Development viability and policy
The Government’s viability pressure
The Government’s policy ambition is not the problem – delivery is. Compared to our survey last year, the sector’s confidence in delivery has weakened. Many respondents see a widening gap between policy goals and the economic and operational realities facing real estate businesses.
Viability pressures stem from a mix of long‑standing issues. Some challenges, such as legacy cost inflation, are structural and slow to unwind. Others reflect policy uncertainty and the cumulative effect of frequent regulatory change. Tax reform remains a key focus point with the 2025 Autumn Budget introducing uncertainty, and prompting a pause in activity as transactions stalled and investment decisions were deferred. Reflecting wider concerns about the UK’s attractiveness, respondents expect mansion tax changes to result in fewer international purchases (29%) and lower transaction volumes overall (24%).
Abolition of Stamp Duty considered the top Government incentives that would improve the viability of new real estate developments
Peter Graham
National Tax Lead, Real Estate and Construction, RSM
Abolishing or significantly reforming Stamp Duty is consistently viewed as the single most effective way to unblock transactions, improve liquidity and support delivery. Broader reforms to business rates are needed but have long lacked Government focus.
Falling further behind on the road to build 1.5million homes
Viability remains the defining barrier to overcome housing challenges. For 39% of respondents, rising development costs remain the biggest obstacle to meeting housing targets. Land availability concerns have eased, falling to 17% from 31% 12 months ago, with softer land values and joint‑venture structures helping start developments on site.
Nearly 40% believe viability would improve if affordable housing targets on large schemes were set between 10% and 20%.
Slow planning set to take years to improve
Planning reform is seen as another area of focus, but respondents’ expectations around impact are cautious. Most believe that reform has not yet translated into materially faster delivery, with many anticipating this will take years. Improvements are expected but current planning capacity is already stretched and any rebound in development activity risks overwhelming the system unless planning throughput and resourcing increase significantly.
Majority consider it will be 1-3 years for the recent Government planning reforms to result in a faster development process
Respondents also point to workforce pressures. An ageing construction workforce could constrain future delivery unless the looming skills gap between experienced workers and the capabilities needed for a more technology‑led, compliance‑heavy environment is addressed. While 44% believe bodies such as Skills England can help, this sentiment has worsened since last year.
Melanie Leech CBE
Chief Executive, British Property Federation
Despite laudable Government ambitions for growth viability remains a powerful headwind against development. Planning reforms to date are necessary but not sufficient to drive economic growth; much more capacity is needed in local authorities and organisations like the Building Safety Regulator; and policy uncertainty still hovers over investment decisions.
The wider industry has yet to feel confident that Government fully understands the pressures on development viability – and it is clear from the survey results that Government could do much more on tax and business rates reform to address the viability headwinds. That said, with easing inflation and falling debt costs, this may be the year that we turn the corner.