The UK has an ENORMOUS housing crisis yet SME Developers get no help whatsoever to de-risk the process even though these are the people that are actually fixing the housing crisis.
Big PLC Housebuilders quite literally stop and start building depending on supply and demand to ensure they maximise profitability, regardless of the dire need for homes in the UK and are allowed to do it because that’s who the government choose to support.
Delays in the planning system continued to impact housing delivery throughout December. Local authority capacity remains under strain, with extended determination periods, inconsistent responses, and appeals taking longer than expected. This was flagged again in several end-of-year sector reports.
These bottlenecks make it harder for SME developers to bring forward viable sites, increasing programme risk and tying up capital for longer periods. While reforms are underway, operational relief is unlikely to materialise in the short term.
What this means for SME developers:
Plan for longer lead times and potential delays in securing full consent. Build flexibility into project timelines and funding strategies, and engage early with planning teams to avoid unnecessary hold-ups. Where possible, phase permissions to unlock earlier starts.
Construction cost volatility and contractor capacity strain margins
Construction costs remain well above historical averages. Material price inflation has eased slightly, but labour shortages, energy costs and regional contractor capacity constraints continue to drive price volatility. Smaller contractors remain cautious, particularly on fixed-price contracts.
This has direct implications for margin management and financial viability. Developers are facing pressure to absorb higher build costs or adjust specifications mid-project, both of which can erode contingency and stretch loan drawdowns.
What this means for SME developers:
Build robust cost plans with clear contingency allowances, and maintain close oversight of procurement and contractor performance. Avoid aggressive assumptions on build costs, and factor in the potential for mid-project inflation or delivery delays.
Corporatisation of the rental market
The government is creating the conditions for large institutional investors and corporate landlords to take a bigger share of the rental market.
It could take landlords years to make back the 5% stamp duty surcharge alone, while corporate landlords can swallow such costs and take more of a long-term view. While upfront costs have risen, there will never be a shortage of UK tenants looking to rent in the UK’s most attractive cities, so rents are likely to still continue rising for those already invested.
In Scotland this corporatisation is likely to be even more apparent, as the Additional Dwelling Supplement of 8% is now so steep that few small-time landlords will want to pay it. Furthermore, acquiring six or more properties can reduce the tax burden for large corporate landlords.
Build to rent in London numbers are rising
London is pressing ahead with Build to Rent (BTR) activity despite signs of a nationwide slowdown, an analysis from Foxtons has found.
It says that planning volumes in the capital are up 8.5% year on year.
The firm reviewed Q3 2025 planning figures and found 106,406 BTR homes are currently in the national pipeline.
That headline total is 2.1% higher than a year earlier, though momentum has faded when measured quarter by quarter.
The firm’s managing director of institutional PRS and BTR, Sarah Tonkinson, said “The Build to Rent sector has established itself as a vital component of the UK rental market, but the latest figures suggest that appetite for new development is cooling outside of London.
But whilst economic headwinds, rising build costs and planning delays have clearly dented activity across regional markets, London continues to buck the trend. We’ve seen consistent growth in planning numbers across the capital, reflecting both the strength of rental demand and the long-term confidence investors hold in the London market.
With affordability pressures persisting in the for-sale sector, Build to Rent remains one of the few areas where delivery can keep pace with tenant demand, and London is at the forefront of that delivery.”
During 2024, BTR schemes in planning expanded by an average of 1.9% each quarter.
Over 2025 to today, that trend has reversed, with average quarterly movement slipping to -1%.
However, the drag is coming from outside the capital where planning levels are down -1.4% annually.
They have fallen at an average quarterly rate of -2.9% between Q1 and Q3 2025.
That compares with an average quarterly growth of 1.8% through 2024.
Foxtons says that London tells a different story as planning volumes across the capital jumped 8.5% over the year.
The leap has been supported by an average quarterly growth of 2.6% during the first three quarters of 2025.
That marks a modest improvement on the 2.4% quarterly pace recorded in 2024.
In Q3 alone, London accounted for 37.2% of all Build to Rent schemes in planning, a share that has been rising steadily since Q2 2024.
Construction output at a 19-month low
November 2025 represented a 19-month low in terms of construction output, reflecting the debilitating effects of the Budget uncertainty ahead.
Construction output fell by 1.1% in the three months to November, while private commercial work dropped by 4.5% over the same period.
Dr David Crosthwaite, chief economist at the Building Cost Information Service (BCIS), said “Significant downturns in public and private housebuilding activity are a major concern.
It continues to suggest that conditions are not conducive for development to progress and underscores the sustained impact of decision-making delays in the planning system.
Process reforms to the Building Safety Regulator are bedding in but capacity constraints in the wider planning system will likely require a more immediate solution than longer-term changes to national regulation.
Promisingly, the wider economy saw higher-than-expected growth in November.
Interest rates and inflation are also softening which should hopefully prompt more positive sentiment among clients and investors.
After months of disappointing results, these are the silver linings construction needs.”
There were fears the Budget would radically alter stamp duty charge a property tax on homes worth over £500,000, but the announcement on November 26 turned out to be less radical, only raising taxes on homes worth over £2 million.
Spencer McCarthy, chief executive of Churchill Living, said “the collapse in construction rates lay bare the extent of the crisis which has now beset homebuilding in Britain.
This decline is a consequence of the relentless headwinds facing housebuilders as we try to deliver the housing stock Britain so desperately needs. Government rhetoric is abundant, but action remains alarmingly absent.
Housebuilding has always been one of the biggest levers government can pull to generate quick and sustained economic growth, but the inability to restore economic confidence, reform planning and reverse the hikes in costs it’s hard to see these figures changing.”