Could we be seeing a new dawn for UK house building?

In her first speech as Chancellor, Rachel Reeves was clear and unequivocal about where her priorities lie. She started by reaffirming Labour’s commitments to applying robust fiscal rules and to no increases in National Insurance, the basic, higher, or additional rates of Income Tax, or VAT.

She then moved onto her plans to launch a new National Wealth Fund, with a remit to invest – and so to catalyse private sector investment – in new and growing industries.

After laying the groundwork of no tax increases and new investment, she moved onto what I have been waiting to hear, and what I personally asked for in an article I wrote in January: namely that planning reforms are not a ‘nice to have’ but an ‘absolute must’.

On this, Reeves did not pull her punches. “Planning reform has become a byword for political timidity in the face of vested interests and a graveyard of economic ambition. Our antiquated planning system leaves too many important projects getting tied up in years and years of red tape before shovels ever get into the ground.”

The Chancellor stated that the new government would reform the National Planning Policy Framework, consulting on a new growth-focused approach to the planning system before the end of July, including restoring mandatory housing targets.

She didn’t go into detail regarding the housing targets, but the Labour manifesto committed to a return to building 300,000 new homes a year: a grand total of 1.5m over 5 years.

That in itself is going to be no mean feat, given the UK’s lacklustre track record. In 2023, 231,100 homes were built while an estimated 176,460 were started. Almost exactly the same as 2022. 

Looking further back, only in the period between the 1950s to the mid 1970s have we managed to build 300,000 plus new homes a year – when the majority were built by local authorities. With the then change in the political landscape and the Thatcherite era, the responsibility for housebuilding shifted to private enterprise and has stayed there ever since. The industry reeled after the global financial crisis of 2008, managing to get back on its feet, only to be knocked to the floor again by COVID. It has yet to recover to anything like the growth we saw between 2000-2007.

To tackle the problem, the Chancellor said that the Deputy Prime Minister intends to get tough with Local Planning Authorities and “will not hesitate to review an application where the potential gain for the regional and national economies warrant it.” She went on to include reviews of green belt boundaries and the prioritisation of brownfield and grey belt land.

Reeves also made reference to the Labour manifesto commitment to building more social and affordable housing where under current guidelines, housebuilders should make 30% of the homes they build affordable.

To facilitate the process, the Chancellor also promised 300 additional planning officers across the country.

Reform to the multiple number of planning challenges is exactly what I wanted to kickstart new building, but I also hope that the reforms don’t just address new building but also conversion opportunities – from empty office blocks to hotels. It is estimated that there are 165,000 privately-owned commercial and business premises currently empty across the UK with an additional 7,000 commercial and business premises owned by local authorities having been vacant for over 12 months. So, a further easing to permitted development rights would be welcome.    

Added to this are the estimated 400 square kilometres of small, brownfield sites owned by local authorities in England and Wales where an additional 1.6m homes could be built.     

Here at Assetz Capital, we are ideally placed to support both conversion and brownfield development given that they appeal to smaller developers rather than the big housebuilders and we are currently seeing a resurgence in the £2-10m financing space in which we specialise. With our next lending milestone of £2bn fast approaching, we remain firmly committed to the sector and have a team of subject matter experts to help and support our client base, throughout the whole of the UK.  

Another challenge to accelerate the housebuilding process is people. According to recent research, the sector needs to recruit 137,000 more workers (including 34,000 to replace retirees) to be in a position to build 300,000 new homes a year by 2030. This is over 17,000 new entrants every year and is almost three times the current rate. In 2022, only 11,000 construction apprenticeships were completed and so the shortfall is startling. 

How the new government intends to address this is yet to be seen, but it surely must involve a review of Visa requirements for EU nationals working in the construction industry?      

As the Chancellor moved towards the close of her address, she ended on a high, the speech equivalent of the rousing final chorus, saying “Be in no doubt – we are going to get Britain building again.” 

Time will tell exactly how the new Labour government intends to make that vision a reality, but they can be rest assured that they have the full support of the UK SME housebuilding sector; full of passionate, talented, and experienced developers, specialist lenders, surveyors, bankers, architects, land buyers and tradespeople.   

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