Spending Review: 1.5 million homes goal still behind brick wall

£39 billion allocated to the Affordable Homes Programme (AHP) is among the Spending Review’s flagship packages. This is a big increase on the spending announced for the programme by the previous government, and is hoped to turbocharge housebuilding, boost skills, and increase jobs.  

Government funding is greatly needed, but even with this cash injection, there is still a question mark over the feasibility of the 1.5 million new homes target. Limited government control over the supply of new housing and labour gaps could mean this goal remains beyond reach post-Spending Review.  

BCIS’s chief economist, Dr David Crosthwaite, discusses.

Skills, supply and the stretch for new homes

The Spending Review brought some relief for the housing sector. An additional £39 billion provides greater funding security and means long-term investment planning is more feasible. Confirmation of investment in financial transactions (FTs) is promising too. To support economic growth, the government has committed £9.8 billion to additional FTs, such as loans and equity investments, £4.8 billion of which will be used in FTs from 2026-27 to 2029-30 to catalyse private investment in housing⁽¹⁾.  

However, the government’s significant contribution does not change its lack of control over housing supply. That power lies in the hands of housebuilders who manage the supply of housing and construction activity in a way that delivers the healthiest profit margins. New cash for the AHP and FTs would go some way to funding a housebuilding surge, but housebuilders are ultimately not burdened by the same political incentive to meet the new homes goal.  

Looking at the available data, it’s already clear the government is unlikely to hit 1.5 million homes by the end of the current Parliament. New data from the Office for National Statistics shows housing activity was subdued in April 2025, with an 8.6% fall in public housing output on the year. Monthly and annual increases in private housing output offered some hope, but this activity must rise dramatically if the government is to stay on track. Housing starts and completions data show total starts in 2024 were 30.8% lower than in 2019 and 25.7% lower than in 2023.  

Elsewhere, the latest trading and outlook insight from housebuilder, Crest Nicholson, suggested consumer demand was impacted by the volatile macroeconomic backdrop in the six months to end April 2025, owing to affordability and job security concerns⁽²⁾. However, the insight offered some hope, suggesting the housing market was starting to benefit from increased lender support and better mortgage affordability granted by an easing of the interest rate environment.  

Another update from building product manufacturer, Ibstock, reflected this demand optimism. In 2Q2025, it has taken steps to reinforce productive capacity across several factories in its clay network to meet rising demand in the residential construction markets⁽³⁾. 

This is a good sign as far as housebuilding is concerned, but given the transient nature of construction’s workforce, where workers typically follow demand, future residential projects could face delays if other sectors swallow the resource first. New insight from the Construction Industry Training Board (CITB) suggests nearly 50,000 extra workers will need recruiting each year to meet the 2025-29 demand⁽⁴⁾. Failure to reinforce the workforce could mean delivering over 300,000 new homes a year is near-impossible in any event.  

Areas for concern include the UK’s planning capacity. Government data show that in the two years to December 2024, 42% of development decisions made by district planning authorities were made in extended time. While this is not a direct indication of poor performance, with the inclusion of Environmental Impact Assessments among the reasons for decision delays, it doesn’t appease capacity concerns and suggests there is room for improvement.  

Alongside a promise to recruit 300 new planners, the government has made a series of funding announcements for apprenticeships and training this year, including 1,500 apprenticeships as part of Sizewell C spending. However, it’s difficult to see how this will address the gaps left by the withdrawal of overseas labour after Brexit.  

Moreover, the government has announced plans for proposals that would require construction firms to create high-quality jobs and boost local skills to win major infrastructure contracts⁽⁵⁾. This would make the existing expectation for public bodies to provide wider social and economic value when awarding public contracts mandatory.  

The finer details of the proposals are yet to be ironed out, but the move could be positive for increasing training and career opportunities in construction and even helping to fill labour gaps. That said, the change could have the reverse effect and introduce more red tape for local authorities and contractors to navigate, despite government intentions to streamline the planning system. It’s not clear yet exactly how the government plans to roll this out so hopefully consultations will provide some clarity on the benefits for increasing long-term labour capacity.  

In terms of boosting new housing numbers quickly, multi-occupancy buildings are a plausible method. However, delays in higher-risk building (HRB) approvals, particularly at Gateways 2 and 3, are wreaking cost and completion concerns for developers. Currently, HRBs are simply not as viable as their single-occupancy counterparts, taking the housebuilding issue back to square one.  

The reality is the government’s new homes target was always too ambitious as historic numbers would have borne out.  

More cash for the AHP is a valued commitment, but the realisation that the 1.5 million new homes goal is undeliverable must be beginning to dawn on the government.  

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^{(1) Spending Review 2025 – here}

^{(2) Crest Nicholson Holdings – Half Year Report – here}

^{(3) Ibstock PLC – Second Quarter Trading Report – here}

^{(4) CITB – Labour Market Intelligence Report 2025–2029 – here}

^{(5) Gov.uk -Boosting British jobs and skills key for firms to win major infrastructure projects – here}