The new government’s commitment to a radical acceleration of housing delivery to address the housing crisis and drive economic activity is welcome and much needed. It is all the more welcome to see this reflected in the Budget, with over £5bn committed to accelerate delivery and increase access to affordable homes. However, given the years of missed housing targets, the ambition to deliver 1.5 million homes over this parliament remains a huge challenge, with the OBR predicting at least a 200,000 homes deficit by the end of the parliament.
The biggest challenge, acknowledged by the Chancellor, Rachel Reeves, remains funding the delivery of affordable homes. We welcome the commitment in the Budget to increasing the Affordable Homes Programme by £500m to £3.1bn, although much more will be needed in phase two of the spending review to achieve Labour’s goal of securing a step change in affordable housing delivery.
Planning reform is vital to increasing housing delivery and can be progressed alongside the fiscal measures announced in the Budget. We welcome the government’s proposed changes to national policy, including a targeted approach to green belt release through the new “grey belt” classification. However, to boost housing delivery in the short-term and unlock economic growth, government must accelerate development and densification on brownfield land: urban sites that have been previously developed but are now under-utilised or in need of regeneration.
Recent research from leading UK engagement platform, Commonplace, commissioned by British Land, Landsec and Berkeley Group, found that urban communities view undeveloped brownfield sites as “wasted potential”, and, far from being anti-development, overwhelmingly support urban regeneration that delivers for their local area. In addition, the research showed that these communities are open to supporting taller and denser development, provided they are involved in the planning process at an early stage and the benefits of development are shared.
The number of planners working in the public sector shrunk by a quarter between 2009 and 2020. We therefore welcome the Chancellor’s commitment to funding 300 new planning officers while creating a more diverse pipeline of talent entering the profession. These resources should be targeted towards places with the greatest potential for growth, such as the city regions, high-potential clusters and strategic sites referenced in the government’s industrial strategy.
In order to make the most efficient use of both new and existing resources, the government must simplify the planning system: clearly defining what policies should be included in each tier (national, regional and local) to minimise policy layering and complexity and avoiding duplication between planning and adjacent (building and environmental) regulations. The planning system is overburdened and process-driven and could be further streamlined through continued investment in digitisation to create a modern, tech-enabled planning system at a national scale.
Up until 2010 affordable housing was substantially funded through grants. Since 2010, grant availability has significantly reduced and the responsibility for funding and delivering affordable housing has largely passed to the market.
As a result, there is downward pressure on housing completions from the rise in interest rates; unprecedented construction cost inflation; new building safety legislation, which has reduced efficiency, particularly on brownfield sites, through the introduction of second staircases; and a challenging sales market, with increased mortgage rates and a subsequent fall in demand.
A gradual reduction in interest rates will stimulate the market but the pace is slow and we cannot rely on rising house prices alone to address permanent changes in legislation and viability. If the new government is to achieve its goal of radically increasing affordable delivery, a new funding model is needed to address these pressures and complement the positive supply-side reforms introduced by the new government.
Other announced measures in the Budget including extending the mortgage guarantee scheme to support lending at a higher loan-to-value, at the lower end of the market, and enabling local authorities to retain and invest 100 per cent of right-to-buy receipts will support delivery, but in the longer-term other fiscal incentives and funding solutions will also need to be considered.
Risk sharing on brownfield sites would enable developers and local authorities to work more closely together to review the ability of developments to deliver affordable housing. Where sites are stalled with levels of affordable housing that are unviable, collaboration and an “open book” approach could enable quicker delivery where the local authority is prepared to adjust the headline rate of affordable housing, vary levels of discount through changes to the tenure split and/or increase the overall quantum of development, with additional affordable housing delivered when financial performance improves.
More flexible arrangements that are responsive to local market conditions would give developers the confidence to continue to invest in development through the cycle.
The reforms outlined above would enable the government to rapidly increase housebuilding in the areas where it is needed most, to ensure that more people have access to the quality, affordable homes they need close to their places of work. The Budget provided a welcome boost for housebuilding, but staying the course on planning reform and innovating to unlock delivery will be just as vital.
This article first appeared in our Spotlight Housing supplement, published on 29 November 2024.
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