SME house-builders losing appetite to invest: policy cost drivers for project teams
Reviewed by Joe Ashwell

First reported on The Construction Index
30 Second Briefing
SME house-builders are sharply curbing speculative development, with 70% of Home Builders Federation members saying current market conditions limit their ability to start new sites and 27% expecting to cut land acquisitions in the next three months. Only 41% expect to increase housing starts in the next quarter, sentiment is strongly negative in London (57% negative, 14% positive), and firms building fewer than 75 homes a year are the least optimistic. Developers face compounding cost pressures from a doubling Landfill Tax, a new £340m-per-year levy on new homes, Biodiversity Net Gain, the Residential Property Developer Tax, Building Safety Levy and the forthcoming Future Homes Standard adding an estimated 3–8% to build costs.
Technical Brief
- Landfill Tax is set to double immediately, with a 500% increase planned over the Parliament.
- A new levy on new homes will raise £340m per year, directly loading scheme on-costs.
- Future Homes Standard compliance is forecast to add 3–8% to baseline residential build costs.
- More than 75% of surveyed SMEs (76%) rank planning delays among their top three supply-side barriers.
- Cost and availability constraints mean 27% of SMEs intend to cut land acquisitions in the next quarter.
- Regional sentiment diverges sharply: Wales reports 67% positive outlook versus heavily negative views in London, southwest and southeast.
Our Take
The Home Builders Federation also features in recent coverage of more than £9bn in unspent Section 106 and other developer contributions in England and Wales, which suggests that for SME builders in London, the southwest and southeast, cash locked in local authority pipelines may be compounding the planning-delay barrier identified by 76% of respondents.
In our Policy category, HBF is one of the more frequently recurring trade bodies, and its parallel work on initiatives such as the Women into Home Building programme indicates that SME capacity issues are being tackled on both the cost/regulatory side (Landfill Tax, Future Homes Standard) and the labour/skills side rather than through planning reform alone.
Prepared by collating external sources, AI-assisted tools, and Geomechanics.io’s proprietary mining database, then reviewed for technical accuracy & edited by our geotechnical team.
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