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Lauren Atkins |
Published 4 September 2025
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Columns are the author’s own opinion and do not necessarily reflect the views of Onward.
The UK housing delivery system is at breaking point. In many parts of the country, the cost of delivering new homes now exceeds their capital value. The result is a dramatic reduction in the number of small and medium-sized (SME) developers active in the market, a steep decline in housing starts and completions, and a growing affordability crisis for both buyers and renters.
A toxic mix of layered regulatory costs, inflexible planning rules, and stalled post-planning processes has created an environment where even approved schemes fail to progress. At the same time, policy withdrawal on the demand side (e.g. Help to Buy, First Time Buyer Stamp Duty Relief) is stifling buyer activity, leaving developers unable to de-risk projects. Meanwhile, reforms in the private rented sector (PRS) are accelerating landlord exits, flooding the market with second-hand stock, and pushing up rents.
Solving these challenges will require a total shift in narrative and policy, away from punitive, one-size-fits-all regulation and toward proportional, joined-up interventions that support those willing to build and invest.
New-build completions fell to 184,390 homes in 2024, down 5.3% on 2023 and 14% below 2019 levels – the lowest since 2015. Construction starts were 30.8% lower in 2024 than in pre-pandemic 2019 and starts in 2024 were also lower by 25.7% (45,860).[1]
For SME developers, the numbers are even more alarming. In the late 1980s, SMEs delivered about 40% of new homes; by 2007, 30%; and today just 12%.[2] This collapse disproportionately affects rural and edge-of-settlement areas, where larger developers rarely operate, exacerbating housing undersupply outside major conurbations.
Despite rising need, developers report “nothing is selling”; in parts of London, with the Lifetime ISA cap of £450,000 now excluding sales of many new flats in the capital and South East. Data from Savills (2024) shows that in London, over 60% of new flats launched in 2023 were priced above £500,000, outside the scope of the only remaining demand-side incentives.[3] Combined with mortgage rates hovering around 5.5%, in early 2025 absorption rates plummeted, with new-build sales in inner London down 22% year on year.[4]
This stagnation feeds through to viability: as schemes slow, developers are forced to carry land and finance costs longer, further squeezing margins and raising the risk of unintentional mothballing.
The regulatory burden on development has grown exponentially over the past decade, eroding both viability and confidence.
Natural England’s nutrient neutrality rules are stalling delivery. In the Solent catchment alone, over 40,000 homes are delayed awaiting nutrient mitigation solutions. The Home Builders Federation estimate that more than 160,000 new build homes have been blocked by the disproportionate moratorium on development, which spans more than a quarter of local authority areas, from Cornwall to the Tees Valley.[5]
Winchester City Council has effectively frozen permissions on certain sites due to phosphate constraints and almost 12,000 homes in Somerset have been in limbo for years after a court ruling restricted developments on land that contains high levels of phosphates.[6]
In 2015, CG Fry secured permission for 650 homes at Jurston Farm. Development proceeded until Phase 3 was halted due to nutrient neutrality rules imposed by Somerset West & Taunton Council. The developer obtained permission to appeal only in January of this year.
It doesn’t stop there. Further requirements on water quality, recreational-disturbance payments and Biodiversity Net Gain all add cost. On top of this, Thames Basin Heaths SPA mitigation requires SANG and SAMM contributions. In Surrey Heath, the 2019 SPD sets SANG at £112.50 per m² of new residential floorspace (with SAMM charged per dwelling). By way of illustration, a nearby seven-home scheme incurred around £53,000 in SANG alone.
Instead of replacing each other, both now often apply in parallel. In Waverley Borough Council, for example, a 150 m² three-bed home attracts £78,000 in CIL plus £20,000 in biodiversity costs, effectively removing all profit on small schemes. Meanwhile, almost £18m in unspent CIL receipts sits idle in Waverley, £11,813,230.20 (reported year) + £6,094,606.45 (previous years), The National Audit Office (June 2025) cites Home Builders Federation (2024) analysis indicating over £8 billion of unspent developer contributions held by councils, comprising £6.3 billion in Section 106 and £1.8 billion in CIL.[7][8][9]
Only around 14% of Gateway 2 applications were signed off within the target period in 2024.[10] Average decision times have stretched to about 36 weeks – nine months, loading schemes with £10,000–£50,000 per week in carrying costs depending on scale and funding[11]. The market impact is visible: Construction Enquirer reports London new-home starts down 38%, with Gateway uncertainty a key factor[12]. In effect, BSR involvement in buildings over 18 metres is functioning less as a safety facilitator than a hard stop on delivery, raising questions about whether the BSR (or similar bodies) has the incentives needed to support housebuilding while safeguarding standards.
Government modelling in DLUHC’s Feb 2025 consultation estimates on average, properties will require between £6,100 and £6,800 worth of investment to meet the standards under the preferred metric approach.[13]
Post-Grenfell MHCLG’s current best estimate is that the cost of remediating buildings over 11 metres is £12.6 to £22.4 billion. It plans to keep taxpayer contributions capped at £5.1 billion, with private owners, social housing providers and developers paying the remainder. Developers will pay to remediate buildings within the ongoing Developer Remediation Programme and, from autumn 2025, through a Building Safety Levy on new developments.[14]
With these combined costs, for context, some service charges for leaseholders are rising at a rate of 400–600%
These costs have prompted an exodus of small landlords in London, with 29% of homes sold in 2023 being ex-rental stock.[15]
Layered costs like these were designed to improve quality and safety but, without proportionate implementation, they have collectively made schemes unviable.
While much policy focus falls on the early stages of planning, the reality is that many schemes falter after consent is granted. The post-consent stage has become a choke point in the housing pipeline.
Housing associations, facing mounting retrofit obligations, regulatory debt, and severe funding constraints, are increasingly pulling out of Section 106 (S106) agreements. Without a registered provider (RP) partner, developers cannot deliver the affordable housing required by their permissions, leaving entire schemes mothballed despite having planning consent.
According to the Home Builders Federation, as of October 2024 there were 17,432 affordable homes with S106 planning permission that had not been contracted, equivalent to around 63% of all S106-funded homes in 2023–24.[16] These delays are affecting 136 development sites, up from just 27 in March 2024 – a 307% increase in stalled projects within six months.
The latest NHBC figures coincide with research from the G15 group of large housing associations in London. They warn there has been a catastrophic 66% drop the number of new affordable homes being built in the last two years.[17]
A lack of RP contracts effectively locks many SMEs out of development finance, because lenders require evidence of deliverability across both affordable and open-market units. Housing associations, for their part, are redeploying capital toward costly retrofits and compliance with post-Grenfell fire safety and EPC standards.
The problem is particularly acute in high-value areas. In London and the South East, developers report that up to 80% of high-rise schemes now fail to secure RP interest, especially where retrofit liabilities make new acquisitions unattractive.
Affordable housing starts dropped 88 per cent in the year to March, from 26,386 to 3,156, according to figures released in November 24, the lowest since records started in 2015. Different data showed starts by local authorities and housing associations dropped 75 per cent in the year to June, the largest fall since 1990.[18]
London is heading into the worst downturn in affordable housing supply in decades, as inflation, high interest rates and building safety costs hammer the finances of housing associations.
The result is a double bind: not only are affordable units delayed, but so are the market homes cross-subsidised by those deals. HBF Government Progress Report data suggests that more than 100,000 private homes and 17,000 affordable homes are currently blocked or delayed due to a lack of Registered Provider bids for Section 106 units.[19]
Without affordable component discharges, these 139 stalled sites are unable to proceed, threatening delivery against the Government’s broader 1.5 million homes target.
Each stalled scheme inflates land holding costs, ties up developer equity, and erodes the viability of future phases. Meanwhile, housing associations and councils are diverting scarce resources to compliance rather than new delivery. As The Guardian (Dec 2024) reports, this dynamic directly delays the supply of much-needed social and affordable homes, exacerbating waiting lists and undermining local housing strategies.[20]
The Section 106 delivery challenge is symptomatic of a stressed system. Unlocking this supply will require urgent strategic interventions, such as a streamlined S106 renegotiation processes, and clearer mechanisms to reallocate or recycle stalled affordable housing obligations.
Alongside the barriers at post-consent stage, there is another striking inefficiency within the system: the £8 billion pounds in developer contributions that are sitting idle rather than enabling the homes they were intended to support.
These contributions were collected from developers specifically to fund schools, roads, green space, and other critical infrastructure required to make developments viable. Yet large portions are not reaching projects on the ground.
The practical impact is profound. If just 40% of this combined £8 billion pot were unlocked and reinvested, it could co-finance enabling works, utilities upgrades, and mitigation measures for an estimated 40,000–50,000 homes, based on average infrastructure support costs per dwelling cited by the Home Builders Federation (2024). Instead, these funds are often tied up by administrative complexity, protracted approval processes, and local decision-making that prioritises financial caution over delivery.
Reforms to unlock these funds could act as a near-term stimulus for housing delivery. A national framework that mandates spending deadlines, requires transparent reporting of balances, and allows developers to apply for reallocation toward live sites would immediately accelerate projects. In an environment where developers struggle with up-front infrastructure costs, these dormant funds represent one of the few levers that can be pulled quickly without new public borrowing.
In short, CIL and S106 were designed to enable development, not to become long-term reserves. Unlocking this capital is critical to breaking the logjam in housing delivery.
Amend the National Planning Policy Framework (NPPF) to introduce a statutory Viability Override and Infrastructure Reinvestment Mechanism that directly tackles stalled consented sites.
Allow developers of stalled consented sites to work with their local planning authority (LPA) to bring schemes back into deliverable form.
Process Safeguards:
This combined policy would unlock thousands of consented but currently stalled homes by bridging funding gaps, reducing unnecessary regulatory drag, and ensuring that the £8 billion currently sitting in unspent developer contributions is deployed for its intended purpose: funding the infrastructure that makes new homes viable.
It would offer a clear, nationally backed pathway for councils and developers to respond to market realities, protecting public contributions already collected and accelerating delivery without undermining long-term policy goals.
Introduce a statutory Proportional Regulation Mechanism through the NPPF and relevant environmental legislation, designed to ensure that environmental compliance, mitigation requirements, and retrofit obligations scale appropriately.
Process Safeguards:
These reforms would unblock tens of thousands of small development sites by making environmental compliance deliverable for SME builders, restore the share of new homes built by SMEs beyond today’s 12% baseline, and stabilise the PRS by curbing financially driven landlord exits. By embedding proportionality into policy, the housing system becomes more responsive to risk, scale, and local context while still achieving the UK’s environmental and climate goals.
Introduce a focused package of demand-side support to boost sales absorption alongside a temporary relaxation of conversion restrictions in areas with acute delivery shortfalls.
Policy Measures:
This combined approach would stimulate buyer demand where sales have stalled particularly in London and the South East, where over 60% of new flats exceed current Lifetime ISA limits and unlock additional supply by enabling office-to-residential conversions in underperforming areas.
The UK’s housing crisis is not a mystery: it is the predictable outcome of mismatched policies, escalating regulatory burdens, and withdrawal of demand-side support. Without reform, approved projects will stall, SME builders will continue to exit, and the private rental sector will shrink driving up costs for households and the state alike.
The solutions outlined here from unlocking billions in dormant contributions to mandating viability overrides are practical, evidence-based measures that restore proportionality and unlock the latent capacity of a sector still willing to build, if only the system allowed it.
[1] BCIS (2025), BCIS, Latest UK housing starts and completions figures, Building Cost Information Service, link
[2] Home Builders Federation (2017), HBF, Reversing the Decline of Small Housebuilders: Report, Home Builders Federation, link
[3] Savills (2022), Savills, Number of £500,000 house price hotspots up 50% since the start of the pandemic, Savills, link
[4] Molior London (2025), Molior London, Residential Development in London Q2 2025, Molior London, link
[5] Home Builders Federation (2025), HBF, Nutrient Neutrality, Home Builders Federation, link
[6] BBC News (2025), BBC, Thousands of affordable homes blocked by nutrient rules, BBC News, link
[7] Waverley Borough Council (2024), Waverley Borough Council, Infrastructure Funding Statement 2023–2024, Waverley Borough Council, link
[8] National Audit Office (2025), NAO, NAO identifies need for improvements to developer funding system, National Audit Office, link
[9] Home Builders Federation (2024), HBF, Unspent Developer Contributions Report 2024, Home Builders Federation, link
[10] Centre for Cities (2024), Centre for Cities, The Building Safety Regulator (BSR), Centre for Cities, link
[11] Building (2025), Building, Nine-month wait to get building safety sign-off for new builds, regulator admits, Building Magazine, link
[12] Construction Enquirer (2025), Construction Enquirer, London new home starts plunge 38% as Building Safety Act bites, Construction Enquirer, link
[13] Construction Enquirer (2025), Construction Enquirer, London new home starts plunge 38% as Building Safety Act bites, Construction Enquirer, link
[14] House of Commons Public Accounts Committee (2025), UK Parliament, Developer Contributions for Infrastructure, House of Commons, link
[15] Rightmove (2025), Rightmove, Record levels of former rental homes for sale, Rightmove, link
[16] Home Builders Federation (2024), HBF, 17,000 affordable homes stalled by lack of bids from housing associations, Home Builders Federation, link
[17] Construction Enquirer (2025), Construction Enquirer, London new home starts plunge 38% as Building Safety Act bites, Construction Enquirer, link
[18] Financial Times (2024), FT, UK housing market report, Financial Times, link
[19] Home Builders Federation (2025), HBF, Government Progress on Housing Delivery, Home Builders Federation, link
[20] The Guardian (2024), Guardian, 17,400 affordable homes in England and Wales not being built due to lack of housing association money, Guardian, link
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