Gateway 2 strangling supply of new homes, industry warns

Responses to a survey of almost 50 volume and SME housebuilders, conducted by property consultancy Knight Frank, has found over 6,600 homes are stuck in regulatory limbo due to Gateway 2 bottlenecks. According to the firm’s latest Land Index & Housebuilder Survey, nearly half of the respondents said that Gateway 2 checks are adding 12 months or more to their project timelines.

Oliver Knight, Head of Residential Development Research at Knight Frank, commented: “These delays are directly impacting housing supply at a time when the government has set the industry extremely ambitious housebuilding targets. Progress is being made to address some of these issues – recent changes to the Building Safety Regulator's leadership and processes announced by the Government will hopefully ease the current blockages – but it's unlikely to be an immediate fix.”

Knight Frank said that the unpredictability of the Gateway 2 process is meaningfully reducing demand for land and appetite to begin new projects. Urban brownfield land values dropped during the quarter as demand fell away, bringing the annual decline to -5%, while greenfield land values also dropped, bringing the annual decline to 5%.

Charlie Hart, Head of Development Land at Knight Frank, said: “Entrepreneurial developers build in our cities, where density and infrastructure constraints require them to be nimble and dynamic, yet over-regulation is stifling delivery. Developers understand what new homes buyers and renters want and need. Trust their judgment by setting the parameters to ensure safety, but allowing the flexibility to stimulate low-risk development that prioritises speed to market.”

Despite government efforts to speed up planning, Knight Frank’s survey of developers and housebuilders suggests conditions have worsened, not improved, over the last three months – a reality that will weigh further on both land values and delivery in the second half of 2025. Almost three quarters of Knight Frank’s survey respondents cited planning delays as their biggest challenge during Q2 – up from 60% in Q1.

Charlie Hart commented: “Developers in urban towns and cities need to be given the confidence to start building again at pace. Removing the roadblocks that add risk and hinder viability should be the top priority of our politicians. This means continuing to address the intense bureaucracy of the planning system to allow for flexibility to respond to changing buyer preferences and market conditions.”

Oliver Knight added: “The reinstatement of mandatory local housing targets and a commitment to greenfield/greybelt flexibility has boosted sentiment outside of urban markets among housebuilders. Increased funding for planning departments and the appointment of more officers should soon begin to ease local authority resourcing issues.”

Buyer sentiment was cited by 37% of respondents as the second biggest challenge facing delivery. This chimes with recent Molior data released in July which found new homes sales volumes in London had dropped to their lowest level since late 2009, with just 1,691 sales agreed in Q2 2025. 

Charlie Hart said: “Renewed support for local first-time buyers through a reimagining of the Help to Buy scheme, reformation of stamp duty, and incentives for domestic buyers who purchase off-plan will get the market moving. We must also acknowledge the strategic importance that the Build to Rent sector and overseas off-plan sales market can offer in helping to unlock and fund the delivery of high-density, high-risk, speculative development.”

Oliver Knight added: “Without buy-side incentives and further supply-side reform, housing delivery is very likely to continue contracting over both the short and medium term. Indeed, developers’ willingness to begin new projects – a good leading indicator for delivery over the medium term – remains weak.”

Asked to list the issues preventing the pursuit of a planning application, almost half of Knight Frank’s survey respondents chose S106 Affordable Housing obligations and viability. When asked about their expectations around start volumes over the next three months, 82% of respondents said they would either stay the same or decrease, while only 18% said start volumes would increase.

This sentiment was reflected in recent Molior data for London, which found private housing starts fell to their lowest quarterly level ever between April and June 2025, with just 731 new units commencing construction across the capital. 

“This is yet another canary in the coal mine for the industry – it has real consequences in London, but also our regional cities,” Charlie Hart said. “Without urgent address by both central government and London City Hall, the capital’s development, construction and other associated sectors – a cornerstone of its economy – are at high risk of failure.”

Summarising the research, Oliver Knight added: “Overall, the survey results for this quarter depict a market constrained by policy delays, weak demand and rising costs, with little short-term relief expected until financing conditions ease or recent planning reforms start to take effect.”