House build election

Whenever I talk to chief executives or managing directors of businesses in any sector, they all say they desire the same thing, stability and certainty in order to allow them to plan and make investment decisions. Both of these have been in short supply over the past four years, but with a general election looming, there may be hope that the clean slate it generally provides will allow the incoming government to establish these conditions. For the housebuilding sector the election probably comes at a good time following the disruption that the sharp rise in interest rates and cost of living crisis of recent times caused.

We have heard plenty in the build up to the election and on the campaign trail from all the political parties about how they will tackle the housebuilding sector and the general shortage of housing across the UK. However, if one believes the polls and the pundits, it seems likely that the Labour party will sweep to power with a substantial majority. So what will their plans mean for the housebuilding sector.

In their manifesto, Labour have committed to building 1.5million homes in the first five years of their reign and to build a series of new towns akin to the post-war building boom. They also plan to reform the planning and economics of housebuilding to make this all more achievable.

On paper this all seems positive news but how achievable are these plans especially in light of the promises of the current conservative government whose targets were equally as positive but were never attained?

Labour’s target of 300,000 new homes a year looks ambitious in light of the fact only 232,800 were built last year, whilst the number of new homes gaining planning consent fell below the number being built for the first time since the financial crisis of 2009. According to Savills, the outlook for new homes delivery for 2024 and beyond is pretty bleak. Pre-covid, in more stable conditions, the private housebuilders delivered on average 150,000 new homes a year, that figure is now 120,000 not helped by the wind down of the Help-to-Buy scheme. NHBC data shows sales of these ‘private’ homes is down 26% and so there will need to be a significant uplift not only in private home provision but also the economic confidence for people to want to buy. Whilst build-to-rent may make up some of the shortfall (c20,000 new homes), it will fall upon the social housebuilder and local councils to make up the shortfall.

Of course Labour’s priority is to build more affordable housing which may allow social house builders the opportunity to contribute more but based on their current abilities and funding then this improvement may be difficult to achieve with Savills predicting they may be able to hit 140,000 new affordable homes for sale or rent. This still therefore leaves a significant shortfall.

The planning changes Labour proposes will therefore have to have an effect in order to allow the 300,000 target to be reached. The proposed "blitz" of planning regulations, combined with the creation of new towns, the expansion of mayoral controls over planning decisions, and the "planning passport" for brownfield developments, looks like a step in the right direction. However, as the Conservatives have found, these measures do not guarantee success. David Cameron’s National Planning Policy Framework (NPPF) in 2012 sought to install top down targets on local authorities to encourage more planning approvals but Michael Gove had to drop these when it became apparent local authorities were dragging their heels. Furthermore, new towns are not a new idea and can take years to get off the ground. Ebbsfleet Garden City is still nowhere near completion years after it was first begun. Objections, legal challenges and the lack of available land that is not currently green blet is severely limited, so there is no magic switch available.

Labour’s brownfield first strategy may help get around the green belt issues but some insiders have dubbed this as wishful thinking. Compulsory purchase orders by local authorities may sound like a good idea but land may already have had options sold in it above ‘hope value’ leading to protracted purchase processes. It may require reformation of the Land Compensation Act to get around this.

Labour’s plan do not also take into account the acute shortage of skilled workers in the construction sector. Brexit led to the reduction in available talent and coupled with the ageing of the existing workforce has led to a bleak outlook. The Construction Industry Training Board has suggested that the UK needs 251,000 extra construction workers to meet existing target let alone the more ambitious Labour plans. Labour’s housebuilding plans will therefore need to be matched by new training and recruitment of UK workers and probably the import of more foreign skilled workers to meet their construction outputs.

One would expect any party with hopes of governing the country to have ambitious construction target to not only meet demand but also to fuel economic activity, and this would be especially so from a Labour party. So let’s hope that should the pundits and pollsters get it right and Labour do win the election then their plans will be achievable and that they have greater success in overcoming the anticipated planning issues, legal objections and labour shortages than their predecessors had. But either way, a fresh government will at least, for a period of time, give the industry the stability and certainty it craves.