Rachel Reeves’s plan to overhaul landfill tax has been branded “insane” by construction leaders, who warn it could add £24,000 to the cost of building a new home and cripple the government’s pledge to deliver 300,000 homes a year.

At present, landfill tax has two bands: a standard rate of £126.15 per tonne and a lower rate of £4.05 per tonne for inert materials such as soil, chalk, clay, and stone. Much of the waste produced on construction sites falls into this cheaper category.

The Treasury is consulting on proposals to phase out the lower rate by 2030, creating a flat-rate levy at the higher level. Ministers argue this would deter fly-tipping, cut fraud from misclassified waste, and encourage greater recycling and reuse of materials.

A “Development Killer”

Waste management company Business Waste estimates that landfill costs per home would rise from £690 today to £24,820 under the reforms. The Mineral Products Association (MPA) puts the additional cost at between £22,000 and £28,000 per property.

Rico Wojtulewicz of the National Federation of Housebuilders warned:  “Builders are just going to be leaving the industry entirely because they can’t make the numbers work… Fewer homes will get built, which means high demand and lower supply, and that causes house prices to rise. It could be a complete and utter development killer – it’s insane.”

The MPA also cautions that taxing inert waste at over £125 a tonne risks shutting down much of the aggregates sector.

Costs Already Rising

Housebuilders are already struggling with higher material and labour costs. The average new-build sells for £368,354, some 43% more than existing properties, according to the latest Land Registry figures. Developers warn that further waste charges will either:

• be passed on to buyers in the form of higher prices, or
• make some projects commercially unviable, leading to reduced supply.

Data from the National Federation of Housebuilders illustrates the scale of the shift: landfill charges for a 619-home scheme with a school came in at £135,448 under the current system; under the proposed changes, the bill would jump to £4.2 million.

Treasury’s Case

The government insists the reforms are still under consultation. A Treasury spokesperson said:  “No decisions have been made on changes to landfill tax, and we remain committed to working with businesses to understand the impact of the proposals.”

Officials argue that simplifying the system will close tax loopholes, tackle an illegal waste trade worth £100m a year, and stimulate investment in recycling and circular-economy technologies.

Beyond Housing

Critics stress that the impact will extend beyond housing to roads, drainage, and major infrastructure projects, where inert waste volumes are high. They warn that the policy risks stalling development across the board, undermining growth and jobs.

The Balancing Act

The debate over landfill tax reflects a wider challenge for the government: how to balance environmental goals and the need for recycling innovation against the pressing requirement to increase housing supply and affordability.

With the construction industry calling the proposals a “3,015% tax rise” on waste disposal, the question is whether the Treasury can find a compromise that promotes sustainability without pricing new homes out of reach for buyers.