Eco-rules and taxes add tens of thousands to new build costs

Twelve changes to taxes, rules and regulations in the next three years will add £20,000 to the price of a new build home.

That’s the claim from a trade body, the Home Builders Federation, which says the extra costs will discourage development and hit affordable housing targets in deprived regions.

A new HBF report, seen by the Financial Times, claims the extras costs will add up to £4.5 billion to developer costs each year, or more than £20,000 per new home.

The biggest single cost cited by the HBF comes from the Future Homes Standard, set to come into force in 2025. This requires that new homes have low carbon heating and are highly energy efficient and could cost £1.9 billion a year.

The HBF also claims developers already face immediate extra costs of more than £5,000 per home to meet stricter regulations on energy efficiency brought in this year, plus a recently introduced levy to raise funds to replace potentially flammable cladding following the Grenfell disaster.

The HBF is known to back the environmental improvements sought by the new rules but says too little consideration has been given to “the impacts that could be felt as a result, either for the speed and volume of housing supply or for the ongoing investment in public infrastructure and affordable housing”. 

The  HBF warns that developers are likely to try to offset them by paying less for land or cutting contributions to affordable housing and infrastructure negotiated with councils as part of planning consents.

Housing Secretary Michael Gove has already suggested that government targets of 300,000 new homes a year will be missed.

He told the BBC over the weekend: “We need to be straight with people: the cost of materials has increased because of the problems with global supply chains and also a very tight labour market means that the capacity to build those homes at the rate we want is constrained.”

A challenging situation may be made worse still as the Help to Buy subsidy scheme is ending.

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