Major house builder warns sector cannot maintain cross-subsidy model without grant increase

“However, the burden of achieving this, at a time when the economy is adjusting to more normal conditions following a decade of zero interest rates, must be recognised and priorities set, as housing cannot continue to cross-subsidise at these levels without increased public funding.”

The cross-subsidy model requires developers and housing associations to raise money through selling private-sale homes to fund affordable housebuilding.

However, the model has struggled in recent years, particularly in London, due to downturns in the housing market making it difficult to sell private-sale homes.

Housing associations have warned that reliance on cross-subsidy means they are more exposed to market fluctuations, and they have argued that more grant funding would increase their ability to build through downturns.

Berkeley’s interim results for the six months to the end of October show a pre-tax profit of £298m and an operating margin of 19.5%. It also increased its cash reserves from £410m to £422m.

The house builder specialises in brownfield regeneration, but Mr Perrins said it had become “increasingly difficult” to progress this type of development.

He added: “Changes to planning, tax and regulatory regimes have created an increasingly uncertain, unpredictable and burdensome environment.”

He said Berkeley had paused land-buying and had “no plans to invest in the future, not until planning and regulation are sorted out”.

However, Mr Perrins was more optimistic about rising construction costs, saying, “We are seeing deflation in our build costs for the first time”, following a period of sharp price rises.

In March, Berkeley said a separate planning category for brownfield developments was necessary as a result of the proposed changes to the National Planning Policy Framework.