Can the Labour Government get Britain building again?

Mandatory housing targets are back, alongside a pledge to build 1.5 million homes in the next five years. But can Prime Minister Sir Keir Starmer achieve what no Government has done since the early 1970s and build 300,000 homes a year?

One of the advantages of a new Government is its ability to formulate long-term plans while in power. We’ve seen in the past how short-term decision-making has slowed down potential new legislation, as it gets bogged down in a drawn-out consultation process.

Starmer has at least one term in power and will undoubtedly need those five years - if not more - to tackle our current housing issues, of which there are a number to say the least. Addressing these challenges won’t be quick or easy and will require substantial effort and investment, but for now at least, there is a feeling of optimism that the new Government is up for the task.

The King’s Speech revealed more of its plans around housing, including a Planning and Infrastructure Bill, which is designed to ‘speed up and streamline the planning process’ and facilitate the construction of more homes ‘of all tenures’.

The Government plans to delegate more power to local authorities, modernise planning committees, build on ‘grey belt land’ and reform the compulsory purchase of land. Labour has also previously announced its intention to hire 300 additional planning officers.

Taking on the NIMBYs

Starmer had already hinted at his readiness to confront opposition from NIMBYs (Not In My Back Yard) prior to the election campaign regarding new housing developments. In the King’s Speech, he said: ‘The planning system must enable growth—allowing democratic engagement on how, not if, homes and infrastructure are built.’

Time will tell if Starmer possesses the determination to overcome local resistance and push forward with plans for new homes. At the beginning of a five-year term, he may have the confidence to take a bolder stance on this issue than his predecessors. However, achieving these ambitious goals will likely require him to ruffle more than a few feathers along the way, especially considering the current gap to reach the target of 300,000 homes per year.

The latest Housing Pipeline Report from the Home Builders’ Federation (HBF) - a good indicator of future housing supply - shows the number of units achieving planning permission in the year ending Q1 2024 was 236,644. This is the lowest 12-month total for almost a decade, since Q3 2014. Year on year, this represents a 13% drop and a 22% drop compared to the year ending Q1 2022.

The number of units approved during Q1 2024 - 53,862 - is the lowest quarterly total since Q2 2015. In terms of sites, the number granted permission in Q1 2024 in England - 2,472 - was the lowest quarterly figure since the HBF Housing Pipeline Report began in 2006, representing a 10% drop from the previous quarter.

The reasons behind the current housing shortage are complex and we are unlikely to see the current pipeline figures improved significantly through planning reform alone. Addressing shortages in builders, raw materials, and land remains crucial.

Getting builders on board

The Government will also need the support of builders. It was unfortunate timing that just a week before Labour outlined its housebuilding targets in the King’s Speech, one of the UK’s largest housebuilders, Barratt, announced it would be slowing down its housebuilding next year, citing a “challenging” backdrop and “sensitivity to current mortgage pricing and availability.”

In its recent trading update, the housebuilder revealed it will complete between 13,000 and 13,500 homes in 2025. This is a decrease from the 14,004 homes completed in the year to June 2024 and an 18.6% drop from the previous year’s 17,206 completions. Barratt is not alone, Taylor Wimpey announced in February that it also expects to build fewer homes over the next twelve months.

With Barratt revealing in its trading update that the average selling price of its homes is around £307,000, down from £319,600 in 2023, incentivisation may well be key if the Government is to increase developers’ appetite. Meeting the 300,000 target will require not only planning reform but also investment and incentives for developers to ramp up building. There have been calls for the launch of a new first-time buyer scheme, along the lines of Help to Buy, to stimulate the market and it will be interesting to see which direction the Government takes on this.

While there are already a healthy number of first-time buyer mortgage products on the market, what may be lacking are lower interest rates to match - a goal the Labour Government will be hoping to achieve with a reduction in the Bank of England (BoE) Base Rate over the next few months and beyond.

While we are unlikely to see any noticeable increase in homebuilding over the next few years, there is now at least some confidence that the Government has the ambition to make it happen in the longer term - or at least give it their best shot.