An uncertain 

Patrick Mooney explores how contrasting news on planning approvals, new homes and public finances are providing a confused picture of the future housing market

In many respects the housing market was remarkably unaffected by the Covid pandemic, with strong demand fuelling higher prices, as buyers competed to take advantage of stamp duty savings, historically low interest rates and a plentiful supply of mortgages. But will the cash-rich volume housebuilders be able and willing to plug the growing gaps within public finances that are threatening to undermine future growth in the market?

Already, inflation and interest rates are edging upwards amid talk of a cost of living crisis (fuel and energy price rises leading the way), and the situation in eastern Europe is bound to create uncertainty and possibly lead to a price correction, or at least a cooling in market conditions.  

Last year we saw planning approvals for new homes bounce back to one of their highest totals in the past 15 years, and property companies have been reporting bumper profits on the back of record house price levels.

Britain’s biggest housebuilder, Persimmon, recently announced its profits for 2021 jumped by nearly a quarter to £970m due to “positive pricing conditions” in every region in which it operated. Vistry announced it had more than tripled its annual profits to £320m, while back in March the Halifax reported that prices were rising at their fastest rate since 2007 with the average house price hitting a record high of £278,123.  


Sector analysis by real estate debt advisory specialists, Sirius Property Finance, has shown that while the level of new homes being granted planning permission dipped during the first year of the pandemic, this negative trend reversed in 2021 with the third highest annual total of approvals seen since 2007.

Over the last year a total of 319,000 new residential homes were granted planning permission, an eight per cent annual increase on the 295,000 figure in the previous year and the third highest annual total since 2007.

London looks set to see the biggest boost to new home stock levels (if the approvals are built), with planning permission granted for 60,200 new residential units over the last year, accounting for 19 per cent of the total. The South East saw the second highest level with permission for 46,500 new homes, the North West saw permission granted for over 40,000 new homes, but in the North East, just 13,800 planning applications were granted.

However, this rosy picture on approvals could be jeopardised by the severe hits that public finances have taken, with local government suffering the most severe Covid related cuts to their income. This followed a year of austerity cuts, and could in fact damage the planned infrastructure improvements upon which many large housing developments are reliant.

In the capital, Transport for London’s finances have taken a battering as a result of passenger numbers falling through the floor since March 2020. This is threatening planned investments which are vital for
creating new homes and jobs, across London and the wider South East. Examples of these are set out below.

The planned Bakerloo Line extension, with its 25,000 new homes and 15,000 jobs, has already been put on hold due to lack of Government funds, as has the development of up to 200,000 new homes across London and the South East that Crossrail 2 was expected to spawn.

In addition, work on the Docklands Light Railway extension to Thamesmead has been delayed, leading to uncertainty for 20,000 new homes and the creation of 8,000 jobs. A further 6,000 homes planned for Colindale station in Barnet are also believed to be in doubt.

Similar delays and hold ups are being discussed across other urban conurbations throughout the country, with local authorities unable to fill the huge funding gaps that have appeared in housing budgets. It is unlikely Homes England can replace all of the missing funds, which is why the volume developers are likely to be asked to cough up and forego some of their profits.


A further complication for developers may come in the shape of a “health test” for the new programme of Levelling Up schemes. This is a new policy area for the Government but could see significant changes in how billions of public funds are allocated, accessed and spent on services like education, health and housing.

Property developers who want planning permission for major house building projects could face a new test being imposed by local councils to assess whether their plans will promote healthier living in local areas and tackle inequalities. Where developments can be shown to deliver “health gains” such as better air quality and healthier lifestyles, they could be granted accelerated planning permission.

Writing for the Social Market Foundation, Dr Caglar Koksal of Manchester University says good developments can improve residents’ wellbeing and encourage healthier lifestyles, while badly designed buildings can encourage overcrowding and reliance on cars for transport instead of walking or cycling. Overcrowding has already been linked to the spread of diseases including Covid-19, while places with higher rates of car use often have poor air quality and higher rates of obesity.

Local councils with planning powers should set higher health-related standards before giving permission for big developments, Dr Koksal says. But those developments that actively incorporate design features that support healthier lives should be rewarded with fast-track permission. This can save the developers money.

Dr Koksal said: “When the demand for housing remains exceptionally high, developers have very little incentive to promote health with their schemes. The primary concern of most house builders is to deliver profits for their investors. However, local authorities can motivate and inspire developers to work together and create healthier places.” Things might be about to change!


The proposed “health gain” could vary by area and include any acute local health issues such as respiratory diseases or obesity. Dr Koksal added that local authorities could set “robust design standards,” supported by the National Planning Policy Framework, to positively influence design quality. These could include a well-connected network of attractive, safe, convenient transport corridors with separated pedestrian and cycle routes, high-quality open and recreational green spaces, and decent homes built to the highest standards.

Dr Koksal added: “Delivering healthy homes and high-quality neighbourhoods requires a strong steer from local leaders, who are responsible for establishing a unifying vision for their area and helping planning departments and public health teams inside local authorities work together to implement the shared vision.”

James Kirkup, director of the SMF, said that Dr Koksal’s research and ideas could be used to deliver on a key Levelling Up promise of longer, healthier lives. “Giving Britons longer, healthier lives will require making the places we live healthier. The relationship between building, local environment and health is hugely important, and understanding it better is vital to delivering better, healthier lives.”

Ministers led by Michael Gove have promised that average Healthy Life Expectancy will rise by five years by 2035, with an interim target to narrow the gap between local areas where it is highest and lowest by 2030. The ‘64,000 dollar question’ is how much housebuilders will contribute to this, and will buyers pay extra to deliver the funds for developing homes and neighbourhoods that lead to longer and healthier lives?