Housebuilders want chancellor Jeremy Hunt to get cladding and insulation product manufacturers to contribute to the estimated £3bn bill to make hundreds of risky flats safe.
The trade body, in its Spring budget representation, is arguing for a levy, or a corporation tax surcharge, so that they can contribute to the post Grenfell remediation bill.
Home Builders Federation, HBF, executive chairman Stewart Baseley said: "It is only the private home building industry which has been repeatedly targeted for contributions, which likely now total £5bn worth of commitments to buildings they have built and those developed by foreign developers."
Mr Baseley warned that a slew of 12 different taxes and levies on residential builders, at £4.5bn a year, meant many sites risk becoming unviable affecting the supply of affordable homes.
A modelling exercise by WPI Strategy shows the new building safety levy, to be introduced later this year, will result in an additional development cost of £1,580 per home.
This would spark a two per cent drop in land values resulting in 3,700 fewer homes completed a year with areas of lower land value like the Midlands and the North most affected. The HBF calculates 70,000 affordable homes could be lost over the ten years due to the levy.
SME housebuilders are particularly at risk of pulling out of the sector as rising costs have translated into weaker demand.
The Federation of Master Builders, FMB, chief executive Brian Berry said: "Small, local house builders are facing increasing cost pressures from a range of upcoming regulatory changes and desperately need a change in fortunes".
Planning needs to be revamped
The trade body wants the government in next week's spring budget on the 15th March to prioritise the delivery of new homes.
"We need to see significant reform to the current planning system, which is far too slow and complex, alongside direct funding from government into planning departments.
"If the government wants to deliver its stated ambition to deliver a more diverse housing supply, then it needs to be actively supporting small house builders," said Mr Berry.
The National Federation of Builders, NFB, is calling for a small sites register and a medium-sized definition of up to 50 homes to be introduced in local plans.
NFB housing and planning policy head Rico Wojtulewicz said: "Planning reform has not happened as earlier proposed. Therefore, the government needs to have targeted SME policies, or risk losing the sector which does levelling up in practice and trains seven in ten construction apprentices."
Brokers Hank Zarihs Associates said development finance lenders were concerned that planning delays made it difficult for SME builders to predict their costs accurately.