Viability crisis threatens new housing and commercial delivery, property group says
Calls for tax reform and regulatory certainty are intensifying ahead of the Autumn Budget, as the British Property Federation (BPF) warns that a worsening viability crisis could undermine the delivery of new homes, workspaces, and infrastructure across the UK.
In its submission to HM Treasury, the industry body highlighted the real estate sector’s £110 billion annual contribution to the national economy and its support for one in every 13 jobs. The federation cautioned that these gains are now at risk, citing persistent financial pressures affecting all property types.
Recent data underline the scale of the challenge. The BPF pointed to July’s S&P Global UK Construction Manager’s Index, which reported the steepest decline in construction activity in five years, alongside falling build-to-rent (BTR) starts and a second consecutive drop in new development recorded by the September 2025 Deloitte London Office Crane Survey.
The BTR sector has been particularly affected, with construction starts in the first half of 2025 falling to 2,600 homes, compared to 18,000 completions in 2024. The BPF noted that the current tax system is undermining the feasibility of high-density housing schemes, such as BTR, which are delivered more quickly than homes for sale. The reduction in BTR activity poses a challenge to government targets of 1.5 million new homes this Parliament and the accelerated creation of new towns.
The BPF’s submission set out several recommendations for the chancellor. It called for the restoration of Stamp Duty Land Tax (SDLT) relief for high-density housing, noting that the removal of Multiple Dwellings Relief (MDR) in 2024 has negatively impacted large-scale high-density developments, especially in less valuable regions. The BPF estimates that up to 25,000 BTR homes have been delayed or cancelled as a result and is calling for targeted SDLT support to be reinstated.
The federation also urged the government to extend Empty Property Business Rates Relief to 12 months. Currently, business rates are payable on empty retail and office properties after three months, and on logistics buildings after six months. BPF research found that only 9% of vacant shops are re-let within six months, suggesting that the current relief period does not reflect real market conditions. The BPF also highlighted that 83% of commercial buildings in the UK’s seven largest cities have an EPC rating below ‘B’, emphasising the need for more time to refurbish and improve energy efficiency.
The BPF also recommended abolishing council tax on newly completed BTR homes for the initial letting period. New BTR properties become liable for council tax three months after completion, but larger schemes can take a year or more to fully let. The BPF argued that this system imposes additional costs on high-density developments that are completed quickly.
In addition, the organisation called for the broadening of zero-VAT eligibility for energy-saving materials. The BPF is seeking zero-VAT status for all energy-saving materials and heating equipment used in refurbishments, not just for standalone improvements, to support the viability of upgrading older rented housing.
“The data is stark,” said Melanie Leech (pictured top), chief executive of the British Property Federation. “Without targeted interventions from government to address the development viability crisis, key government priorities such as 1.5 million new homes and the Industrial Strategy will not be delivered.
“As long-term investors in communities across the country, our members want to harness domestic and global capital to support the delivery of new towns at pace; and invest in more productive workspaces, new homes for all stages of life, and the buildings and public spaces that underpin modern, cohesive communities. Yet despite welcome moves to reform the planning system, investor sentiment remains fragile, as evidenced by the collapse in construction activity across the UK. There are simply too many layers of regulation, tax and levies on new development which is at odds with the commitment to ‘back the builders’.
“We appreciate the fiscal pressure the government is under, but we urge the chancellor not to underestimate the cost of inaction – the government will not raise any taxes and levies on development that doesn’t happen. Only by addressing the development viability crisis will the government unlock the economic growth and investment we need to see across the country.”
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