"While recent planning reforms and affordable housing funding are positive steps, they are not a complete solution to boosting new home building"
- Richard Donnell - Zoopla
Almost half of England is not financially viable for new housing development, with delivery considered ‘challenging’ across two-thirds of the country, according to new research from Zoopla.
The government has set a target of 1.5 million new homes over the next five years. However, Zoopla’s analysis indicates that achieving this ambition is proving far more complex in the areas most in need of new housing. The number of homes granted planning permission has dropped by 23% since 2022 and is down 7% in the past year, casting doubt over the delivery target.
“While the government says it wants to ‘build baby build’, our analysis shows that this can only be currently achieved across half the country, in areas that are typically more expensive for consumers to buy,” explained Richard Donnell, executive director at Zoopla. “It is much harder for builders to build homes where it’s affordable for home buyers to buy.”
Rising costs outpace sales prices
New analysis of housebuilder accounts shows that the cost of constructing homes has increased by 17% between 2022 and 2024, while average selling prices rose by only 1%. Smaller housebuilders, who deliver around 30% of new developments, are likely to have faced even greater cost pressures than larger, listed companies.
Rising costs have been driven by several factors:
Higher borrowing costs
Increased construction and labour expenses
Additional financial pressures from recent policy changes
Future costs linked to the Building Safety Levy and the proposed Future Homes Standard
The report also highlights that demand for new homes has weakened since the closure of the Help to Buy equity loan scheme in autumn 2022 and due to higher mortgage rates. Affordable housing demand has also slowed. Developers typically rely on housing associations to purchase up to a quarter of new homes through Section 106 agreements, but these associations are facing challenges from rising borrowing costs and building safety expenses.
Regional divide in housing viability
Zoopla’s findings underline a significant regional disparity. Two-thirds of southern England has sales prices that can support new development, compared with 13% in the Midlands and 10% in the North.
Builders are continuing to construct homes in some areas with weaker viability, largely on land acquired under more favourable conditions. These projects often proceed at lower profit margins. However, acquiring new land remains difficult, with 37% of housing targets located in regions assessed as unviable for development.
While southern England presents better viability for builders, it also represents some of the most unaffordable markets for buyers. This mismatch reduces potential demand, slowing sales and increasing risks for new housing projects.
Recommendations to support new housing
The report sets out four measures to improve housing delivery:
Planning reform: Simplify and accelerate the planning process
Regulatory review: Reassess new policy requirements that raise development costs
Targeted funding: Release funds quickly to allow housing associations to purchase homes
Demand support: Explore targeted buyer support, particularly for first-time buyers
“The government can't control the price of raw materials like bricks or concrete, but it can influence the rising costs of new regulations,” noted Donnell. “While recent planning reforms and affordable housing funding are positive steps, they are not a complete solution to boosting new home building. Further reforms are needed to boost capacity and speed at the local planning level and new funding should be focused on immediate, not long-term, delivery. Direct support for homebuyers could help, but if deployed, requires careful targeting.”
Donnell also pointed to how builders could adapt. “Builders also need to ensure they are marketing homes as efficiently as possible. Affordability pressures are making people look further for their next home, especially in the new homes market. Zoopla has boosted the visibility of new homes within property search and is helping builders target would be buyers from across wider catchment areas.”
He concluded: “Building more homes is vital in helping to ease the pressures facing those in the housing market, but the viability of building is at risk from further cost increases and we can't rely on higher house prices to fix it.”
