Government likely to miss housing target by 25%, CIH warns

On a more positive note, deliveries of building materials are increasing and Capital Economics now forecasts starts to rise from 30,900 at the end of 2024 to 40,000 in 2027.

However, this is “not enough”, Mr Perry argued, pointing out that all recent projections of total housebuilding agree there is likely to be a shortfall against the target.

“A reasonable conclusion from all recent forecasts is that the government is likely to fall perhaps 25 per cent short of its target, and that while extra incentives may be required to achieve this figure, capacity constraints mean it is unlikely to surpass it,” the report said.

Construction industry capacity, even with government measures to improve it, will likely prevent output reaching 1.5 million in any event, it added.

Within the overall target, the government expects 30,000 homes to be delivered annually by the new Social and Affordable Homes Programme.

The report highlighted data showing that grant-funded starts and completions increased significantly in 2024-25 and suggested output from the social sector could increase to 70,000 homes annually for the next three years.

The report described this as a “welcome improvement but insufficient to fill the gap created by the private sector’s slow recovery”.

This week, The Times reported that the Home Builders Federation has written to the Office for Budget Responsibility (OBR), pointing out that its forecast that UK housebuilding would hit 1.3 million homes a year was too optimistic.

Neil Jefferson, chief executive of the Home Builders Federation, said that the OBR’s forecasts would only be achievable if the government brought in incentives for first-time buyers and reduced “planned taxes” on new homes that were making sites unviable.

In response, the government said that from the outset it had been clear that delivering 1.5 million homes was a “stretching but achievable target”.

A Ministry of Housing, Communities and Local Government spokesperson said: “We will leave no stone unturned to build the 1.5 million homes this country desperately needs and restore the dream of homeownership.

“On top of the major planning changes we have already introduced to get developers building and our huge £39bn investment in social and affordable housing, we are going further and faster to accelerate reforms and bring about the biggest era of housebuilding in our country’s history.”

The UK Housing Review, the 16th in the series, comprises several articles written by contributors from across the sector on topics from land value capture to reforming the private rented sector.

It also examines how the housing crisis is playing out differently across Scotland, Wales, Northern Ireland and England.

An article in the briefing by Hakeem Osinaike, executive director of housing at Southwark Council, warns that the financial sustainability of council housing is under intense pressure.

This is because rising costs, policy restrictions and low rent increases have left many councils forecasting Housing Revenue Account deficits, forcing them to pause or cancel maintenance and development plans.