Can we really build 1.5 million homes by 2029?

In his regular column in The Sunday Times this month, Matthew Syed bemoans the difficulties about getting things done in the UK. Lots of talk, many good intentions but delivery is another matter. He asks, “will we have to declare a national emergency to get anything done?” In housing, we already talk about a housing crisis, with homelessness still stubbornly high, affordability a major issue and new housing output heading for record low levels. How do we break out of this doom loop?

Housing Secretary Steve Reed’s, “build baby build” is a catchy message but building 1.5 million homes by 2029 is very ambitious. The Office for Budget Responsibility has already cast doubt on whether the target can be met; most experts believe getting to a million by 2029 would be a good outcome given the slow start and the obstacles in the way. Government, housebuilders and social housing providers need to be in lockstep if we are to build the new homes we need. But is there sufficient understanding in Whitehall of the housing system and how it’s hugely influenced by the market and economy?

Most of the new homes will be provided by a small number of large private builders and they will only build what they can sell. Increased planning and other financial obligations are damaging the viability of many schemes. But in many parts of the country, demand is flat with suppressed confidence amongst builders, buyers and investors. There’s a particular problem in London – just 3,447 homes started this year. Government has acknowledged this by agreeing a temporary change to the London affordable housing quota for new developments from 35% to 20%, and a £322 million City Hall Developer Investment Fund to support new schemes. That’s helpful but just a sticking plaster on a system that’s not working.

Proposed changes to the planning process and quicker approvals under the new building safety regime will help but are taking too long to put in place. Even so, how will they change market sentiment? If people aren’t buying, schemes won’t be built. Months of speculation about the content of the November 2025 Budget including possible new property and other taxes and their impact on affordability, the price of mortgages and transaction costs have been deeply unhelpful.

The social housing sector also has issues to overcome.

Government policy decisions over the last few years are severely impacting housing association capacity and appetite. Rent controls to counter the costs of living crisis have re-based total rent income, impacting on borrowing capacity and appetite; additional costs of complying with building safety obligations and decarbonization; and demands for more spending on customer services are all stripping out capacity. It’s unarguable these things should be done but their impact on development capacity seems not to be fully understood. It’s not unreasonable to pressure providers to provide better services and spend more on quicker repairs but this impacts not just capacity.

Tighter margins, greater demands and intense scrutiny is impacting risk appetite. For some, dropping out of or scaling back development is a logical choice. And although many say that around half of their new programmes will come from homes provided under S106 planning agreements on private sites, the reduced appetite for these is impacting many private schemes – if HA buyers can’t be found, they can’t be built.

So all in all, it’s very a challenging environment and in the short term there are a few things the government can do to help.

For private housing:

Become less reliant on such a small number of large housebuilders and make it easier for smaller firms to play their part. Government could ensure this by fast-tracking projects below a certain threshold or by removing regulations or obligations on smaller sites;
Understand the impact on supply of imposing ever more obligations and taxes on the industry – it can’t build if it can’t make a profit;
A period of stability – in which new burdens are not placed on developers – that enables such costs to be fully reflected in land values;
Take a fresh look at how best to capture a fair share of value upliftfrom greenfield and change of use sites;
Consider short term incentives to rebuild confidence among buyers and investors;
Challenge the industry’s profit expectations – is there a trade-off with a short-term support package like Help to Buy?

And for the social housing providers:

The agreed 10-year future rent increase settlement is helpful but support convergence for older tenancies that sit well below current rents at a rate of an extra £3 per week;
Speed up decisions – why did the Social and Affordable Housing Programme details take so long?
Higher Social Housing Grant rates are needed if 60% of the new programme is to be for social rent;
Don’t abandon shared ownership – it remains an attractive tenure for first time buyers with good prospects for rising incomes and creates surpluses for HAs that help subsidise rental tenures;
Review the timescale for net zero for existing homes – a more realistic approach to what is affordable is needed;
‘Fabric first’, zero-carbon is too simplistic and expensive when existing buildings take many forms – consider emerging technologies and a focus on affordable heat;
Understand how the increased costs of the Future Homes Standard will impact on capacity;
Think very carefully about the scope of Decent Homes 2, which will likely further diminish output;
Engage in and support efforts to attract institutional equity into housing;
Challenge providers over efficiency to drive down the rate of operating cost growth.

But for the longer term, recognise our housing system just isn’t working. Let’s be bold and review it, end to end – land supply, planning, tax, investment options, building workforce planning, the whole lot. If we keep doing what we’ve always done, we’ll keep getting what we always have. And that’s just not enough.

Written by Keith Exford Non-Executive Director.

Read Keith Exford’s Report: Social and Affordable Housing Programme Delivery Challenges

Originally published by Housing Today: It’s time to be bold and recognise our housing system just isn’t working | Housing Today