Tens of thousands of homes planned across the United Kingdom remain unbuilt due to rising regulatory costs and taxes, which have eroded developers’ profitability, according to a report by a commission led by Lord Barwell, a former Conservative housing minister. The commission was launched as part of Prosper UK, a centre-right growth group founded by Baroness Davidson of Lundin Links and Sir Andy Street.

Since 2020, new regulations and levies have added an average of more than £38,000 in costs to each new home, with additional safety expenses exceeding £22,000 for flats in buildings taller than 18 metres. These costs stem from government initiatives such as biodiversity net gain requirements to preserve nature, nutrient neutrality rules aimed at protecting waterways, the Future Homes Standard designed to reduce carbon emissions, a levy to fund cladding safety improvements, and mandatory second staircases in high-rise developments for fire safety.

While the commission acknowledged the positive intentions behind these policies, Lord Barwell emphasized that the cumulative financial burden has made many housing projects economically unviable. For example, a 300-home development that was projected to generate an £8 million profit in 2020 now faces a £6 million loss. Another smaller scheme with 50 homes faced additional charges of £1.5 million for education contributions and £500,000 for biodiversity enhancements, raising per-unit construction costs by approximately £40,000.

A key challenge highlighted in the report is that many of these charges only become apparent after developers have purchased land, limiting their ability to adjust acquisition costs to reflect the new obligations. Meanwhile, house prices have remained relatively flat, failing to offset the increased expenses. This disconnect has discouraged investment as developers and financiers are no longer assured of adequate returns for their risks.

The commission recommended an immediate pause, for three years, on all new development-related burdens to restore project viability. It argued that costs related to biodiversity improvements and nutrient pollution mitigation, which are societal issues linked to farming and water management practices, should be borne by taxpayers broadly rather than homebuyers. Similarly, the report stressed that the funding of social housing should come from general taxation rather than developer contributions, urging local councils to be prohibited from requiring developers to finance affordable housing as a condition of planning permission.

Lord Barwell also welcomed recent government efforts, including the Labour Party’s revived Help to Buy scheme and the Conservative proposals by Kemi Badenoch to simplify section 106 agreements and relax zero-carbon building regulations. He cautioned, however, that demand stimulation and regulatory reform must proceed in tandem to address the housing supply crisis effectively.