UK government ignoring construction costs and threatening housing delivery

December 6, 2024

Commenting on how the UK government is overlooking construction costs, damaging UK housing delivery, Daniel Austin, CEO and co-founder at ASK Partners, said: “Government initiatives such as the 95% mortgage guarantee scheme and £5bn allocation for new homes are clearly positive initiatives. However, a critical issue remains overlooked: the cripplingly high construction costs that severely limit the number of projects that can be completed. While the planning process also garners attention, there appears to be little consideration of how to support the housebuilding industry through these financial pressures. If construction projects continue to stall due to steep costs and an imbalance between delivery expenses and expected sales, land will increasingly lose its appeal for builders and investors, further exacerbating the housing crisis.

“The rise in construction costs is as damaging to housing delivery as fluctuating market sentiment and rising interest rates. Compounding this, the government has introduced measures such as the Building Safety Act and ESG requirements. While these initiatives are much-needed, they add significant cost pressures to builders’ portfolios, costs that many cannot sustain, ultimately risking projects being abandoned.

“To address the housing crisis, the government must consider the broader impact of rising costs on the entire market. A holistic approach is needed and one that ensures financial viability across small, medium, and large-scale developments. One solution would be targeted financial support for the housebuilding sector, which could help make construction manageable again. Without such support, delivering on their promise to build one and a half million homes becomes increasingly unlikely. By tackling this issue head-on, the UK can reinvigorate its real estate sector and work towards a sustainable resolution to the housing shortage.”

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