpay for land, or landowners to ask too much, the document was sent over after an Order of Cost estimate to meet the expected Future Homes Standard, which showed a 22.58% uplift on a 900 sq ft, three bedroom home.

And these are the costs which will form the basis of this cover story because ‘it all comes off the land value’, right?

“It’ll just come off the land value”

Civil servants and politicians regularly tell me two things, that the developer will just sell the home for more, as if there isn’t something called a market price, or that any higher regulatory costs will just come off the land value. I am yet to receive a cumulative impact assessment for the 15 cost increases imposed on industry in the last five years!

In some cases, regulatory cost increases can come off the land value, particularly when a site is very large. However, some contracts are final sales, without clawback or re-pricing clauses, often because there is a large pool of buyers, some of which are investors looking to make a quick buck but not understanding the real cost of development.

Sometimes you cannot renegotiate the price because the landowner ‘is not having it’, especially if they see a large builder down the road not doing what a smaller site is required to do. The developer of that smaller site could ‘fight the system’ but at what cost? Delays add tens of thousands of pounds, even more if you are a hand to mouth housebuilder paying staff.

Besides, how much can still come off the land value? The Landfill Tax and it’s 3,015% tax increase per tonne on muck away will make huge swathes of land worthless, and that’s on top of the recent Zoopla report on new build viability, which identified that since 2022 the cost of building a home has risen by 17%, yet the price has only increased by 1%.

It found that 4% of homes in southern England have average sales prices which can support the cost of delivering new homes, compared to 10% in the North and 13% in the Midlands. It concluded that building new homes across almost half (48%) of England is not financially viable and that 64% of the country would find housebuilding ‘challenging’.

Even councils cannot make the number work, with projects being pulled in almost every location and a report by the Housing Forum, which spoke to councils about their thoughts of delivery, cited viability as the number one challenge. 

Zoopla recommended four solutions: Planning reforms, regulatory review of development costs, enabling housing associations to borrow more and first time buyer support, ie: Help to Buy. 

The regulatory cost landscape

It is worth reminding ourselves of the fifteen new taxes or regulatory costs imposed, or proposed on the housebuilding industry.

  • BNG onsite
  • BNG offsite
  • Nutrient neutrality
  • Removal of red diesel rebate
  • Part S: Infrastructure for Charging Vehicles
  • Part L (2021): Conservation of fuel and power
  • Part O: Overheating, specifically the introduction of Dynamic Thermal Modelling
  • Part F: Ventilation
  • Residential Property Developer Tax (RPDT): 4% levy on developers achieving profits above £25million
  • New homes ombudsman: Disproportionate charges on smaller sites
  • Building Safety Levy (BSL): Localised levy based on total floorspace (levy times m2)
  • Future Homes Standard
  • Future Homes Standard: PV element, where costs are likely to be on connections
  • Increased planning fees and subsequent, new policy to let fees be set locally
  • Part G:  Sanitation, hot water safety and water efficiency (proposed)
  • Landfill tax: 3,015% increase on landfilled muckaway (proposed)
  • Part M4 (2) (consultation expected)
  • Plastic Packaging Tax (PPT): Across all sectors but particularly costly for construction

All the above have been introduced in the last five years, which makes ‘taking it off the land price’ a tad complex when a site of 50 homes takes 18 months to get planning permission for a site of fifty and 28 months to go from planning to delivery.

And we have not touched on local policies, such as:

  • Going above Building Regulations, specifically Part L.
  • Introducing embodied carbon thresholds, with penalties for non-alignment.
  • Charging council tax (100% premium after a year) on vacant homes, despite vacancy existing because Registered Providers (RPs) are not taking on the affordables that LPAs require.
  • Setting land aside for self build, a policy which is aside from affordable housing.
  • Dictating the housing typology on developments (eg: number of bedrooms).

Apart from PPT, the above list of government imposed costs are construction related. We have not touched on policies impacting all industries, such as National Insurances (NI) rises, IR35, Inheritance Tax reforms, apprenticeship wage increases and the increased minimum wage.

Chance for change

There will be people screaming at this piece, ‘what about X’ or ‘you haven’t considered Y’; I know. There are so many other variables and costs, particularly locally. But that can come off the land value, too?!

As the New Towns programme takes shape, the Government will find out how valuable land is when the cost of delivery is so high. And using Compulsory Purchase Orders (CPO) will not realign the debate but instead expose the flaws in the land value argument. 

Unfortunately, New Towns will not start until near the end of the Labour parliamentary term and so many housebuilders will leave the sector before reality sets in; however, the pressure will mount as councils show their displeasure with viability and non-market private housing projects, such as self-build, CLT and Coop stagnate due to costs. 

This is why it is so important to ensure the Medium sized site definition of between 10 and 49 homes streamlines planning and targets the greatest number of SMEs by removing the 1 hectare area threshold. The Government has offered a marker to not only help SMEs but highlight why planning is so broken.

This is already happening with greybelt, as these newly defined sites are being treated as strategic due to their brownfield definition connection and policy compliance. However, while the Government has proved that planning reforms can get sites allocated more quickly and anecdotal evidence suggests planning opposition isn’t as fierce, they are not delivering any quicker and this is because the cost of building is increasingly unviable. 

The commercial reality of new supply is going to tell in the next two years, after permissions won under the Conservative government, often under old regulations, are still being delivered. In the next twelve months, we will see how the cumulative impact of regulatory costs really hit development, particularly as the FHS and BSL should come in quickly.

The Government is listening and some heads are coming out of the sand on the commercial realities of delivery. Unfortunately, this reality check may be too late for some housebuilders but it does feel as though we are on a precipice where this and subsequent governments cement their legacy as either wanting to build houses and places, or setting housing numbers to lose elections by.

Rico Wojtulewicz, Head of Policy and Market Insight at NFB