The chancellor Rachel Reeves has just delivered her Spring Statement in the Common, which was more of an economic update than delivering a raft of tax changes or spending pledges.
When it comes to housing, the chancellor pointed to the government’s reforms to the UK’s planning system, highlighting that it will result in housebuilding being at its highest level in over 40 years, according to the OBR.
She said that the government’s bold planning reforms back the builders not the blockers to deliver an extra 170,000 homes by 2029/30 – boosting homes built by 30% that year after a 13 year house building low in 2025-26.
According to the chancellor, this brings the UK one step closer to the government’s Plan for Change mission to build 1.5 million new homes this parliament with the OBR confirming the government is on track to build an extra 1.3 million homes by the end of this parliament.
Further reforms, such as the Planning and Infrastructure Bill, the government’s long-term housing strategy and the new Affordable Homes Programme – on which the government made a £2bn down payment this week – are not reflected in the forecast and will all help to reach the 1.5 million target.
As a result of the planning reforms the UK’s economic watchdog also think the economy will be 0.2% larger by 2029/30, worth around £6.8bn in today’s prices.
The OBR have also concluded in their forecasting that this could rise to over 0.4% in 2034/35 – meaning billions of pounds more for public services like the NHS and more construction jobs to get houses built for hardworking families.
For a zero-cost policy, this is the biggest positive growth effect the OBR have ever forecast.
The government says the boost to GDP is driven by:
+ Higher productivity in the construction sector, from bringing land on the edges of our largest towns and cities into more productive use, lower planning costs and removing artificial constraints imposed by planning that prevent the construction sector from expanding.
+ A greater flow of ‘housing services’ – there will be more houses for the same number of people, allowing new households to form (e.g. people moving out of their parents’ home into a home of their own). This increases GDP through more rent being paid (where new homes are let out), or ‘imputed rents’ (which reflects what owner occupiers would pay to rent their home on the open market).
+ Beyond the five-year forecast, greater housing availability increases labour mobility which contributes further to growth, by allowing people to move to high productivity places.
Homes will be built on disused car parks and petrol stations, whilst national landscapes and sites of special scientific interest will continue be protected. Government guidance ensures that Green Belt will not be fundamentally undermined.
This features as part of the Plan for Change to get Britain building, which also includes the Planning and Infrastructure Bill currently going through parliament, which the OBR will take a judgement on in due course.
The government will also consult on policies to support a more streamlined and consistent planning system. As part of delivering the Plan for Change milestone to deliver 1.5 million homes by the end of this Parliament, the government will publish a Long Term Housing Strategy and has committed to set out details of further new government investment in social and affordable housing to at the Spending Review this year, following on from the £2bn down payment announced yesterday as well as confirming the government’s plans to provide certainty for the transformative programme of building the new generation of new towns.
Industry reaction:
Richard Donnell, executive director at Zoopla, commented: “The housing market needs a strong and growing economy to support housing supply. It’s promising to see the Government focusing on longer-term impact by boosting funding for new homes and avoiding short-term measures like stamp duty holidays that don’t really help with the fundamental challenges in the housing market.
“The top priority should be an easing of mortgage regulations, which will support first-time buyers, an important buyer group for homebuilders and the broader market.
“This would also help the rental sector, where there are still 12 people chasing every home for rent, with those on low incomes bearing the brunt. Increased funding for social housing is essential in the upcoming Spending Review to help support housing delivery and boost the stock of social rented homes, which has been static for 30 years.”
Matt Thompson, head of sales at Chestertons, commented: “We have met a lot of first-time buyers who held out hope for the Chancellor to make a U-turn on stamp duty thresholds in today’s Spring Forecast. As this hasn’t been the case, first-time buyers will now have to ensure that their budget can cover the cost increase which means some might compromise on location or type of property. Although the rush of first-time buyers that the market has seen earlier this year has slowed down, demand remains strong as mortgage rates are still attractive enough to motivate buyers to get on the property ladder.”
“Earlier this year, the news reported an exodus of wealthy individuals from the UK amid the abolition of Non-Dom tax breaks. Although the Chancellor decided to soften those changes, it had already alienated a demographic that is key to the UK’s long-term economic growth. We are pleased that Rachel Reeves has taken the backlash into consideration and decided not to introduce a mansion tax for the time being which could see some HNWIs deciding to stay or return to the UK.”
William Reeve, CEO, Goodlord, remarked: “The PRS is creaking under intense pressure. A lot of this is attributable to supply and demand; there simply aren’t enough homes to go around. Today’s announcement that £2bn will be directed towards social house building is welcome, but the planned 18,000 homes barely touches the sides of what’s needed.
“We’re going too slowly to hit the government’s target of 1.5m new homes this parliament, which in itself won’t be enough to close the UK’s housing gap. And we are falling behind our neighbours – the numbers are stark when you compare our housing stock with countries like France. This is being compounded by anti-market reforms. Despite the Government’s narrative about promoting growth and stripping away red tape, where housing is concerned it is doing the opposite. It is inhibiting the market from finding solutions that would reduce the amount of money the Government needs to pour into the sector.
“For example, we should scrap provisions in the Renter’s Rights Bill that will suffocate market dynamics, such as bans on ‘over-bidding’ and abolishing fixed term student tenancies. Both reforms are anti-market and will actually make things harder for tenants, not easier. Likewise, we should remove the artificial barriers between the social and private sectors, introducing more fluid, means-tested pathways between the two sectors and targeting support more effectively. And we should be pushing even harder to drive through planning reform and make investing in property a more attractive option.”
Paresh Raja, CEO of Market Financial Solutions, said: “Overturning outdated parts of government to improve efficiency has been a major focus for Labour since the election, and planning reform was raised again as a key part of this agenda. However, the “get Britain building” rhetoric must now translate into tangible action – bringing in new construction workers is a positive step, as the Chancellor had already announced three days ago, but much of today’s speech involved repeating the Autumn Budget’s plans to encourage housebuilding.
“Reforming the planning system is obviously important. However, investors and developers are unlikely to commit to new projects unless they see a strong and growing economy that provides long-term confidence and a return on their investment. The OBR forecasts were a blow in this regard, and the onus must now be on turning the corner to turbo-charge GDP growth.
“House prices are rising, inflation fell in February, and the base rate is expected to come down further this year. These are all positives, highlighting that the property market remains bouyant, and this is important given how significant the sector’s contribution to GDP is. In future statements and budgets, we need the Chancellor to focus more energy on supporting homebuyers and borrowers, which will further stimulate growth in the market.”
More to follow… this article is currently being updated
