The UK is falling considerably short of its goal to build 1.5 million new homes by 2029, according to new data analyzed by estate agent Savills. In the year to June 2026, only 202,700 homes were built, marking a modest 0.4% increase from the previous three months. To meet the government's target, an average of 300,000 new homes would need to be constructed annually.
Savills has projected that the rate of home completions will slow further, averaging approximately 167,500 homes per year over the five years leading up to 2029-2030. Housing minister Matthew Pennycook acknowledged the difficulty in achieving the five-year goal, stating that it is "looking really tough."
Further data from Glenigan and the Home Builders Federation (HBF) indicates a decline in new development planning permissions. In the first three months of this year, only 1,220 private housing sites received planning approval across England, the lowest figure recorded since the dataset began in 2006. This represents a significant drop from around 2,000 sites in 2022 and nearly 3,000 in 2017.
Factors Impacting Construction
Housing minister Pennycook cited increased material costs, exacerbated by the conflict in the Middle East, and rising mortgage rates as key factors contributing to the slowdown. He noted that demand for new homes has been sluggish due to these economic pressures, creating a challenging environment for house builders.
Analysis from Savills indicates that construction cost inflation has outpaced house price growth significantly between 2020 and 2025. The HBF estimates that the cost of building a new house has risen by an average of £76,000 since 2020, with apartment construction costs seeing even steeper increases. For instance, the cost to build a typical two-bedroom flat in London has surged from £245,000 in 2016 to approximately £430,000 today, a 75% rise, while the average selling price for flats in the capital has decreased over the same period.
The widening gap between construction costs and property prices is diminishing developers' profit margins, particularly in London and the South East. While house price growth would typically encourage more building, other rising expenses are also a concern.
New Regulations and Taxes
New building regulations and environmental planning policies have also added to construction costs over the past five years, according to the HBF. The upcoming Future Homes Standard and the Building Safety Levy are expected to further impact developer margins. The Building Safety Levy, set to take effect in October, is a tax designed to raise £3.4 billion from UK home builders to fund repairs for building safety issues like unsafe cladding.
This levy will be charged before construction is completed and collected by local authorities, adding an estimated £3,000 per plot on average. The HBF warns that this tax could render many development sites financially unviable. Neil Jefferson, chief executive of the HBF, stated that to increase housing supply, the government must address site viability and affordability, noting that rising taxation and policy costs are thwarting positive development moves. He added that concerns about interest rates, the economy, and a lack of affordable mortgage lending are suppressing demand for new homes.