Brian Berry of the Federation of Master Builders (FMB) looks back over what has been a pivotal year for housing, and highlights the challenges and opportunities presented to builders by the new Government’s policies.
Well, what a bumpy and eventful year 2024 turned out to be! We have had a shock early General Election that caught the Conservative Government by surprise; a landslide victory for the Labour Party; the first Labour Budget in 14 years; the election of a new USA President; and of course, growing geo-political instability. All of these events have impacted housebuilders in one way or another. Now that the new Labour Government has had time to settle in it’s a good opportunity to look at some of the highlights and see what ups and downs they have had for the sector.
Labour’s housing push – the first few months
Labour’s housing target of 1.5 million new homes over five years is to say the least an ambitious goal. Plans to reform the planning system should help to make it easier to build homes and the latest announcement to increase low-cost loan options for house builders is positive. However, for the Government’s plans to succeed it will be crucial that this money is directed towards those small housebuilders who need it most and can build the homes this country needs.
The Government has also made brownfield sites the focus of their plans. This could be a bonus for SME housebuilders who tend to prefer to use smaller, brownfield sites, but with ambitions for hefty affordable housing numbers and brownfield sites only representing a small percentage of overall land in the country, will the numbers stack up?
There was also the much talked about ‘grey belt’ which is what will be defined as previously developed upon green belt land. There was a scramble to understand what this term really meant. The consultation on the National Planning Policy Framework (NPPF) made it a little clearer, although the level of clarity has sparked much debate. Labour also set up a commission to look into building new town, another lofty ambition, which the FMB has made clear must include smaller housebuilders.
So, does this mean in five years’ time we’ll have 1.5 million additional homes? Probably not, and this is seemingly supported by the outgoing head of Homes England. It’s more likely that two terms will be needed to deliver that figure given we haven’t built 300,000 new homes in a single year since the late 1960s. Overall though we must use this push for new homes as an opportunity to reset the housing market. The UK has become too reliant on a small number of volume housebuilders to deliver new homes, while SME numbers have crashed, putting us deeply out of sync with other developed economies. My concern is the plans of this Government seem reliant upon large-scale strategic housebuilding, which – in theory – will reduce house prices and result in more housing. But, this is far from the business models that volume developers work to, and pushes aside organic, sustainable growth.
The first Labour Budget in 14 years
The long-awaited Budget finally arrived at the end of October and we’ve now all had time to mull over it. Previous new governments tend to try and get the finances sorted early on, but Labour played a waiting game. What we eventually ended up with was certainly a step change to the previous government. But the immediate message was costs are going up for businesses. The fallout is still being debated into the end of the year, particularly the rise in national insurance contributions for employers which will sting many in 2025.
It is good news that the Government has committed to upgrade the country’s energy inefficient homes with £3.4bn pledged to fund their Warm Homes programme. While the full plans for how this will impact homeowners, and not just social housing, is not yet clear, it may help to provide a pipeline of work for small builders.
The Budget also finally cemented Labour’s plans to provide and increase the number of planning officers. However, the 300 additional planning officers is a drop in the ocean compared to what is needed to boost local authority planning teams – 0.7 planning officers per local authority planning team will struggle to make a difference!
What’s to come in 2025?
As we leave 2024 and enter 2025 the Government has started to realise the scale of the challenge. Departments beyond MHLCG, including Education, Work and Pensions and Business have now understood that more builders are needed to get anywhere near delivering 1.5 million new homes. The creation of Skills England may also help with this push but given it’s going to take at least nine months to set up expectations have to be managed. Efforts to boost recruitment will need to be funnelled into building up our vocational educational system, which has found itself in second place behind academic routes to work for decades. Let’s hope in 2025 this and wider sectoral issues can find a path to some form of a resolution and the Government can realise its much sought after and increasingly elusive ‘growth’ in the economy.