HBF research is further evidence of urgent need for reform to improve housing viability
Leading audit, tax and consulting firm RSM UK says recent research from the HBF (Home Builders Federation) further highlights an urgent need for a review of planning reforms and tax policy to improve the viability of UK housing developments and speed up delivery.
The HBF report published on May 6 found the cost of building a new home has risen by £76,000 since 2020 and now represents over 20% of the average cost of a UK home at £265,000. The report highlights around 40% of this increase is due to government regulations and taxes, with the rest due to material inflation and the cost of labour.
RSM recently wrote to Matthew Pennycook MP, Minister of State for Housing and Planning, urging the Government to consider a range of options to help stimulate growth in the market. The leading audit, tax and consulting firm says delays to planning applications, increasing costs and high taxes are making many residential developments increasingly unviable.
According to RSM UK’s latest Real Estate 360 report, a survey of over 270 business leaders in real estate, over a third (39%) said the increasing cost of development is now the biggest barrier to meeting the Government’s housing target, while over a quarter (26%) say planning challenges are the biggest barrier. Over half (58%) stated said they don’t believe the Government can meet its target to build 1.5m new homes by 2029, while 15% said they were unsure.
Stacy Eden, Partner and National Head of Real Estate at RSM UK said: “With costs set to escalate further due to the economic impact of the Iran conflict, the real estate industry urgently needs further support from Government to make housebuilding more viable. Short-termism and a piecemeal approach to increasing housing supply is currently holding the industry back, so we’ve called on the Government to reconsider policy and tax reform. We’ve asked for government to work with the sector to further streamline the planning process, remove unnecessary red tape and reduce taxes on the industry, speeding up Gateway 2 approvals.”
When it came to government incentives to improve viability, RSM’s Real Estate 360 research found a third (33%) felt abolishing Stamp Duty would help, while 28% said more investment in the supply of skilled workers was needed. A further 28% said first time buyers need more support to get on the housing ladder, and a quarter (24%) said investment in planning officers would speed up real estate applications.
Stacy Eden concluded: “While we recognise that some factors impacting housing supply are outside government control, high taxes, lengthy planning processes, and a lack of skilled workers are all currently holding the sector back. A long-term, holistic approach to improve the viability of developments is urgently needed from government to enable the sector to thrive.”