Government's 2026 housing targets at risk amid financing pressures, planning delays and worsening skills shortages, warns new sector report

A new analysis of the UK development sector reveals that the Government's ambitions for accelerating housebuilding in 2026 are at significant risk, despite renewed policy commitments and the introduction of planning reforms.

The Development Index 2026 - built from industry leader's insights across the UK's leading developers, housebuilders, REITs, and asset managers - highlights a combination of structural and emerging challenges that threaten delivery across the built environment.

Confidence collapses as viability falls

Almost all industry leaders surveyed reported "low" or "very low" confidence in the UK development market entering 2026, citing weak market sentiment, slower decision-making, and persistent economic uncertainty. The report also indicates that financing remains available, but on selective and more expensive terms, with many debt funds struggling to deploy capital due to a shortage of viable projects. Typical financing costs remain between 7–12% per annum, further undermining scheme viability.

Planning delays are escalating despite more applications

While planning applications rose by 6% year‑on‑year, approvals have fallen 11%, compounding the delivery bottleneck. Developers warn that Gateway 2 legislation alone adds an average of 26 weeks to planning processes, even though the backlog is expected to improve in early 2026. Local authority capacity constraints and the slow rollout of the new NPPF continue to restrict progress.

Costs continue to erode deliverability

Across the sector, rising costs of land, materials and labour remain a major barrier to new housing supply. These pressures, combined with housing affordability challenges (only 14% of properties in large towns and cities are affordable to single-income buyers), are threatening the viability of both market-sale and rental schemes.

Skills shortages are intensifying

The Development Index also identifies a growing skills gap as a critical threat to the Government's 2026 targets. Niche acquisition and quantity surveyor roles remain among some of the hardest to fill, with employers facing acute competition for experienced professionals who can navigate complex planning policy, ESG requirements, and viability constraints.

Businesses across some construction and production roles, and cradle-to-grave and delivery positions within development, are increasingly relying on interim hires with expertise in niche skill sets and in the delivery of projects, or to navigate tax or cost implications.

Maria Sinclair, Managing Director of Cobalt UK, comments: "Despite strong ambition from the Government, the development ecosystem simply isn't functioning at the pace required to meet 2026 housing targets. Until viability improves and the sector is fully resourced, delivery will continue to stall. It is important to add that we are seeing some encouraging signals in the market, from anticipated interest rate cuts and the forthcoming revision of the National Planning Policy Framework, to the continued strength of mixed-use, Build to Rent and infrastructure-linked industrial projects.

"However, policy progress alone cannot bridge the widening gap between ambition and delivery. Unless the sector's fundamental constraints, particularly local authority planning capacity, persistent viability challenges, and critical labour and skills shortages, are addressed, the target of 1.5 million new homes by 2030, let alone the delivery expectations for 2026, will remain out of reach."