BLOGS

The UK government has made housing its flagship domestic mission. Ministers have promised 1.5 million new homes by the end of this parliament, backed by a rewritten National Planning Policy Framework (NPPF), the Planning and Infrastructure Act — which received Royal Assent in December 2025 — and a £39 billion Social and Affordable Homes Programme. The ambition is real. The delivery, however, is not keeping pace.

On the ground, developers face a compounding set of headwinds: a planning system that is structurally too slow, a sales market offering only modest price support, and construction costs that continue to erode viability margins. The result is that schemes which might have gone forward two or three years ago are being paused, shelved or redesigned into something smaller and safer — and that gap in activity is now embedded in the medium-term supply pipeline.

The planning system: slower than ever where it matters most

The headline figures from the planning system are stark. According to the Home Builders Federation (HBF), just 209,781 new homes received planning permission in the year to September 2025 — the lowest 12-month total since 2013, and 38% below the peak recorded in early 2022. The 11th consecutive quarterly decline in permissioned sites, recorded by Glenigan in the HBF's Housing Pipeline Report, signals that the underlying trend is structural rather than cyclical.

Major housing schemes now take more than 300 days on average to receive a planning decision — a 75% increase over the past decade, according to analysis by Searchland. Only one in five major development decisions in the year to March 2025 was made within the statutory 13-week timescale, according to the HBF. Planning authorities in England received 76,300 applications in the final quarter of 2025, itself down 4% year-on-year, and overall decisions granted in the 12 months to December 2025 fell 4% to 261,700, according to data from the Ministry of Housing, Communities and Local Government (MHCLG).

In London, the picture is acute. Fewer than 34,000 units across only 910 projects were approved in the capital in the latest 12-month period — the lowest level since the Housing Pipeline Report was first published. Building safety reforms introduced for higher-risk buildings have roughly doubled average permission times in London since 2019 and contributed to an 80% collapse in build-to-rent construction starts in the capital in 2025, according to the British Property Federation.

The consequences are not abstract. In six out of nine English regions, the number of homes granted planning consent in the year to Q1 2026 was lower than the number actually completed — a clear signal that the pipeline of new homes is actively contracting, not growing.

Fragile demand, modest prices and the viability trap

Even where planning permission is secured, the decision to proceed to construction is not straightforward. Developers require confidence that the homes they build will sell — at prices that cover rising costs.

On that front, the current environment offers limited comfort. After revisions driven by geopolitical uncertainty and persistent mortgage-rate pressure, Savills has revised its 2026 mainstream house price forecast to a fall of -2%, with the most acute pressure expected in London and the South East. Knight Frank projects 1.5% growth for the year, while Zoopla estimates 1.5% and Rightmove closer to 2%, but these figures represent the consensus range of modest nominal gains rather than a meaningful uplift for developer viability.

With the Bank of England base rate held at 3.75%, two-year fixed mortgage rates remain in the 4.8%–5.2% range and five-year deals around 4.5%–4.9%. That is a world away from the sub-2% environment in which many of the schemes now struggling for viability were originally appraised. At the same time, tender prices for residential construction are forecast to rise approximately 3% through 2026, according to LendInvest analysis.

REalyse data reflects this tension at the local level. When modelling schemes across multiple districts, the gap between achieved sale prices per square foot and the build cost floor required to justify development has widened materially in many areas since 2022. Schemes that once pencilled comfortably at a 15–20% margin are now marginal or loss-making at current land values — and developers know it.

The NHBC's sentiment survey captures the mood directly: 77% of developers cited planning delays as a constraint in Q4 2025 — but beneath that, the bigger strategic threat is the combined effect of a slow planning system and an uncertain sales exit. Major housebuilders such as Taylor Wimpey and Persimmon have reported sales rates of 0.61 and 0.63 per outlet per week respectively, well below the levels needed to justify aggressive site acquisition.

SMEs are being squeezed out — and that matters for supply diversity

The viability crisis is not falling equally across the industry. While larger housebuilders can absorb extended timelines and cross-subsidise schemes, smaller and medium-sized developers — who once delivered around a third of all new homes — are being disproportionately squeezed.

SME developers now account for between 10% and 12% of homes built in the UK, according to LendInvest's State of Play 2025 report, down from roughly a third in earlier decades. Outside the top 50 housebuilders by volume, completions fell by 16% in the year to Q1 2026, compared to just 6% among the next tier. For those outside the top 50, output is now more than a third lower than in 2021.

For SME developers, a planning process that can stretch 12–18 months for a reserved matters approval is not merely inconvenient — it represents a capital recycling problem that fundamentally challenges business models built on faster turnover. The additional costs associated with the new Homes Levy, expected to add approximately £3,000 per unit when it launches in October 2026, will land hardest on developers with the thinnest margins and least financial headroom.

REalyse planning data shows that smaller schemes — those of 10 to 49 units — often face the same systemic delays as larger developments, despite theoretically benefiting from simplified local plan designations. The updated NPPF's attempt to create a distinct medium-site category is a step in the right direction, but it is unlikely to reverse the structural decline in SME output in the short term.

What this means for supply and affordability through 2027

The most alarming aspect of today's pipeline data is not where completions sit today — it is where they are heading. Savills forecasts completions in England falling to just over 150,000 homes in both 2026/27 and 2027/28, down from an already inadequate 204,500 in the year to Q1 2026. UK-wide, ONS and BCIS data recorded around 150,600 housing starts in 2025 — up 12% on 2024 but still 21% below pre-pandemic 2019 levels, and the development-to-completion lag means that the restricted starts of 2023 and 2024 are still working their way through the pipeline.

On the affordable and social side, council housing waiting lists stood at 1.34 million households as of early 2026 — a 10-year high — even as affordable housing starts in the six months to September 2025 fell 12% year-on-year and social rent starts dropped 38%. The structural tension between national need and what the system can deliver has rarely been so visible.

For renters, the gap between supply and demand is already showing up in asking rents. REalyse data tracking active rental listings across major urban markets shows continued upward pressure on rents in areas where new supply is most constrained — precisely the markets where planning delays are most acute and developer appetite most cautious.

Reform is coming — but not fast enough to close the gap

Government is not standing still. The Planning and Infrastructure Act creates new powers to regulate planning committees, introduces streamlined consent pathways, and enables ministerial intervention in cases of persistent delay. A new draft NPPF, published in December 2025, reinforces the presumption in favour of sustainable development and introduces tighter requirements for local housing need. A National Housing Bank, capitalised at £16 billion, is now operational as a Homes England subsidiary, with specific products aimed at smaller developers.

These are meaningful changes — but they are working against a structural debt that has built up over years of underfunding local planning authorities, rising legislative complexity, and a planning culture that has become, as MHCLG itself has acknowledged, overly cautious and inconsistent.

Real Estate:UK's latest research puts the opportunity cost starkly: investment volumes in UK property topped £57 billion in 2025, yet a planning system that is actively preventing new development from proceeding is, in effect, choking the downstream impact of that capital on housing supply.

The Planning and Infrastructure Act received Royal Assent in December 2025. Its provisions will take time to embed. The medium-term supply picture — particularly for completions in 2026 and 2027 — is already largely determined by decisions made, or not made, over the past three years. The homes that will not be built then are already missing from the pipeline now.

For developers, lenders and investors navigating this environment, the premium on data-driven site selection, planning risk assessment and viability modelling has never been higher. Identifying where planning consent is flowing, where viability remains intact, and where demand fundamentals are strong enough to justify commitment — despite the headwinds — is the work that separates deals that happen from schemes that stall indefinitely.