Housebuilders reel at costs from new regulations, but even stricter rules due

Hundreds of housebuilders have argued new rules on house designs introduced this year threaten to push firms out of the industry, ahead of stricter changes due in 2025.

Stricter, more costly regulation and slow planning approval are among several issues that threaten to push smaller firms out of the sector, companies wrote in a letter to the prime minister on Thursday.

“It is vital that action is taken to support those of us that remain, so that we stand a chance of surviving and playing our part in addressing the housing crisis,” industry body the Home Builders Federation said.

According to UBS, the average cost of building a home has increased by around £4,000 since the government’s new building regulations came into force on June 15.

These aim to reduce carbon emissions from new builds by 31%, with housebuilders required to install better insulation, alongside technology such as solar panels.

New rules due in 2025 under the Future Homes Standard are set to have an even bigger impact though, UBS anticipates, costing builders roughly £6,000 extra per house.

These will see heat pumps replace gas boilers and smart systems as standard, while further pushing the use of solar panels and other emission-reducing technology.

Combined with higher taxes, the Home Builders Federation forecast the cost of building new homes to jump by as much as £20,000 meanwhile.

Redrow PLC (LON:RDW) founder Steve Morgan argued that there was a “wall of bureaucracy in the system” which “is completely stacked against” smaller housebuilders.

“The current operating environment and the government’s anti-building stance makes it virtually impossible for today’s generation of [smaller housebuilders] to succeed,” he added.

Analysts have also pointed to uncertainty for larger firms over the new rules, including the likes of Barratt Developments PLC (LON:BDEV), Bellway PLC (LON:BWY) and Taylor Wimpey PLC (LON:TW).

Questions over supply chains, labour shortages and timescales all remain ahead of 2025’s sweeping reforms, UBS said previously, suggesting more clarity was needed ahead of the changes.