Can Labour turn its housebuilding woes around?

Far from the 300,000 needed every year of this parliament, the number of additional new homes fell below 200,000 in 2025-26.

Delivery of under 400,000 in almost two years means 1.1 million will be required over the rest of this parliament to hit the target: 367,000 a year.

A report in The Sun on Sunday last month suggested that tensions over the issue had broken out right at the top of government, as chancellor Rachel Reeves asked housing secretary Steve Reed why he was not living up to his ‘build, baby, build’ slogan. “You have been in the job for months now, Steve,” she reportedly told him.

“The 1.5 million target was undeliverable in the first place and was always likely to be derailed even further by outside events”

But the 1.5 million target was undeliverable in the first place and was always likely to be derailed even further by outside events.

The real challenge is to deliver a sustainable long-term increase in output. Here at least, ministers can reasonably point to decisions taken in areas like planning reform, the National Housing Bank and new towns, and the £39bn, 10-year programme of investment in social and affordable housing as reasons why output should increase later in the parliament and beyond.

But they have still not addressed structural issues in the market, such as the divide identified by Zoopla last year, where new homes are unaffordable in half of the country and not financially viable in the other half. They have not acknowledged the reality that even “the biggest boost in social and affordable housing in a generation” will not deliver much of an increase in output until the early 2030s.

And broader economic trends are pulling the market down further, with reports from a succession of major house builders hammering home that message. Berkeley Group has announced it will stop buying new land and hiring new staff as costs rise much faster than its selling prices, while Taylor Wimpey has warned that pricing and costs are coming under pressure. Crest Nicholson has delayed publication of its results during talks with its lenders, while Gleeson says concerns about inflation have triggered “higher-than-usual caution” about its financial position.

So the market was severely challenged even before the crisis in the Middle East, with higher inflation driving up costs still further and higher interest rates reducing affordability for buyers. The Construction Products Association now forecasts that annual delivery of net additional homes will not get back above 200,000 until 2029-30. Its forecast for the whole of this parliamentary term is now only 943,204 homes.

If that’s even half right, the debate could soon move on from whether ministers can hit their 1.5 million target to focus on a much more embarrassing question. Can they build more than the million delivered in the last parliament by the chaotic governments of Boris Johnson, Liz Truss and Rishi Sunak?

“The Home Builders Federation says that the average cost of building a home has risen by £76,000 since 2020, half of that down to increased costs for labour and materials but the other half due to extra taxes and levies and higher regulatory costs”

Something will have to change, and soon, to avoid that, and it could be a close-run thing. The Home Builders Federation says that the average cost of building a home has risen by £76,000 since 2020, half of that down to increased costs for labour and materials but the other half due to extra taxes and levies and higher regulatory costs.

It is calling for a moratorium on new taxes, including the suspension of the Building Safety Levy, arguing that viability will be further eroded without a willingness to make trade-offs between different government priorities.

Some house builders are also calling for the return of Help to Buy, seeing it as the least bad option for restoring confidence, but critics will need convincing that this will not just be help for profits, dividends and bonuses.

By contrast, there are growing calls to invest more in social housing. In the contest to be the new Labour leader and prime minister, Andy Burnham has called for a return to “a postwar level of council housebuilding” and Wes Streeting has revealed plans to speed up construction of social homes.

Or the government could support the private market and affordable housing at the same time, and look to the sort of policies introduced after the financial crisis to kickstart stalled developments, and after the 1990s housing crash to fund housing associations to acquire unsold market homes.

None of these ideas will be cheap or simple to implement, but a combination of all of them may be required to get housebuilding back on track.

Jules Birch, columnist, Inside Housing