The cost of building a home is at a record high, the Treasury says, and house prices have not kept up.

This sentence is in the Treasury's own Budget document, in a box headed "Building more homes".

The same box says the UK has "around 4.3 million fewer homes than it would have if its housing stock per person matched its European comparators", citing a 2023 report by the think tank Centre for Cities. The Office for Budget Responsibility published its forecast on the same day. It cut its forecast of new homes by 190,000, as we reported in 190,000 fewer homes in the forecast. It puts higher interest rates and weak demand first, and costs after them. Its assessment, it says, is "related to the wider regulatory and fiscal environment and to sharp rises in construction costs".

The Treasury's sentence splits the cost into two parts. Materials and labour are priced by the market. Regulation and policy are set by the government, and for most of them the government has published its own estimate of what they cost. This piece takes each part in turn, with the official figures, and sets out which ones the Budget changed.

What it costs to build, against what homes sell for.

The Office for National Statistics measures the price of building work with its construction output price indices. Its index for new housing in Great Britain, public and private together, stood at 158.4 in June 2026, the highest since the series began in 2014. In December 2022 it was 139.4.

Over longer periods, costs have also risen faster than prices.

The OBR makes the same comparison. Since late 2022, it says, "residential construction costs have risen more rapidly than house prices over this period, putting further pressure on development viability". In a separate box on council housing, it puts the rise in the cost of construction and maintenance in the housing sector over the past decade at "over 40 per cent". That is a different measure from the index above, and it includes maintenance.

New homes have done better than the average. The average price of a new-build home in England was £384,434 in April to June 2026, 12.2% more than in October to December 2022. That figure is provisional and rests on few sales. The Land Registry has so far recorded 250 new-build sales in England for April to June 2026, against 28,845 for October to December 2022, and it revises the figures as more are registered.

The gap matters because of how a site is priced. A builder's margin and the price paid for the land both come out of the difference between what the homes sell for and what they cost to build. We explained how that works in how land gets its value. The OBR puts it this way: "Industry evidence suggests that higher borrowing costs and weaker buyer sentiment have weighed on house price growth, reducing developers' ability to absorb rising costs."

Materials.

The Department for Business and Trade publishes a monthly index of the prices of construction materials. Its index for new housing reached 168.2 in August 2026, a provisional figure, on a scale where 2015 is 100. No annual average in the figures, which go back to 1996, has been higher: the highest is 158.1, in 2025. The index rose 5.6% in the year to August 2026 and is 49% above its 2019 average.

Steel and pipes led the rises over the year to August.

• Fabricated structural steel rose 21.2%.
• Rigid pipes and fittings rose 15.5%.
• Steel reinforcing bars for concrete rose 12.5%.

Some prices fell. Cement fell 0.8%, ready-mixed concrete 0.7% and imported sawn wood 1.6%.

Most of the rise in structural steel came between January and April 2026, when its index went from 148.4 to 168.1. That was before 1 July, when the government changed its trade measure on imported steel. The amount that can enter the UK without a tariff was cut by 51% compared with the previous "steel safeguard", and the tariff on steel above that quota rose to 50%. The Budget expects the tariff to raise £85 million in 2026-27 and between £110 million and £120 million in each year after. The figures so far do not show what effect the change has had on prices.

Labour.

The Treasury names labour costs alongside materials. The ONS earnings figures cover employees, not the self-employed. For employees in construction, average weekly pay was £819 in June to August 2026. That is 14.1% more than in October to December 2022. Across the whole economy, pay rose 19.7% over the same period. Since January to March 2020, construction pay has risen 26.4% and pay across the economy 40.0%.

Vacancies have fallen back. Construction employers had 27,000 vacancies in July to September 2026, the same number as in January to March 2020 and down from 42,000 in October to December 2022. The Construction Industry Training Board, the industry's training body, estimates that "an average of 41,200 extra workers will be needed each year between 2026 and 2030".

One measure of the industry's finances is company failure. In the 12 months to September 2026, 3,873 construction companies in England and Wales entered insolvency, 2% fewer than in the previous 12 months. That is more than in any other industry, and 17% of the cases where the industry was recorded. The Insolvency Service notes that the numbers by industry "do not reflect the relative likelihood of companies in any given sector entering insolvency". They cover all construction, not only housebuilding.

The costs the government sets.

The second half of the Treasury's sentence is "regulation and policy costs". The OBR names the main ones as the building safety regime, biodiversity net gain, nutrient mitigation and taxes on developers. Energy standards for new homes add to them. For most of these, the government has published its own estimate of the cost in an impact assessment, the document a department must produce when it brings in a regulation.

The Future Homes Standard was laid before Parliament on 24 March 2026 and comes into force on 24 March 2027, or 24 September 2027 for higher-risk buildings. A home can still be built to the 2021 standard if its building control application goes in before 24 March 2027 and work starts before 24 March 2028. The impact assessment puts the extra cost at £1,550 a home in a high-rise block of flats and £5,690 for a mid-terrace house. It puts the cost to business at £709 million a year over the first ten years. The standard is already law, and the Budget does not mention it.

The Building Safety Levy is charged per square metre, at a rate set for each council area, and we set out the rates in the levy on the field. Its impact assessment expects it to raise £3.4 billion over around ten years, and says it is "expected to have only a very small negative impact on supply".

Biodiversity net gain. Defra's figure of about £921 a home assumes 34 homes to the hectare. Its consultation on a brownfield exemption estimated that exempting sites up to 1.5 hectares would save developers around £41 million a year, within a range of £21 million to £61 million. It put the cost to nature at around £87 million a year. Those figures use one of the definitions of brownfield land it tested, and on that definition a further 26% of the homes that now need net gain would no longer need it. In its impact assessment on the small-sites changes, Defra says it expects "a significant proportion of the compliance cost savings to feed through to higher land values in the medium to long term". We set out the rules in what changed for small sites and self-builders.

Nutrient mitigation. The government has not published a cost a home. Its replacement for mitigation arranged site by site is the Environmental Delivery Plan, created by the Planning and Infrastructure Act 2025. The first, for three river catchments in Norfolk, went out to consultation on 17 September 2026. The government says it could "unlock up to 15,780 new homes in Norfolk", with developers paying a "simple, flat rate" in place of what it calls "piecemeal and costly nature mitigations". The consultation has closed, and the plan has not yet been approved.

The Building Safety Regulator. Higher-risk buildings, those at least 18 metres or seven storeys tall with at least two homes, need the regulator's approval before work starts, a stage known as Gateway 2. The regulations give it 12 weeks to decide, or longer if the applicant agrees in writing. In the 12 weeks to 5 October 2026 it approved 55 of the 57 applications for new higher-risk buildings and conversions that it decided, covering 11,822 homes. The median time to approval was 23 weeks. The Budget lists "improving the performance of the Building Safety Regulator" amongst steps already taken. The OBR counts the regime amongst the changes that have increased "the cost, complexity, and timescales associated with residential development".

The industry's own figures are larger. The Home Builders Federation, which represents housebuilders, says "£76,000 has been added to the cost of building a home since 2020". It puts £37,000 of that down to material and labour costs, over £23,000 to regulation and more than £7,000 to taxes and levies, with up to £7,000 more on some sites for costs such as nutrient mitigation. It gives £10,200 a home for the Future Homes Standard and £5,700 for biodiversity net gain. The government's figures are £4,350 and £921. The two sets may not count the same things, and the government has not published a combined figure of its own.

What the Budget changed.

The Budget's measure on the cost of regulation is mainly a promise about the future. "To provide further certainty for house builders, the government will not make major changes to building regulations for the remainder of this Parliament", except to continue improving building safety, including the Grenfell Inquiry's recommendations. It will also "continue to consider how amendments to regulations could support development by being more proportionate". In the Budget speech the Chancellor called it "drawing the line on constant changes to building regulations".

It changes one of the costs in the table, biodiversity net gain on brownfield sites, from a date still to be announced. It also makes land sold to housing associations zero rated for VAT from 1 April 2027, which we covered in 190,000 fewer homes in the forecast. On workers, it requires at least 3% of the workforce on large government construction and infrastructure projects to be apprentices.

The levy, the developer tax and corporation tax stay as they were. The Budget does not mention nutrient mitigation or the Future Homes Standard.

What to watch.

• The ONS construction output price indices for July to September, due on 12 November 2026.
• The materials index, published monthly by the Department for Business and Trade.
• The biodiversity net gain response, with the date the brownfield exemption starts and the definition of brownfield land it uses.
• A decision on the Norfolk Environmental Delivery Plan, and whether others follow.
• The Future Homes Standard, in force from 24 March 2027.
• Any proposals to make regulations "more proportionate", which the Budget does not date.
• Gateway 2 decision times, against the 12 weeks in the regulations.

Sources: HM Treasury, Budget 2026, 28 October 2026, Box 4.A and sections 5.4, 7.8, 7.11 and 7.13, and Table 6.1; HM Treasury, Budget 2026 speech, 28 October 2026; Office for Budget Responsibility, Economic and fiscal outlook, October 2026, paragraphs 2.61 and 3.31, Box 5.2 and footnote 13; Office for National Statistics, Construction output price indices, April to June 2026, Table 2; HM Land Registry, UK House Price Index, August 2026; Department for Business and Trade, Building materials and components statistics, September 2026, Tables 1a, 1b and 2; Office for National Statistics, Average weekly earnings, 20 October 2026, series K5CD and KAB9, and Vacancies by industry (VACS02); Construction Industry Training Board, Construction Workforce Outlook 2026 to 2030; The Insolvency Service, Company insolvencies, September 2026; Ministry of Housing, Communities and Local Government, Part L 2021 final stage impact assessment, December 2021, Table 8; Ministry of Housing, Communities and Local Government, Future Homes Standard impact assessment, March 2026, paragraphs 4.5 and 13.4; The Building Regulations etc. (Amendment) (England) Regulations 2026, regulations 1 and 5; Building Safety Levy: assessment of impact, July 2025; Department for Environment, Food and Rural Affairs, Changes to biodiversity net gain for small sites impact assessment, May 2026, and Biodiversity net gain: considering a targeted exemption for residential brownfield development, April 2026, Table 3; Ministry of Housing, Communities and Local Government, Government unveils plans to unlock over 15,000 new homes, 17 September 2026; The Building (Higher-Risk Buildings Procedures) (England) Regulations 2023, regulation 5; Building Safety Regulator, Building safety news and updates, 8 October 2026; HM Revenue and Customs, Residential property developer tax, October 2021; Home Builders Federation, New taxes and policy costs add £76,000 to the cost of building a new home, updated 6 October 2026. The percentage changes are our own arithmetic on the published index values and prices.