As the Government and construction sector struggle to meet ambitious housing targets, record low planning approvals and economic uncertainty underscore the challenges. Patrick Mooney highlights the urgent need for reforms to address the crisis.
The New Year brought with it an absolute slew of gloomy news articles highlighting the difficulties facing the Government and the construction sector, as they both struggle to come to terms with the challenge of delivering the very ambitious targets for building new homes.
We had already been warned of extreme shortages of available sites, money, skilled labour, supporting infrastructure and the materials and components for building new homes, when we received what was perhaps the most pessimistic and alarming news from the Home Builders Federation.
2025 was only a few days old when the HBF issued its Housing Pipeline Report, containing data from leading market research and intelligence firm Glenigan, which showed a continued downward trend in planning approval figures for Q3 in 2024, in both the number of sites and homes approved for development.
With just 2,260 sites approved in July to September, this marked a 10% decline from the previous quarter and it was the lowest quarterly total recorded since the HBF began reporting in 2006. The rolling annual total of 10,180 sites approved also represented a new record low, further illustrating the significant challenges the housing sector faces in meeting growing demand.
While the number of homes approved during Q3 increased by 2% to 57,356, this was still 40% below the peak. The rolling annual total of 240,661 homes saw a modest 1% rise from Q2 2024 but this remains 6% lower than the same period in 2023. The decline in planning approvals highlights that, to meet the Government’s target of 370,000 new homes annually, approvals need to increase by over 150%.
Huge increase in supply needed
Neil Jefferson, chief executive of the HBF commented:
“The continued decline in planning approvals is deeply concerning and underlines the scale of the challenge we face in addressing the country’s housing crisis.
“Efforts by the Government to reform planning policy are very welcome, but the data makes it clear that much more needs to be done to re-ignite housing delivery. Planning approvals will need to increase by more than 150% to meet the Government’s target, which is a huge leap from the current figures.”
The gloomy statistics were underpinned by other indicators showing a very subdued development sector – whether it is the number of new Energy Performance Certificates issued, or the council taxbase statistics, they all point in a worrying downward direction.
First up we saw that Energy Performance Certificate registrations for new builds have been falling for the last couple of years. The number of EPCs registered in the year ending September 2024 was down 7% on the previous year, and the rolling 12-month total is down 13% compared to 2019, when housing supply was at its peak. This represents a drop of almost 35,000 homes.
Then there are the number of new properties added to local authority council tax lists. Since 2020, the Government has published annual council taxbase statistics each November, covering the period to the preceding September which is a more up to date recording of housing delivery than the net supply statistics.
The most recent data release showed the number of dwellings increased by 213,000 between September 2023 and September 2024. Compared to 2023, when almost 237,000 properties were added, this is a drop of over 23,000, or 10%, on the previous year and significantly below the annual target of 370,000 new homes a year which Ministers have been targeting.
A similar picture emerges when looking at other data sources. Looking back to the late 2010s, when housing supply was at its peak of around 240,000 homes being delivered a year, the number of homes receiving planning approval in a 12-month period was consistently around 100,000 higher (45%) than today.
The number of new homes being approved is worryingly low as these roughly reflect the homes that will be completed in two to three years’ time. Typically housing supply figures follow the same trajectory, but are slightly behind planning permission numbers. This number is not only falling but it is well below the figure needed to reach even 300,000 new homes a year.
Boxing Day bounce
In contrast to a struggling construction sector, the housing market could be heading for a mini-boom. The country’s leading property portal Rightmove announced that they had enjoyed their busiest post-Christmas period showing there is plenty of appetite for new homes from would-be buyers.
Boxing Day has long been known for its traditional ‘bounce’ in housing market activity, as people’s thoughts quickly turn to what a New Year living in a new home could look like. Rightmove’s data showed a 26% increase in the number of new properties listed for sale compared to Boxing Day 2023, which previously held the record.
Nearly half (46%) of homes coming onto the market were ‘second stepper’, three and four-bedroom homes. Smaller homes, popular with first-time buyers, made up 35% of listings, while 18% were larger, top-of-the-ladder properties.
But it wasn’t just sellers contributing to this ‘bounce’, as home-hunters were also on the lookout for their potential next home. Enquiries sent to estate agents about homes for sale were 20% higher than Boxing Day 2023, as would-be buyers took advantage of the increased choice. And the agency saw the highest number of Boxing Day visits to its website in history, surpassing the previous record set in 2021.
Rightmove’s chief data officer, Steve Pimblett, said: “We’ve seen a record-breaking Boxing Day, not only for people turning to the Rightmove platform once the Christmas Day festivities are over, but also for home-movers taking action and getting ahead with their 2025 moves. While it’s very early days, these first indicators are positive signs for a busy start to the year for agents.”
A further short-term stimulant to the property market in the first quarter of 2025 is likely to be provided by a planned rise in Stamp Duty changes. This will mean increased buying costs for some home-movers from 1 April onwards, with some buyers rushing to complete their purchases before the deadline.
The number of first-time buyers that are active in the market and sending enquiries to agents is 13% ahead of the same period last year. The availability of stamp duty-free homes for first-time buyers varies enormously by region. Only an estimated 8% of London homes will qualify, while over 70% of properties in the North East fall within the new £300,000 threshold.
Market jitters
The Government also needs to address the lack of available affordable mortgage lending that is suppressing the huge real demand for new homes and is particularly hampering first-time buyers and young people’s ability to get on to the housing ladder.
This uncertainty in the market, allied to the lack of Registered Providers in a position to take on the affordable homes being provided as part of planning permissions through S106 agreements, is discouraging house builders from investing in new sites and planning permissions and pressing the accelerator on housing supply, despite the positive planning interventions the Government has made.
Neil Jefferson of the HBF, added:
“The lack of affordable housing is impacting communities across the country, and without a stable demand for new homes, the industry lacks the confidence to invest in building the homes that are desperately needed.
“Increasing housing will require going beyond planning reform and addressing broader issues such as financing for homebuyers and a lack of providers in the market to take on the affordable housing developers build. Continued intervention from the Government will be crucial to ensuring we have a robust housing market that can deliver for the nation and tackle the housing crisis head-on.”
We often talk about a perfect storm hitting the housing market, but on this occasion it is hard to avoid the description. Nearly everyone wants more houses to be built, but the current difficulties demonstrate how it needs more than just political intent and speeches to change how construction and the housing market works.
There are very sophisticated push and pull factors in place, with the impact of policy changes often only being felt in several years’ time. Most politicians struggle to see beyond the date of their next election and they demand early results. On this occasion the Government needs to hold its nerve and work with developers, construction companies, financial markets and local communities if it wants to get anywhere close to achieving one of its highest priorities.