Can Labour achieve its housing target?  

The new government’s commitment to building 1.5 million homes over the next five years was cemented in the King’s Speech; as the monarch outlined its legislative priorities for the year. But despite the optimistic reaction across the construction industry, what are the obstacles that lie in the way of Labour achieving its most ambitious manifesto target?

The best laid planners

At the heart of Labour’s plan is the government’s reformation of the National Planning Policy Framework (NPPF). This promises to reinstate local housing targets, ‘fast-track approval of urban brownfield sites’, free up ‘poor-quality and ugly areas’ of the Green Belt – known as ‘grey belt’ and pay for 300 planning officers. It also plans to announce the creation of a taskforce to accelerate stalled housing sites that could lead to 14,000 homes (across Liverpool Central Docks, Northstowe, Langley Sutton Coldfield, and Worcester Parkway).

The proposed changes – that will be outlined in a consultation that’s due at the end of this month – have been welcomed by the housing industry. However, leading figures within the sector remain sceptical on the lack of detail regarding how it will be achieved.

In particular, doubts remain over the length of time it will take to source and recruit planners into the public sector.

BCIS Chief Economist Dr David Crosthwaite said: ‘Aside from allocating funds for training, it’s unlikely that local authorities’ salaries will compare favourably with other potential employers. Many of the skills required for planners are transferable; therefore private practices or developers could be more attractive employers.’  

However, one way of speeding up the planning process could be to boost the number of administrators, as suggested in The Royal Town Planning Institute in their ‘Planifesto’ issued before the election. This would free up more time for qualified planners to make decisions. It also suggested ‘a new administration fee for landowners to put forward new sites as part of their local plan site allocation process’ to ‘provide additional income without prejudicing plan-making.’

The green, grey belt of home

As Chancellor Rachel Reeves has clarified, there won’t be a ‘central decree’ and it will still be up to local communities and local authorities to decide where housing is built.

If this turns out to be the case, the party could be in trouble. A recent Knight Frank survey reveals that opposition to building appears to be strong, on a case-by-case basis. The number of major planning decisions decided within a 13-week timeframe continues to hover at around 20%, down from over 50% 10 years ago. According to the Home Builders Federation, planning permissions for new homes across England dropped to their lowest level for almost a decade over the 12 months to the end of March. As Knight Frank reported ’just 236,644 units were granted consent, well below what will be needed to meet Labour’s annual target of 300,000 homes.’

There may be an assumption this is down to former Conservative strongholds that tend to oppose planning due to preserving the green belt. But some refusals are down to complications with building on brownfield sites; the areas Labour wishes to prioritise first for building on, to protect the green belt. Brownfield can be notoriously difficult to develop, particularly on old industrial sites where decontamination costs can be significant. The issue of biodiversity needs considering too; these sites can be valuable habitats for invertebrates, bees and other pollinators in urban areas. In addition, although there is plenty of brownfield sites in former industrial towns, not all of them need more houses. But in those that do there is also the question of who will pay for remediating the land.

And what of the ‘poor-quality and ugly areas’ that Labour wants to free up for development? There is, as yet, no agreed definition on what constitutes ‘grey belt’, with figures from the housing industry urging that one is needed.  Labour has pointed to examples that include previously developed sites, such as a disused garage that are designated as ‘green belt’. But a recent report from Knight Frank found that 11,000 previously developed sites would only be able to house a mere 100,000-200,000 new family homes; a figure that’s way off their 1.5 million target.

It’s also worth noting that radical changes to planning could be hampered by back-benchers with marginal majorities in previously Conservative and/or anti-development areas.

In the eye of the developer

However, regardless of whether the land becomes available or not, some leading figures consider Labour’s new planning policies as little more than ‘pointless’, regardless of whether the land becomes available or not.

In response to their confirmation in the King’s Speech, Dr Crosthwaite said: ‘The government is tinkering around the edges, as this is not the blocker. Property developers are speculators, and they will always want to control the supply to market irrespective of the government’s plans.’ 

He added: ‘As the vast majority of new homes are built by commercial property developers, they control the supply to maximise their returns. Over the last few decades, many governments have tried to influence the number of new homes being built, but most have failed.’ 

As Dr Crosthwaite explains, governments have no lever to control housing supply and flooding the market with new homes would not be in the best interest of property developers, or existing homeowners, as carefully controlled supply maintains price levels​.

He said: ‘The only way the government could influence supply would be to build themselves, which they used to do when local authorities employed direct labour organisations (DLOs); responsible for the largest provision of social housing post-war. But this option seems unlikely given the current state of the public finances.’ 

The latest figures from the Hays/BCIS Site Wage Cost Indices – that track movement in the cost of site labour in the construction industry – also indicate the impact the high cost of borrowing continues to have. Its construction job placements continue to fall quarter on quarter, although the latest figures only cover the period up to the end of the second quarter this year.

BCIS Solutions Architect Paul Burrows, who compiles the indices for BCIS and Hays, said: ‘It remains to be seen whether the second half of the year will see a recovery. At the moment, homes aren’t selling and tradesmen I speak to are saying that housebuilders are mothballing sites and waiting for the market to pick up.’  

He added: ‘Those workers are now looking for work with domestic consumers, extensions and R&M which may start to lower prices a little. We’ll have to wait and see how the market develops in the coming months.’ 

Mind the gap

Although Labour’s moves to reform the planning system have been welcomed across the industry, the general consensus is that the government’s plans will simply underline the growing skills shortage in UK construction. Labour is aiming to address this with a new government body Skills England created to plug ‘skills gaps’ in key sectors. However, it’s unlikely this will be set up in enough time to provide the ‘quick fix’ the industry needs. In response to Labour’s 1.5 million new homes plan, the Construction Industry Training Board (CITB) has calculated an extra 152,000 workers would be needed to meet this level of demand.

Dr Crosthwaite says: ‘The fact we ceased making serious efforts to train new workers in on-site trades decades ago, is now coming home to roost. If Labour are serious about ramping up housebuilding and infrastructure, they need to support the construction sector in achieving this. This could involve investing in more prefabrication (moving work off-site), and relaxing rules for skilled foreign workers.’ 

He adds: ‘I’d also like to see a return to Tier 1 contractors employing site labour rather than relying on sub-contractors lower down the supply chain to provide it.’ 

These views are reflected by other leading figures in the sector, such as president of RICS Tina Paillet, who warned Labour would not fulfil their objectives without ‘addressing the skills shortage’ and ‘supporting industry work in solving this issue’.

Who’s gonna build your home?

Currently, the NPPF  requires that at least 10% of new homes in major residential developments are for affordable home ownership.  Labour has pledged to increase that amount to 50%, once the land for development is released. However, leading housing associations have said this won’t be possible without more government investment. Not only has inflation significantly pushed up costs for property developers, these schemes would be unattractive, due to insufficient return on investment.

In the week following Labour’s victory, 20 councils across England united in an urgent plea to the government to save council homes with a ‘£644 million one-off rescue injection’ – one of five solutions to ‘secure the future of England’s council housing’.

However, Dr Crosthwaite says their request still fails to mention who’s going to build the social housing which is probably ‘the biggest blocker.’

‘Since the demise of DLOs, local authorities have lost their in-house experts, the architects, engineers and quantity surveyors, who were capable of running the design and procurement of construction work. The current policy of Framework Agreements might be something else which is ripe for review.’  

He added: ‘It really doesn’t matter whether it’s an arms-length management organisation, a housing association or the private sector – to build houses you need a budget, funding and the will to provide truly social housing.’  

Conclusion

It seems unlikely that reforming the planning system will be enough for Labour to fulfil its ambition to build 1.5 million homes, as while interest rates remain high and the market currently shows little chance of recovering, there’s no incentive for private housebuilders to build. Equally, Labour’s aim to make 50% of it affordable is nothing but a pipedream without the substantial funding the government needs to make this a reality. In the event the market does pick up, the sector appears to be unequivocal – this can’t be achieved without first fixing labour shortages and the ever-widening skills gap in the industry. Investment in training and a re-evaluation of the government’s immigration policy would be a good place to start.

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