Is the government’s housebuilding target doomed?

Further back in the pipeline, the number of homes granted planning permission fell 7% in the year to the end of June to 221,000, the fourth annual decline in succession.  

The estimates published by the Ministry for Housing, Communities and Local Government (MHCLG) provide a more accurate picture of new housebuilding than the familiar starts and completions figures, and a more timely one than the net additional dwellings statistics that form the basis of the target. 

“It’s little wonder that new housing secretary Steve Reed went so hard on his ‘build, baby, build’ message in a meeting with leading house builders last week”

The official figures on net additional dwellings for 2024-25 will not be published until November but MHCLG estimates (based on EPCs for new dwellings, but allowing for demolitions) that the annual total will be 199,300. That’s just over 100,000 below the annual rate required to hit the target. 

There are many mitigating factors for this: housebuilding has been battered by rising costs and interest rates and cannot be turned on like a tap, and it will be a while before the planning reforms initiated in the government’s first few weeks translate into more approvals and more new homes. But given that backdrop, it’s little wonder that new housing secretary Steve Reed went so hard on his ‘build, baby, build’ message in a meeting with leading house builders last week.  

He listed action so far including the restoration of mandatory housing targets, the New Homes Accelerator and the £39bn over 10 years for the Social and Affordable Homes Programme. He promised “a blitz of new measures expected to be announced in the coming weeks and months” including New Towns and the Planning and Infrastructure Bill passing into law. 

He also said that ministers will focus “on the remaining barriers, including complex planning processes, that stand in the way of building 1.5 million homes in this parliament”.

However, the assumption that planning alone is to blame for the shortfall in supply is already being tested to destruction. What are the other “remaining barriers”? The shortfall is greatest in London, where higher construction costs, higher interest rates and tighter regulation are also seen as factors. 

In a report last week, the Home Builders Federation (HBF) called for the release of more green belt land, a lowering in affordable housing requirements and the suspension of the upcoming Builidng Safety Levy. So, if the housing secretary plans to leave “no stone unturned” in the race to meet the target there are plenty of options out there to deregulate and liberalise. 

But there is little sign so far that he recognises the demand side of the equation. Put at its simplest: who can afford to buy the 1.5 million homes even if they get built? 

He’s given the impression so far that it’s all about “fulfilling the dream of homeownership” with only passing references to renting or to social and affordable housing.  

“The assumption that planning alone is to blame for the shortfall in supply is already being tested to destruction”

But the HBF sees faltering first-time buyer demand as another key reason for slow delivery in London and it is calling for “a targeted homeownership scheme for first-time buyers who want to buy a new, energy-efficient property”. 

The return of Help to Buy (though it would not be called that) might boost completions in the short-term, but wouldn’t that come at the cost of exacerbating the long-term affordability problem? 

If the old model of speculative housebuilding can only be sustained through subsidies, what can take its place? Encouraging more build-to-rent investment by institutional investors would boost supply, but wouldn’t that bump up the cost of land for other types of home? 

It’s hard to see the Spending Review settlement being reopened but if overall numbers are all that matters, there could be a temptation to give more priority to shared ownership and affordable rent and less to social rent. But at what cost to genuine affordability? 

Answers to questions like these will hopefully arrive in the long-term housing strategy soon. The 1.5 million homes target was a manifesto commitment, but targets can distort policy just as much as they dictate priorities. Focusing solely on how many – and on a target that almost nobody believes can be achieved – risks ignoring more fundamental questions about how and why.