UK house building is falling far short of the Labour Government's target to construct 1.5 million homes by 2029, new data from Savills shows.
Only 202,700 homes were completed across the country in the year to June 2026, according to figures analysed by the estate agency. That figure represents a modest rise of 0.4 per cent compared to the previous three-month period. The data is based on new Energy Performance Certificates, which are mandatory documents issued for every newly constructed home in Britain.
To reach its 1.5 million target by the end of the current parliament in 2029, the Government needed to deliver an average of 300,000 new homes every year. However, property consultancy Savills warned that the completion rate is set to slow even further over the coming years, projecting an average of just 167,500 completions annually over the five-year period to 2029-30.
Housing minister Matthew Pennycook admitted in an interview with talk radio station LBC that it is "looking really tough" for the Government to meet its five-year target.
The Labour Party took power in 2024 with a pledge to overhaul the UK planning system and boost house building across England. Estate agency Savills, which tracked the housing figures, is one of the country's leading commercial and residential property service firms.
Rising costs and Middle East conflict
Pennycook attributed the slowdown in residential construction to international instability and pressure on household finances. He noted that the conflict in Iran has pushed up material costs for house builders while elevated mortgage interest rates have weakened buyer demand.
"We always knew things were tough, and things are really tough for house builders at the moment," Pennycook told LBC. "Not least given the conflict in the Middle East; materials prices are going up, demand for new homes is really sluggish not least because of mortgage rates. So it's a very, very challenging time for the housing market."
Analysis from Savills highlights the worsening financial squeeze on house builders. Between 2020 and 2025, the rate of construction cost inflation outpaced house price growth by 80 per cent. Data from the Home Builders Federation shows that the average cost of building a single new house has escalated by £76,000 since 2020, with inflation hitting apartment developments even harder.
Record low planning permissions across England
Data compiled by construction analyst Glenigan and the Home Builders Federation reveals a sharp drop in planning approvals. In the first three months of this year, local authorities granted planning permission for just 1,220 private housing sites across England. This represents the lowest quarterly total recorded since the dataset was created in 2006, down from approximately 2,000 approved sites in 2022 and nearly 3,000 in 2017.
The growing divergence between development costs and market values has severely strained developer profit margins. A construction industry source stated that building a standard 70-square-metre two-bedroom flat in London cost around £245,000 in 2016, but that figure has jumped by 75 per cent to approximately £430,000 today. Over the same ten-year period, the average selling price of a London flat has dropped below its 2016 level.
While the gap between construction expenses and property prices is most severe in London and the South East of England, where affordability constraints and high mortgage exposure limit price growth, developers nationwide are experiencing financial pressure. Savills indicated that house builders would require a sustained period of rising property prices to resume construction at scale, though other regulatory overheads continue to increase.
Building Safety Levy and regulatory pressure
According to the Home Builders Federation, new building regulations and environmental planning mandates have added substantial expense over the past five years. Developers face additional financial pressure from incoming regulatory changes, including the Future Homes Standard and the Building Safety Levy, with little prospect of rapid house price growth to offset costs.
Scheduled to take effect in October, the Building Safety Levy is a government tax on new residential developments. Collected by local authorities prior to building completion, the policy aims to raise £3.4 billion from house builders to remediate structural safety hazards, such as dangerous cladding, across residential blocks in England. The Home Builders Federation warned that the tax will add an average of £3,000 to the cost of each plot, rendering development financially unviable in several areas of the country.
Neil Jefferson, chief executive of the Home Builders Federation, warned that policy burdens threaten to halt new projects. "If the Government wants to see housing supply increase it has got to look wider than planning and tackle the two major constraints of site viability and affordability," Jefferson said. "Positive moves to boost housing supply are being thwarted by the growing level of taxation and cost of policy requirements that are making many sites simply unviable to develop."
Jefferson added: "In a little over a month, the Government will introduce another new tax on new homes in the form of the Building Safety Levy, which will make a host of potential sites unviable at a stroke so the overall environment for home building looks like it will remain tricky in the short term. Meanwhile, concerns around interest rates and the economy and a lack of affordable mortgage lending, in particular for young people, is suppressing demand for new homes and so limiting industry's ability to build them."
Borrowing costs for homebuyers remain high as inflation linked to the Middle East conflict has driven up mortgage rates. The shift has reversed expectations of near-term interest rate cuts by the Bank of England, creating further headwinds for buyers seeking new mortgages or remortgaging existing properties.
