UK housing targets: How legislative changes impact SME developers

The UK Government remains steadfast in its ambition to deliver 1.5 million homes and 150 major infrastructure projects within the current parliamentary term (3-4 years). This drive to boost housing supply is underpinned by a raft of legislative reforms aimed at improving safety, sustainability, and efficiency in the development sector. Yet, for small and medium-sized enterprises house builders and developers (SMEs), which play a vital role in meeting housing targets, the path forward is increasingly complex.

SMEs are grappling with rising costs, mounting regulatory obligations, and a scarcity of viable land. Landowners, meanwhile, are often reluctant to accept the true impact of these changes on land values, further complicating site acquisition and development viability. Against this backdrop, within this article we will look at four key legislative developments that will impact SME house builders and developers.

The Future Homes Standard: What SME house builders must prepare for

The Future Homes Standard (FHS), set to become law by December and mandatory by 2026, aims to cut carbon emissions from new homes by 75–80%, requiring no gas boilers, better insulation and smarter energy systems. While large developers may be able to absorb the associated costs and adapt, SMEs house builders and developers face significant challenges including increased build costs, cashflow pressures, skills shortages, and compliance burdens. However, there are upsides: energy-efficient homes appeal to buyers, offer long-term savings, could increase house prices and may attract green finance. We have seen many house builders put these benefits at the front and centre of their marketing campaigns.

SMEs that plan early, secure supply chains and market sustainability effectively could not only survive but thrive, marketing their properties as greener and more economical in the long run.

Building Safety Levy: Impact on SME developers

The Building Safety Levy is scheduled to come into force in England under the Building Safety Levy (England) Regulations 2025, introduced pursuant to the Building Safety Act 2022. The levy is a key component of the Government’s strategy to ensure that developers contribute to the cost of remediating historical building safety defects, particularly in the wake of the Grenfell Tower tragedy.

The regulations remain in draft but implementation of them is anticipated.

According to the draft regulations, the Levy will apply to the majority of new residential developments and purpose-built student accommodation requiring building control approval, with exemptions for affordable housing, supported housing, and developments by non-profit registered providers (albeit these have their own set of rules to follow). Local authorities will act as the collecting authorities, and the levy must be paid before occupation or completion and will therefore form part of buyer’s due diligence processes and will hit developers at the most cash strained part of the development process. The amount payable will vary by local authority and depend on whether the site is previously developed land. Developers who fail to comply may face the withholding final certificates from the local authority, making the properties unsaleable.

For SMEs it’s important to consider that the financial burden imposed by the Building Safety Levy may be alleviated in part or full as the draft regulations indicates that the levy doesn’t apply to developments of fewer than 10 units and a 50% discount is available for developments on previously developed, brownfield, land.

Planning & Infrastructure Bill: Faster approvals for SME developers

From early 2026, planning reforms under the Planning and Infrastructure Bill will streamline decision-making and accelerate infrastructure delivery in England and Wales. Key changes include faster consenting for major projects, reduced judicial review delays, and standardised National Development Management Policies. Local authorities will gain fee-setting powers to boost capacity. In a bid to encourage development, Wales aims to become the UK’s fastest nation for infrastructure approvals.

The impact of these reforms for SME house builders and developers is yet to be seen but offer the possibility of a faster and more efficient planning system, although this has been promised and not delivered by successive Governments.

Commonhold White Paper: How leasehold changes affect SME builders

The Commonhold White Paper published on 3^rd March 2025 presents the Government’s vision for tackling perceived concerns relating to leasehold properties in England and Wales.

The intention is to address the challenges faced by leaseholders and to establish “commonhold” as the default tenure for flats and shared properties. The legislation is designed to allow leaseholders greater influence on the decision-making process of how their block/development is run, giving residents the ability to manage their building/development through a commonhold association, tailoring the building/development to the needs and wants of the people that live there.

The proposals have not been widely welcomed by property professionals and the wide implementation of commonhold is far from certain.

Any changes are bound to have an impact on how new build flats are sold and may well add complexity and cost whilst house builders and developers familiar themselves with the benefits, burdens and practical implications and unintended consequences of such drastic changes.

Opportunities and challenges for developers

On the face of it, the Government’s commitment to deliver 1.5 million houses should signal happier days ahead for SME house builders and developers.  The promised and much needed simplifications and efficiencies to the planning system are welcome, despite being long overdue.

That said, these proclamations sound all too familiar and recent history suggests that there will be a lot of noise but little practical benefit for SME house builders for whom the additional costs of the building safety levy and every increasing build costs and regulations will continue to damage growth and investment. It also has to be seen how the Government will combine its housing commitments and planning reform against a challenging economic climate and need to raise government revenues. Will the government find the money to truly rejuvenate and revolutionise the planning system in the manner that is actually needed? We shall stay optimistic.