The Home Builders Federation (HBF) has highlighted what many developers have been experiencing for some time: development viability is becoming one of the greatest obstacles to delivering new homes across England.
One of the biggest concerns raised by the industry is the shortage of viable development land. While the Government sought to increase housing delivery through policies such as the introduction of “grey belt” land, the reality remains that identifying land which is both practically and financially viable is becoming increasingly difficult. This presents a significant challenge to the Government’s ambitious target of delivering 1.5 million new homes by the end of this parliamentary term (2029).
What is Development Viability
Viability determines whether a development is financially worthwhile. A scheme is considered viable when the total revenue generated from the completed development exceeds the total costs of delivering it. Those costs extend far beyond the purchase of land and include planning expenses, construction costs, professional fees, financing and regulatory compliance requirements. As a result, every site needs to be assessed not only from a practical perspective but also an economic one. A site may appear suitable for development on paper, but if the costs associated with delivering the site outweigh the projected sales values, it will not proceed beyond the planning stage.
Why Development Viability is the Pressure Point for Housing Delivery
Commercial reality is increasingly colliding with rising delivery risks. Land value expectations, planning obligations, regulatory requirements and construction costs all compete for a share of increasingly constrained development budgets. At the same time, investors and lenders are demanding greater certainty and stronger returns. As a consequence, viability now dictates where a site can be acquired, whether planning obligations can realistically be delivered and ultimately whether the development can proceed at all. It exposes structural tensions throughout the development process. Local planning authorities seek contributions towards affordable housing and infrastructure; investors require acceptable returns; developers face rising construction and compliance costs. As a result, market reality and political ambition are becoming increasingly disconnected. Whilst planning reforms appear to seek the unlocking of more land, developers will only proceed on sites that are capable of generating acceptable returns. If viability cannot be demonstrated, developments are delayed, redesigned or abandoned altogether. Industry reports suggest building new homes is currently financially unviable across 48% of the country with viability challenges affecting a further 16%. That leaves roughly a third of the country for possible development.
How Rising Costs and Regulatory Burdens Affect Development Viability
The costs of building materials, labour and regulatory compliance have risen substantially, outpacing general inflation. While policymakers have frequently suggested that rising development costs can be absorbed through reductions in land values, the reality is often more complex. Uncertainty surrounding planning outcomes can discourage landowners from entering into longer term option agreements, promotion agreements or conditional contracts for their land. The continued decline in available sites for developers to secure planning permission only serves to worsen viability pressure and reduce deliverable housing.
Industry Calls for Reform to Improve Development Viability
The HBF propose the cancellation of the Building Safety Levy, which is currently scheduled to come into force in October 2026. The levy has attracted criticism from many within the development industry, who argue that it is unnecessary, unjustified and disproportionate at a time when developers are already contending with substantial cost increases and regulatory burdens. Additional charges on development risk further undermining viability, reducing the number of schemes capable of proceeding and inevitably slowing housing delivery.
The Future of Development Viability
The Government remains committed to increasing housing supply, but policy ambitions alone cannot deliver homes where schemes are economically unviable. If viability conditions do not improve, housing delivery will continue to fall short. Planning reforms, access to finance and careful assessment of regulatory costs will all play an important role in addressing this challenge.
How our Development Team can help
A well‑structured legal strategy transforms viability by tightening cost certainty, accelerating land assembly and removing the risks that typically slow delivery.
With a proactive residential development team, developers gain more predictable land delivery, cleaner risk profiles and a scheme positioned to secure funding and maximise returns.
Our Residential Development team advises developers, promoters, landowners and investors on all aspects of the development process, including option agreements, promotion agreements, conditional contracts, site acquisitions, strategic land transactions and planning-related matters. By identifying potential issues at an early stage and providing commercially focused advice, we help clients keep projects moving and unlock the full potential of their sites.
To discuss your development project or find out how we can support your objectives, please contact our Residential Development team.
