When house prices kept rising developers were making good profits, which we assumed to be infinitely taxable. Now prices aren't rising, but costs are, and it's not easy to roll back on commitments around building safety, affordable housing or biodiversity. And developers won't build at a loss.
It doesn't feel to me like we're asking them to build at a loss (at least, I'm not in London, so maybe things are different there, but out here we're not), but they seem reluctant to build if they can't get their viability spreadsheets to show a 20% margin.
Things definitely are worse in London. But developers won't build unless there appears to be reasonable profits - because it's such a high risk activity so they're needs to be potential profit to balance possible big losses
In places like Swindon where land values are 0 & the council is prepared to give you a pass on virtually everything - no CIL, no S106, offsets on affordable etc. - but housing demand is still high, their risks are nugatory. They need to get used to living in a <10% margin economy like other sectors.
A 10% average profit might just about be viable, but on a site where everything goes smoothly it needs to be a good bit higher than that to cover the times when it doesn't.
Risks associated with housebuilding on a brownfield site are never nugatory - supply chain difficulties, unexpected site contamination, access difficulties, house prices falls, etc
We're looking at regenerating the town centre here, & builders won't even talk to us unless we deliver a shovel ready site, with an those contamination & utilities issues taken care of by the council for them. Their 'viability' formulae don't change as a result though 🤷♀️
That's a helpful approach, and ought to be being factored in to risk appetite. But unless you're also guaranteeing them buyers at agreed prices and supplying the labour, materials and loan finance at agreed rates, there are still risks.
I mean sure, but supermarkets have risks too - bad harvests leading to supply shocks, sudden trade barriers, weather disruption, logistics breakdowns, demand fluctuations, inflation... They'll still get out of bed for 4%.
The construction industry needs a minor wakeup call is all I'm saying. We're not in a world where they get to choke off supply indefinitely anymore.