Government Won't Hit Ambitious Housing Targets Without Direct Public Investment In New Homes

17th September 2024

The Government's welcome planning reforms could deliver a step change in housebuilding over the parliament. But it will need to bolster these reforms with direct investment if it is to meet its target of creating 1.5 million more homes over the parliament, according to new Resolution Foundation research.

The report Building Blocks examines whether the Government’s wide-ranging policy programme could boost housebuilding by enough to meet its stretching housing target - which hasn’t been hit on an annual basis in over half a century – and what other reforms may be needed to boost housing supply.

The report says that the Government’s decision to put local authority housing targets back on a ‘mandatory’ rather than ‘advisory’ footing, as they were before December 2023, is a welcome first step on the housebuilding ladder. This, combined with a new formula for setting targets, should enable a faster pace of development.

Changes to the formula means that housebuilding targets have increased by an average of nearly 50 per cent across the most affordable half of local authorities (assessed in terms of house prices relative to earnings), compared to just over 10 per cent on average for those in the least affordable half.

As a result, housebuilding targets across London have been greatly reduced. While this has drawn criticism from YIMBYs in the capital, the Foundation notes that the previous targets for London were unrealistic to start with and that, overall, hitting the new targets would still mean more homes being built in areas with low affordability than currently are.

The Government has also announced plans to prioritise housebuilding on brownfield land and release low-quality Green Belt land for development. Together, these reforms could provide enough land to build over a million new homes.

But the Foundation’s research shows that, although this will create the space to build more homes, hitting the 1.5 million target will require the use of undeveloped land equivalent to the same size as the area of the current ‘grey belt’. Alternatively, developers would need to build homes at a higher density on brownfield and ‘grey belt’ land, equivalent to an additional storey on around two in five of these homes.

Delays in getting planning permission is often cited as a barrier to development, and the Government has said it will address this by funding 300 new planning officers to approve new construction. However, the Foundation cautions that this extra support is small fry in the context of the number of planning officers falling from 15,000 to 12,000 during the 2010s as local authority budgets were cut, and is equivalent to less than one additional planning officer per local authority in England.

And with the construction sector shrinking as a share of the workforce and ageing too – the share aged 50 and over has increased from around one in four in 2005 to a third in 2024 – there are questions over how ready developers are to build at scale.

The Foundation says that the main overall barrier to meeting the Government’s housebuilding target is the fact that the reforms are currently too reliant on the private sector to deliver new housing. History suggests that the state also needs to play a role. For example, in the post-war housebuilding peak of 1968, two-in-five homes were built through the public sector.

A greater role for the public sector is also needed to boost the supply of affordable housing. While private developers should in theory deliver 8,500 additional affordable homes each year if they hit their target of delivering 300,000 homes overall, enough to return the supply of affordable back to early 1990s levels, these obligations on affordable housing (‘section 106 contributions’) are often watered down in order to get developments built.

The Foundation says that the Government will need to commit significant public investment for affordable housing in its upcoming Spending Review if it is to deliver on its overall housebuilding target, and provide the promised boost to social housing boost.

Camron Aref-Adib, Researcher at the Resolution Foundation, said:

"The Government has set an ambitious target to deliver 1.5 million more homes over the parliament, and followed up with welcome planning reforms to encourage private developers to get building as soon as possible.

“Giving local housing targets more teeth and opening up more land for development should help to boost housing supply, as long as the Government holds its nerve against local opposition.

“But while these reforms are necessary, they are not sufficient, as they rely too much on private sector delivery. If the Government wants to build the 1.5 million more homes that Britain needs, there’s no alternative to direct intervention via greater public investment in affordable housing. That’s the only way Britain has built at scale in the past, and it’s crucial to delivering in the future too."