Labour promises 1.5m new homes—can it deliver?

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By Creative Media News

  • Labour vows to build 1.5M homes
  • Focus on planning, green belt reform
  • Aid first-time buyers with new schemes

According to Labour’s election campaign claims, building more homes is central to the new government’s economic growth strategy.

Keir Starmer vowed that Labour would support house building to accomplish its goal of 1.5 million houses over the next five years.

This means 300,000 dwellings will need to be created each year, doubling the number built in 2022-23.

Labour claims it will accomplish this by shortening planning application delays, assisting first-time buyers and developing the ‘ugly’ green belt. Is this a realistic pledge?

Why are we building fewer homes?

Since the 1980s, the number of residences created and paid for by the public sector has substantially decreased.

Meanwhile, private homebuilders are hesitant to build too many homes or too rapidly, as flooding the market may lower buyers’ prices.

The number of new homes built yearly will rise or decline in response to people’s desire to buy or sell their homes.

According to HMRC estimates, housing sales declined by 19% in 2023 to a little over 1.02 million, owing primarily to higher mortgage rates. As a result, housebuilders have reduced back.

According to the National House Building Council (NHBC), the UK’s largest provider of new home warranties and insurance, the number of new homes planned decreased by 44% last year.

Can Labour build 1.5 million homes by 2029?

Some home market specialists believe that meeting this aim will be challenging.

First and foremost, this is because private sector housebuilders, rather than the government, make the majority of decisions about whether or not to build homes.

‘Politicians have no trowels. “Private completions are key,” argues property expert and critic Peter Bill, noting that only 143,000 homes were finished in 2023-24.

David Crosthwaite, chief economist at Building Cost Information Service, which provides cost and price statistics to the UK construction industry, believes Labour is unlikely to meet its housebuilding target.

‘It’s just a grandiose aspiration,’ Crosthwaite says. Flooding the market with additional homes would not benefit property developers.

‘The only way the government could affect supply would be to build themselves, as they used to do when local governments engaged direct workers to construct social housing. However, considering the situation of the public finances today, this choice appears doubtful.

According to David Fell, head analyst at property firm Hamptons, the speed of change would be modest because the Labour Government will be beginning from behind.

‘The policy levers they can pull are unlikely to create a rapid housing boom,’ says Fell.

‘Higher interest rates will reduce the amount of homes that larger developers can build and sell.

‘With most reporting sales figures 25% to 35% lower than the long-term average, Labour will inherit a housebuilding deficit on day one significantly bigger than the Conservatives faced in the previous 14 years.

Others are more enthusiastic about Labour’s chances of attaining this aim.

‘Of all the manifestos we have evaluated, we feel Labour’s plans do the most to increase home supply,’ says Anthony Codling, head of European housing and building materials at investment bank RBC Capital Markets.

‘We believe the Labour victory will result in a large boost in house supply over the next five years.’

Labour’s planning system overhaul

To help it build more homes, the new government wants to overhaul the planning system.

It has committed to rapidly amend the National Policy Planning Framework to reverse Conservative reforms, such as reintroducing mandatory housing objectives.

These goals were abandoned under Rishi Sunak’s reign in late 2022. At the time, the aim was 300,000 dwellings per year, but this still needed to be met.

Labour promises to provide councils with up-to-date local plans and funding to hire more planning officials. An additional stamp duty fee will be charged to international buyers.

Local government budget cuts have impacted planning departments in recent years, resulting in a planning application backlog that some argue is impeding investment in new housing.

However, Crosthwaite predicts that progress in this area will be slow again.

‘The Labour Party’s aim is to unblock part of the planning backlog, which it will achieve by expanding the number of planning officials and expediting the approvals process,’ he says.

‘Again, this is unlikely to be a rapid cure because sourcing and recruiting planners into the public sector will take years rather than months, if the skillsets are genuinely accessible.’

According to Hamptons’ David Fell, the five-year aim of building 1.5 million houses may be difficult, and we may not see benefits for some time.

‘Policy changes implemented during the first year of the new parliament are only likely to be felt near the end of it,’ he claims.

What is Labour’s proposal for the green belt?

The Labour Party claims it will build in brownfield areas rather than the countryside.

Brownfield land refers to previously built-up areas, such as a warehouse, that are demolished and replaced with residences.

However, to achieve Labour’s ambitions more than using brownfield sites alone will be required, so the party intends to develop lower-quality, ‘ugly’ green belt land, sometimes known as ‘grey belt’ land.

According to Brian Berry, chief executive of the Federation of Master Builders, “the current housing crisis will not be solved unless radical proposals to reform the planning system are implemented.”

‘Labour’s ‘grey belt’ policies provide the real prospect of unlocking tiny sites for future dwellings.’

The new government has established ‘golden guidelines’ for development on this type of land, including a 50% affordable housing target.

Will Labour support first-time buyers?

Along with developing additional homes, Labour intends to put more properties in the hands of first-time purchasers.

Although saving for a down payment remains difficult, home ownership is on the upswing among young people.

According to a recent Institute for Fiscal Studies (IFS) survey, homeownership among people aged 25 to 34 has reached a level that has not been seen since 2010.

It found that in 2022/23, 39% of 25 to 34-year-olds owned their homes, a 6% increase from 33% in 2015.

To boost that figure even further, the new government intends to launch a new and better Help to Buy scheme, known as the Freedom to Buy scheme, to assist people in obtaining a mortgage.

The scheme’s full features are yet to be disclosed, but housebuilders will contribute to its funding.

Peter Bill, a property author and pundit, is sceptical of the proposed scheme.

He continues, ‘There is a broad scepticism about these plans. As appealing as they are to purchasers, they have been shown to increase prices.

Labour would also implement a permanent mortgage guarantee plan to encourage banks to lend to people with small deposits.

However, this may only benefit a tiny number of first-time buyers. According to UK Finance, the average first-time homeowner put down a deposit of roughly 25% last year.

According to David Hollingworth, associate director of L&C, less than 10% of homeowners choose to purchase with a 10% deposit or less.

Finally, many first-time buyers are priced out of the housing market not only because of the required deposit but also because of the amount they can borrow and afford in the face of rising interest rates.

Labour also intends to give locals first dibs on new developments, ending what it calls ‘the farce of entire developments being sold off to overseas investors’ before locals have a say.

While developers of high-end flats in city centres may rely on foreign buyers to buy off-plan, Bill claims it is fine for most housing developments around the country.

He claims: “This first dibs to local buyers was tried with little success in London years ago when foreign buyers were flooding the market.

‘It is doubtful that foreign bidders will purchase entire properties. Politically appealing, but with more holes than a fishing net.’

Mandatory purchase modifications

Labour wants to change compulsory purchase compensation rules so that public organisations like councils can buy land for housing at a lower cost.

Compulsory purchase occurs when a governmental entity has the authority to force a landowner to sell so that new homes can be developed.

However, some landowners can already levy exorbitant fees based on the future value of the land if it receives planning clearance and is transformed into dwellings.

“Unlock your financial potential with free Webull shares in the UK.”

According to Capital Economics, agricultural land in the UK is valued at an average of £25,000 per hectare. In contrast, development land with planning authority is worth an average of £1.95 million, or around 80 times more.

According to Labour’s plan, landowners will be ‘given appropriate remuneration’ rather than ‘inflated prices’ based on the possibility of planning permission.

According to Andrew Wishart, a senior economist at Capital Economics, if the state collected more of this gain in value, the funds could be used to fund public housing or attractive contracts for private housebuilders who insist on higher levels of new home delivery.

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