Housebuilding is being hindered by falling consumer confidence and severe development unviability, according to Gavin Barwell, former housing minister and chair of the Prosper UK Housing Commission. The Commission, established by the new political movement Prosper UK, identified these two issues as central to the ongoing housing crisis.
The lack of consumer confidence is impacting demand, meaning housebuilders are struggling to sell or rent out the homes they are constructing. Concurrently, many projects with planning permission are no longer financially viable. Building an average new home is £76,000 more expensive than in 2020, with half of this increase attributed to cost inflation and the other half to regulation, policy, and tax. However, house prices have seen minimal increases, eroding developers' profit margins.
For instance, a 300-home Build to Rent scheme that would have generated an £8m profit in 2020 would now incur a £6m loss. To address these issues, the Commission recommends a freeze on new regulatory burdens for at least three years and a targeted, time-limited shared equity scheme, capped at around a fifth of sales per site and funded by an industry access fee.