70% of small UK housebuilders are pulling back from new sites as taxes pile up and buyers dry out
The UK’s small and medium-sized housebuilders are increasingly pulling back from new developments as a combination of weak buyer demand, rising taxes, and escalating costs squeezes their margins and confidence, according to a new survey from the Home Builders Federation.
The quarterly SME Sentiment Survey reveals that 70% of these builders report that prevailing market conditions are curbing their willingness to start new sites.
Developers in London are particularly downbeat, reflecting the capital’s acute affordability issues and heavy policy burdens.
Only 41% of respondents anticipate increasing the number of homes they start building over the next three months, while just 28% hold a positive view of the overall housing market outlook.
By comparison, 37% express a negative perspective. Smaller operators, those delivering up to 75 homes annually, are the most pessimistic, with 28% forecasting a decline in starts and 18% expecting a significant drop.
Higher deposits, tighter lending standards, and elevated interest rates have made mortgage access tougher, dampening buyer interest and leaving many schemes financially unviable. Nearly a quarter (24%) of builders cite market conditions as a major factor forcing delays or cancellations of site starts.
Compounding these issues are mounting supply-side pressures. 57% of SME builders identify viability challenges, driven by rising build costs, additional policy requirements, and new taxes, as a primary barrier to delivery.
The industry faces a wave of upcoming cost increases, including a doubling of Landfill Tax rates soon, followed by a 500% hike over the current Parliament, and the introduction later in 2026 of a new £340 million annual levy on new homes. The forthcoming Future Homes Standard is projected to add 3-8% to construction costs.
Planning remains a persistent headache, with 76% of respondents ranking delays among their top three obstacles to building more homes.
More pain ahead
Looking ahead, the survey signals potential long-term risks to supply. More than one in four (27%) SME developers expect to cut back on land purchases in the coming quarter, citing both cost and availability concerns. A sustained slowdown in land acquisition could constrain the future pipeline of new housing.
London shows the weakest outlook, with 57% negative and only 14% positive. The South West (52% negative) and South East (51% negative) follow suit, while the East of England has 44% negative versus 22% positive. Wales stands out as the most upbeat, with 67% of small firms reporting a positive outlook and just 17% negative.
“Small and medium home builders play a vital role in a healthy housing market and in increasing housing supply. However, they are also the ones most impacted by the ongoing market conditions, lack of demand, and rising taxes and policy costs,” said Neil Jefferson, Chief Executive of the HBF.
“While planning changes have been positive, much more is needed to address the concerns of SMEs to enable them to play their part in delivering more homes.”
He called for a moratorium on new regulatory costs, taxes, and levies, plus a review of cumulative increases from departments like Defra, Treasury, and MHCLG.
Without action on viability and affordability, he warned, the government’s housing ambitions will be hard to achieve, he warned.
