"Even at these early stages, there’s no doubt that the government’s focus on planning as a driver of economic growth is a positive development for the industry."
As the dust settles and the country embraces a brand-new government, the industry’s attention has naturally turned to how this will benefit UK housing. In the build-up to the general election, Labour’s manifesto didn’t specifically outline or address housing - instead, their policies fell under broader areas, such as “driving economic growth” and “breaking down barriers to opportunity.”
Post-election, Rachel Reeves, Angela Rayner, and Ed Miliband have all stated in their opening speeches that they will be working together closely to ensure all their work lends itself to tackling the housing crisis and creating economic growth in the UK. However, they will need to overcome a few obstacles to achieve this, such as the fact that there aren’t enough builders in the industry to meet Labour’s demands. How this will play out remains to be seen, but for now, here’s what we can expect:
Building 1.5m new homes
One of the major goals outlined by Labour is their promise to build 1.5 million new homes over the course of the next parliament. A significant part of this means overhauling the planning system. In fact, just 72 hours into her new role as Chancellor of the Exchequer, Rachel Reeves outlined steps for planning reform. To stay on track, Labour will need to build 300,000 new homes every year, which is more than double what was built in 2022-23. She was, however, canny enough to commit to 1.5m homes over a five-year period, acknowledging it will take some time to make change and establish momentum.
Housing market experts believe this will be a difficult and ambitious target to meet. Muyiwa Oki, president of the Royal Institute of British Architects said, “Labour’s ambitions to deliver high-quality, sustainable homes are encouraging - as are pledges to fund additional planning officers.” However, he goes on to say that despite the manifesto offering overarching solutions, the plans lack critical detail on delivering social housing and future proofing existing homes.
Some are more optimistic about Labour’s prospects, believing that their policies could do more to boost housing supply than anything we’ve seen in several years. Home Builders Federation chief executive, Neil Jefferson, said: “The ambition on housing delivery and policy proposals put forward to deliver them are positive and welcome. Planning has been the biggest constraint on housebuilding in recent years and the measures proposed will address the main areas of concern by bringing more land forward for development more quickly.”
Their victory could lead to a significant increase in housing supply over the coming years. Whether it’s enough to meet the 1.5m target remains to be seen, but any boost is welcome. To achieve this, Reeves plans to reintroduce mandatory housebuilding targets for local authorities, help fund an additional 300 planning officers, and support the review of brownfield and grey belt land for development.
Labour’s interest in housebuilding means that their first Budget in the autumn will be closely scrutinised, particularly as we expect them to outline how exactly they plan to keep their promise of 1.5m homes in five years.
King’s Speech
Most recently, in the King’s Speech, the Labour government announced their plans for Housing, Communities, and Local Government. This includes a series of policies that will help them to reach their housebuilding targets:
Housebuilding
Labour have outlined their commitment to housebuilding by prioritising development of brownfield sites, adopting a strategic approach to assigning and releasing green belt land, and reforming ‘compulsory purchase compensation rules’ to hasten ‘site delivery, and deliver housing, infrastructure, amenity, and transport benefits in the public interest’.
Using brownfield sites alone won’t be enough to meet Labour’s goals, so they intend to develop on lower-quality, grey belt land. They intend to expedite planning permissions for such developments, and though the review of the greenbelt has always been a contentious issue, steps must be taken to alleviate the housing shortage.
It is vital, however, that Labour releases additional information about how they intend to carry out this policy. To address concerns such as public transport and accessibility, they must ensure that sites are chosen logically - both to keep cities vibrant and economically viable, but also to ensure homes are built in sustainable locations.
New towns and affordability
They have also committed to building a series of ‘new towns,’ which will help them build their 1.5m new homes. In addition to this, they also committed to introducing a new, permanent expansion of the mortgage guarantee scheme called ‘Freedom to Buy.’
Labour’s homes policy outlines how they will keep mortgage rates low and help first time buyers with this new Freedom to Buy scheme. This forms part of their plan to support 80,000 young people to get on the housing ladder over the next five years. Pivotal to this is their plan to enact a ‘first dibs’ scheme that would allow local people to get into new developments before the properties are sold to international investors. Although the scheme’s exact details are still unknown, developers will partly fund the programme.
Increased stamp duty surcharge paid by non-UK residents
Labour plans to increase the Stamp Duty Land Tax surcharge paid by non-residents when purchasing a UK property. The current rate is 2%, which Labour plans to increase to 3%. They would use this revenue to appoint 300 new planning officers to a total cost of £20m. This should help speed up the planning process and get housebuilding moving.
Labour have noted that additional stamp duty surcharges on foreign buyers will cover the funding of councils to hire additional planning officers and guarantee that local plans are being met. As we know, budget constraints by local governments have impacted planning departments for a few years, resulting in a backlog of applications.
Private rented sector
Also included in the Speech is Labour’s commitment to reforming the private rented sector. Part of this commitment includes abolishing section 21 evictions immediately, and empowering private renters to challenge private landlords raising rents unreasonably.
What else can we expect?
Outside of what has already been confirmed by the new government, there are a number of proposals that have been floated that we can expect to hear about in the future:
Prioritising building new social rented homes
Labour plans to deliver the biggest increase in social and affordable housing in a generation, and their aim is to prioritise the building of new, social rented homes. They’ve not set a target for social housing and have not yet promised to increase funding for the government’s main social housing programme. They do note measures such as protecting existing stock through reviewing Right to Buy discounts and increasing protections on newly built social housing.
A dire need for social homes may call for more concise action and ambition. This may look like scrapping Right to Buy altogether and funding councils to build both new and purchase existing housing stock. However, Labour would need to consider how to plug the gap and address shortages.
Phasing out leasehold properties
We should see action too in the leasehold sector - another contentious topic. The Conservatives' Leasehold and Freehold Reform Act, which attempts to address the issues encountered by leaseholders, will be put into effect by the incoming administration with one significant addition: ground rents will be capped. The goal is to phase out leasehold, mandating that all newly constructed apartments be sold as commonhold. For the five million leaseholders in England, this could result in greater transparency and lower lease extension costs, possibly simplifying the purchase and sale of leasehold properties.
Looking ahead
With housebuilding a priority, share prices of UK housebuilders went up following the election. Vistry, Persimmon, Taylor Wimpey, Barratt, and Berkeley were among the housebuilders that ended the day up (between 2-3% higher) off the back of Labour’s plans to build new homes. Additionally, despite a substantial shift in the UK landscape, house prices have remained broadly stable, according to data from Halifax. We may also see mortgage rate cuts by the end of 2024.
Even at these early stages, there’s no doubt that the government’s focus on planning as a driver of economic growth is a positive development for the industry. We’re likely to see more progress being made to address important concerns, including investing in local planning authorities, developing renewable energy sources, and delivering more new housing.
Furthermore, with Labour’s goal to put economic stability at the forefront of everything they do, this could mean reduced - or, at the very least, consistent rates. There’s no reason to not encourage your customers to go ahead if they’re looking to buy a house soon. The mortgage guarantee scheme is still in effect, inflation is the lowest it’s been in months, and the base rate is stable, with drops potentially coming later this year.
Mission-led and based on principles of security (as highlighted in the King’s Speech 2024), must be the order of the day for the new government. Now, the task for Labour is to ensure that these programmes are successfully carried out locally in order to produce tangible results for the economy and communities.
