Is the government’s 1.5 million new homes target achievable?.

Change. That was the pre-election promise that the new Labour government made to voters in the run-up to the 2024 General Election. And that message was heard loud and clear in their manifesto pledge to build 1.5 million new homes in five years, to combat the growing housing crisis.

So, with Labour now in power at Westminster, let’s take a look at what action they’ve taken so far, the challenges they will face and what needs to change to make their ambitious target achievable.

How many houses are currently being built every year?

In 2019, a target to build 300,000 new homes every year was set by the Conservative administration, with a record 243,770 properties built pre-pandemic in 2019/2020 being the highest number achieved. It was a period that saw a rising population and demand for housing, coinciding with supply chain disruption and rising costs on materials and labour.

And yet, despite the ever growing need for solutions to the housing crisis, in our new residential property market report, our Group Channel Development Director, Chris Baguley, states, “The UK is already an estimated 2.5 million homes short of its targets, meaning that until additional supply is a reality, competition and pricing will remain high for the foreseeable future.”

In their first Budget since the election, Labour reiterated their manifesto promises on housing, committing £5bn of government investment for housing next year, including topping up the Affordable Homes Programme with an additional £5 million.

Where are these houses going to be built?

1.5 million is a lot of houses, and many people will be worried that it means new development on green belt land or close to established communities. But, new houses don’t always have to mean new land.

One of Labour’s first proposals was to set up a New Homes Accelerator programme, aimed at speeding up developments that are stuck in the planning system or partially built. The scheme will provide resources and expertise to local councils so they can identify and resolve issues at each site, and get construction swiftly back on track.

The government also wants to make brownfield and grey belt land more attractive to developers, with initiatives and investments aimed at clearing derelict sites so new homes can be built. For example, a proposed ‘brownfield passport’ will speed up the planning process, and an additional £68 million investment in the Brownfield Land Release Fund has been earmarked for 54 councils.

You can read more from Jonathan and other industry experts in our latest residential property market report.

What does more housing mean for first time buyers and movers?

As Jonathan mentions above, developments can take some time to come to fruition meaning that the problem will not be solved overnight and buyers will have to put up with the increased demand and competition for properties for a while longer. But, ultimately, adding new housing stock in deprived areas will help to alleviate these pressures, causing rapid house value increases to at least slow.

More housing should also see a reduction in the need for gazumping and gazundering; two increasingly common and disruptive processes in the home buying journey that we discuss in our What does ‘Gazumping’ and ‘Gazundering’ mean? blog.

How can developers and councils play their part?

Builders need to… well, build.

The house building industry has taken a bit of a blow recently with leading developer Barratt’s reporting that they built fewer homes last year (and will reduce output again this year). However, other large developers are expressing more enthusiasm, saying that returning consumer confidence, decreasing inflation and the expectancy of lowering interest rates have helped them beat their projected targets for new homes.

The Labour government are also looking at the legion of small and medium enterprise (SME) developers to step in to cover the shortfall, pledging to “provide £3bn worth of support in guarantees, to boost the supply of homes and support our small house builders” as part of Chancellor Rachel Reeves’ first Budget.

However, both large and small developers alike need support:

• Councils need to simplify and speed up their planning processes.
• Other developers need to free up land banked sites.

Chris is joined by a host of industry leaders and Together colleagues in our latest residential property market report, providing their expert perspectives on the current landscape and the future for buyers, movers, investors and improvers.

How can lenders help?

Lenders, and specialist lenders in particular, have a huge role in helping developers meet their home building targets. Making sure that funds are readily available at every stage of the development process is key in keeping projects moving forward.

At Together, our specialist Development Finance team also provide dedicated support to our clients throughout the entire project, building trusted relationships with developers and key stakeholders.

In conclusion

Can 1.5 million new homes be built in the next five years? There’s evidence to suggest that the target is achievable.

With individuals and families up and down the country demanding an end to the current housing crisis, it’s going to take the collective effort and imagination of national and local government, developers and lenders to change the processes (such as planning) that aren’t currently working and get Britain building.

Read our new residential property market report for more industry insight, as we aim to answer the question… Is this the road to residential revival?