Labour Party Sets Ambitious Target to Build 1.5 Million Homes Over Next Parliament
The Labour Party’s election manifesto included a specific target to build 1.5 million new homes over the next parliament in order to “get Britain building again” and create jobs across England. This target, which amounts to building 300,000 homes per year, has not been achieved since the 1960s.
Chancellor Rachel Reeves recently outlined the new government’s plans to achieve this target, which include restoring mandatory local targets on housebuilding that were previously abandoned by former Levelling Up, Housing and Communities Secretary Michael Gove. Additionally, planning restrictions on developing parts of the green belt will be relaxed and the government has stated it will not hesitate to overrule local authorities.
However, despite these ambitious plans, actually hitting the target may prove challenging. This was highlighted in a recent trading update from Barratt Developments, the UK’s largest housebuilder by volume and third largest by stock market valuation. The company stated that it is likely to build fewer new homes in the next year, with a projected range of 13,000-13,500 homes compared to the 14,004 completed in the previous year.
Barratt attributed this decrease to muted demand from July to September last year, along with a drop in the average selling price from £319,600 to £307,000. The company also provided an update on its planned £2.52 billion takeover of Redrow, stating that the deal would create “an exceptional UK housebuilder”. The Competition and Markets Authority is currently reviewing the takeover, with a decision expected on August 8.
Other major players in the housebuilding sector, such as Taylor Wimpey, Berkeley Group, and Persimmon, have also reported decreases in the number of homes completed in the past year. This reflects a general sense of caution among housebuilders, with many citing a slowdown in land acquisition and a need for more favorable market conditions before investing in new sites.
Despite this caution, the industry is generally supportive of the new government’s aims to increase housebuilding. Barratt, for example, stated in their trading update that they welcome the government’s urgency and focus on housebuilding and reform of the planning system. They look forward to working with the government and other stakeholders to address supply constraints and deliver the new homes that the country needs.
However, planning reforms are just one part of the solution. Mortgage lenders have begun to cut their rates, but an interest rate cut from the Bank of England next month could provide an even bigger boost to the confidence of potential homebuyers. As the government and industry collaborate to address the chronic undersupply of new homes, the success of these efforts will greatly depend on a combination of factors including planning reforms, interest rates, and market conditions.
