Zoopla's analysis reveals Government's 1.5 million homes target is unachievable as building costs have risen faster than house prices.
Building new homes is not financially viable across large swathes of the country, with new analysis from Zoopla revealing a fundamental affordability gap that threatens to undermine Labour’s flagship housing policy.
The research shows home building is unviable in 48% of England and challenging in almost two-thirds of it.
Richard Donnell, Executive Director at Zoopla, said “while the Government says it wants to ‘build baby build’, our analysis shows that this can only be currently achieved across half the country, in areas that are typically more expensive for consumers to buy.”
According to the data, there is a major disconnect between viability and affordability – in areas where it is viable to build homes, buyers cannot afford them, and where homes are affordable for buyers, builders cannot make the finances for developments stack up.
Build costs have risen 17% since 2022, while sales prices have increased by just 1% creating an impossible equation for developers in much of the country.
And there is a clear north-south divide. Two-thirds of southern England have sales prices that support development costs, compared to just 13% in the Midlands and 10% in the North.
Donnell says “It is much harder for builders to build homes where it’s affordable for home buyers to buy. Affordability squeeze has been worsened by the ending of Help to Buy and rising mortgage rates, while demand from housing associations has dropped due to building safety costs and higher borrowing rates."
Planning permissions, which offer the best indication of the programme’s progress, have fallen to their lowest level since records began, down 23% since 2022. And, to compound Labour’s problems, in its own constituencies, 37% of its housing targets are rated as unviable for development.
Labour make last minute changes to planning bill
The government has made last minute changes to its planning Bill, as it looks to fast track new housing projects.
According to the FT the Prime Minister “has ordered a last-minute rewrite” The Planning and Infrastructure Bill – in a bid to boost growth and improve the public finances.
The length of the consultation is being reduced, uncooperative councils will lose their rights to make some decisions, and the impact and ability to raise legal disputes will be reduced.
Richard Beresford, chief executive of the National Federation of Builders, said “planning reform was never going to be a quick endeavour because our sclerotic, siloed system needs careful analysis to unpick and understand.
The government should be commended on recognising this and taking a proactive approach to the Planning and Infrastructure Bill because it will be an integral piece of legislation in ensuring all projects can be delivered more quickly.”
Proposed amendments to Planning and Infrastructure Bill, include:
- Changes to ‘holding directions’, allowing ministers to intervene and potentially stop applications being refused by local councils
- Enabling non-water companies to build reservoirs, with all such developments being considered ‘nationally significant infrastructure projects’.
- Allowing Natural England to decline requests from local authorities to comment on nature-related planning applications. At present, it must reply to all requests, even ones that it believes are not relevant.
- Automatic extensions of the time for implementing planning permission where it is challenged in legal proceedings.
- Cutting back legal challenges for major infrastructure projects from three to one and slashing a year off the statutory pre-consultation period.
Rico Wojtulewicz, head of policy and market insight at the National Federation of Builders said “tweaks to the Planning and Infrastructure Bill will help deliver the water and grid capacity that projects require to get planning permission.
They will stop councils finding loopholes to avoid building homes. This is a clear indication that the government understands that ‘Build, baby, build’ is a mantra, not a slogan.”
The amendments need to be approved by parliament in a vote on Monday 20 October 2025. Once the Bill is approved by the House of Lords, it will go back to the Commons.
Ministers target it becoming law by early November 2025, meaning that the Office for Budget Responsibility (OBR) will be able to consider the economic benefits that will come from it in time for the Autumn Budget.
Danny Pinder, director of policy (real estate), British Property Federation, said: “The government’s planning reforms to date have been necessary but not sufficient to get Britain building.
The relentless focus on unblocking new development is welcome insofar as it seeks to give industry the confidence to invest in new homes, workspaces and places, as long as the plan-led system remains the core mechanism for delivering development.
However, as of today, the biggest barriers to development delivery are significant viability challenges, delays caused by bottlenecks at the Building Safety Regulator, and an increasingly cautious position being adopted by investors due to the current economic climate. We need to see action on these by the Budget at the very latest.”
Is the Housing Target Doomed?
A recnt BBC Panorama investigation into the Government’s housebuilding plans has found there is "absolutely no way" it will succeed in its 1.5m new homes target.
Housing Secretary Steve Reed says his job should be ‘on the line’ over the Government‘s 1.5m new homes pledge, but two leading experts have told last night’s BBC Panorama that he is going to fail.
Prof Paul Cheshire, who has advised previous governments on planning policy, told the programme that there was “absolutely no way” it would succeed.
Neil Jefferson of the Home Builders Federation warned the target was “looking increasingly distant”, and that housebuilding is “flatlining” at around 200,000 new homes a year, instead of the 300,000 annually required.
However, when interviewed, Reed insisted he would “absolutely” meet the goal and claimed that the widespread scepticism would make “celebration all the sweeter” when he hit it.
And he added that the Government will force councils to adopt a local plan within 30 months instead of the current average of seven years.
One of the biggest obstacles that was flagged by the programme, though, was the ‘grey belt’. The Government created the concept to make planning easier on low quality green belt land, but has left it to each local authority to decide which sites qualify. Prof Cheshire called this a serious missed opportunity. “They left it to the fuzziness of the planning system and therefore to local lobbying, and it won’t happen.”
To make Reed’s task even harder to achieve, the Treasury is currently planning a 3,000% increase in Landfill Tax on soil removal, which could add up to £50,000 to the cost of building a home.
Government sources told The Times the move was already causing friction in Whitehall. One source said the Housing Department had been “blindsided” by the Treasury’s plans and was trying to get them “killed off”.