3 weeks ago
£450,000 new-build homes carry £55,000 hidden costs, analysis says
When people buy a brand-new house in England, the price can include extra money that they might not know about.
A new report says a house that costs £450,000 could include about £55,000 of these extra, hidden costs.
Some of this money pays for things like new roads, schools, and homes for people who need cheaper housing.
Some of it pays for protecting nature, because builders must make the environment at least 10 percent better than before.
Builders also pay government fees and extra costs when their projects take a long time to be approved.
All of these costs get added to the final price of the house, so the buyer ends up paying for them.
Building a house in the UK has become much more expensive, with costs rising by £76,000 since 2020.
Some people think buyers should be shown a clear list of what they are paying for.
Others say these costs help build better communities and protect nature.
The UK needs more homes, but every extra rule makes houses more expensive to build.
Policy analyst Alan Hibben of the Centre for Policy Studies estimates around £55,000 of a typical £450,000 new-build home's price in southern England reflects less visible policy-related costs.
The estimate includes about £30,000 in planning obligations, including affordable housing and infrastructure contributions, and about £10,000 linked to biodiversity net gain requirements.
The Home Builders Federation says the cost of building a new home has risen by £76,000 since 2020, with £37,000 from materials and labour and more than £23,000 from regulatory costs.
Hibben argues governments fund public policy through the planning system rather than visible taxation and suggests Britain could follow Canada in displaying certain taxes to consumers.
The S&P Global UK Construction PMI rose from 38.4 in June to 44.7 in July but stayed below the 50 mark separating growth from contraction, with housebuilding still declining.
- Who
- Policy analyst Alan Hibben of the Centre for Policy Studies, who produced the cost analysis; the Home Builders Federation, which estimated the £76,000 rise in build costs; and UK housebuilders and prospective buyers.
- What
- An analysis estimating that around £55,000 of the price of a typical £450,000 new-build home in southern England reflects hidden policy-related costs such as planning obligations, biodiversity net gain requirements and delay-related financing.
- Where
- Southern England, United Kingdom; the analysis also points to Canada as a model for tax transparency.
- When
- The analysis and debate come as the UK construction sector contracted in June and July, with the Construction PMI rising from 38.4 to 44.7; the HBF figures cover cost increases since 2020.
- Why
- Because governments have increasingly funded public policy through the planning system rather than visible taxation, leaving buyers to absorb costs embedded in house prices and sparking a debate over transparency.
Pro-transparency view
Pro-planning policy view
Buyer transparency on policy costs
Pro-transparency view
Hibben argues governments fund public policy through the planning system rather than more visible taxation, leaving buyers to absorb the cost without seeing a separate bill, and suggests Britain could follow Canada in displaying certain taxes directly to consumers.
Pro-planning policy view
Planning obligations such as Section 106 agreements and the Community Infrastructure Levy help pay for affordable housing, roads, schools, open spaces and other infrastructure, and biodiversity net gain delivers clear environmental benefits that are part of the development process.
Who should bear rising build costs
Pro-transparency view
With build costs rising by £76,000 since 2020, developers may pass some of those costs through to the price of finished homes, adding to affordability pressure on buyers already dealing with higher mortgage costs and a subdued housing market.
Pro-planning policy view
Developers face a difficult calculation and may also absorb costs and accept lower margins; if a development becomes too expensive or takes too long to complete, a builder may decide a site is no longer financially viable, which can reduce housing supply.
Key facts
- Typical new-build price (southern England)
- £450,000
- Estimated hidden policy-related costs
- Around £55,000
- Planning obligations share
- Around £30,000
- Biodiversity net gain share
- Around £10,000
- Rise in cost of building a new home since 2020
- £76,000 (HBF estimate)
- Material and labour cost increase
- £37,000
- Regulatory cost increase
- More than £23,000
- Biodiversity net gain requirement (England)
- At least 10% improvement
Sources
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