Build: Perspective – Living

The Living sector continues to face sustained viability pressures, despite ongoing depth of investor appetite. Escalating construction costs, policy and regulatory uncertainty, higher financing costs, and protracted planning processes are collectively constraining development activity. Construction costs have increased by 36% since Q1 2020, according to the ONS, placing significant pressure on appraisals. This has been compounded by rising statutory costs and taxation, including the Building Safety Levy (BSL) and higher Community Infrastructure Levy (CIL) rates. At the same time, the cost of finance has risen materially, with SONIA now approximately 300 basis points higher than in early 2020.

Taken together, these factors have eroded the profitability of developing Build to Rent (BtR), and as a result, many schemes are taking longer to move from concept to start on site, or are being reworked entirely.

This is reflected in falling construction starts: just 6,200 BtR homes commenced in the 12 months to March 2026, the lowest level since 2015 and 79% below the 2022 peak. In response, developers and investors are actively reassessing delivery strategies. One approach being taken is reducing building heights, which can lower construction costs and mitigate the time and expense associated with securing Gateway approvals for high-rise developments. Elsewhere, some schemes are pivoting towards alternative living models, including Co-Living. These optimise land use, improve space efficiency and offer lower headline rents, supporting affordability in higher-value urban locations.

Against this backdrop, design efficiency has become increasingly critical. Greater emphasis needs to be placed on rationalised building forms, simplified façades and standardised components. Combined with targeted value engineering, these measures can deliver meaningful cost savings without compromising long-term quality.

Aligning design decisions with operational considerations, including durability, maintenance efficiency and energy performance, can also enhance whole-life performance, supporting investor returns over the asset lifecycle.

Changes across Parts F, L, O, S and B of the Building Regulations, together with the Building Safety Act compliance regime, have materially increased programme risk, cost exposure and financing periods. Strong governance, early engagement with regulators, disciplined change control and robust programme management are essential to minimising delays. Procurement strategy is equally important: two-stage tenders, early contractor engagement and partnering approaches can help manage pricing risk, secure capacity, and align delivery with regulatory requirements.

While industry-led solutions can mitigate some pressures, wider policy reform remains central to restoring viability at scale. Proposed planning reforms and the revised NPPF offer the potential to improve speed and certainty, and there are early signs that Gateway 2 approval times are improving. However, industry sentiment continues to call for greater regulatory stability, tax clarity and targeted government support to sustain investment in a sector that plays a critical role in addressing the UK’s housing undersupply.

_{Read the articles within Savills Build: Perspective report below}