Pressure is mounting on the construction sector, planners and policymakers to hit the Government’s housing targets. Patrick Mooney outlines what must change to achieve them, and who will be left behind if it doesn’t.
In 10 years’ time the development process will look very different to how it does today, with far more use being made of modular building and AI in its various forms, including the use of robotics and algorithms, as well as a transformed planning system. Without such changes, it is difficult to see how we will get remotely close to delivering the Government’s target of 1.5 million new homes by 2029.
In the meantime and to ensure we do not create a huge backlog in building, we face a series of fundamental problems, such as: have we got the bricklayers, the roofers, the onsite trades, the planners and other vital human resources needed to significantly upscale our outputs from construction?
The Spending Review is investing £39bn to deliver more social and affordable homes, an unexpectedly large shot in the arm to the housing sector, with bigger funding increases over the next decade than had been forecast. Across all parts of the housing sector, policy leaders and influencers were full of praise for Ministerial initiatives and new announcements.
In addition, hundreds of thousands of extra homes could be delivered through a Government-backed ‘housing bank’ that is projected to unlock billions of pounds of private sector investment to ‘turbocharge housebuilding’ according to Whitehall press releases.
The National Housing Bank, a subsidiary of Homes England, will be publicly owned and backed with £16bn of financial capacity, on top of £6bn of existing finance to be allocated this Parliament, in order to accelerate housebuilding and leverage in £53bn of additional private investment, creating jobs and delivering over 500,000 new homes.
Problems to solve
The sums quoted above are eye-wateringly large, and they should provide an enormous stimulus, but as we all know, as important as new money is, on its own, it can’t build the new houses. And this conundrum is at the root of the problem. What else needs to be put in place, and who is going to build what and where?
The construction sector has an older than average workforce with huge numbers due to retire in the next decade, adding further to the already lengthy lists of vacancies. This is not a new problem; it predates our departure from the European Union, when foreign workers helped to mask many structural problems in the labour market.
The Government plans to train 60,000 new construction workers to fill the gaps, but industry bosses are warning that this figure falls well short of what is needed, and we will only build the required number of homes by importing large numbers of skilled and semi-skilled construction workers from abroad. So, we are likely to be welcoming back European tradespeople, but only if the politicians can persuade them it is worth their while.
In other parts of the workforce, we face similar difficulties with a widespread shortage of skills and experience. One of the earliest announcements made after last year’s Election was the recruitment of hundreds of new planners by the end of 2026 and an overhaul of Local Plans.
Research from the Home Builders Federation has found a shortfall of more than 2,000 planners in local authority departments, and the average time taken to agree a Section 106 agreement is regularly exceeding one year. And even the most optimistic estimates for the updating of Local Plans are predicting that these will take a minimum of two years, albeit that is significantly down from the snail-like seven years currently being delivered.
Meanwhile, overstretched councils are already failing to spend infrastructure and community payments made by developers, with the combined running total of unspent Section 106 and Community Infrastructure Levy reaching a massive £8bn in 2024. This amply demonstrates that money alone is not the solution.
Downturn in approvals
Perhaps of more immediate concern was the news that the number of new home building sites given planning approval in England during Q1 2025 was the lowest since reporting began some 20 years ago, representing less investment in new sites than during the global financial crisis and the Covid-19 lockdowns.
Approval was given for just 2,064 sites in Q1, a 16% drop from the previous quarter. The rolling annual number of projects approved in the year to Q1 2025 was 9,342, itself a new record low and is the 12th quarter in a row that the annual rolling number has been the lowest since the report began recording
In total, approval for just 45,521 new homes was given in Q1, the lowest number of quarterly approvals since 2012, a 37% drop on the previous quarter and 21% drop on Q1 2024.
The rolling annual number of units approved in the year to Q1 2025 was just 233,695, a 5% drop on the previous 12-month period and the lowest 12-month outturn recorded since 2014. The figure is just 63% of the 370,000 number the Government has cited as an ambition to achieve through cumulative local authority housing targets across the country.
The figures starkly illustrate the urgent need for the Government to address problems in the housing market and the ongoing barriers to housing supply if they are to get anywhere near the 1.5 million homes target.
Estimates suggest that we are currently delivering around a maximum of 200,000 new homes a year, meaning we are already 100,000 behind the rate needed to hit the new build target. With housing construction levels flatlining at best and planning permissions for new sites and new homes continuing to fall, the likelihood of imminent increases seems remote.
While the planning system changes already announced are very welcome, housing supply is determined by several key factors. Without further policy interventions, the industry will struggle to deliver on the Government’s wishes to build more homes.
Plan for growth
Neil Jefferson, chief executive at the Home Builders Federation, said: “The latest planning figures are disastrous. With current supply flatlining and permissions for new homes plummeting, there seems little chance of us building the homes we know are desperately needed. Increasing housing delivery requires much more than good intentions and planning reform.
“Ministers have to address the fact that potential home owners are unable to buy due to the lack of affordable mortgage lending and the absence, for the first time in decades, of any Government support scheme (for first time buyers). Similarly, it needs to ensure Housing Associations are financially able to purchase the affordable homes housebuilders deliver. Without a functioning market for private or affordable homes it is impossible for industry to deliver them.
“Planning permissions and house building levels will not increase unless Ministers work with industry and tackle the issues preventing companies from pressing the accelerator and investing in the sites, skills and supply chains needed to build the homes the country needs.”
The HBF wants Ministers to deliver on five key points:
- Bring forward effective support for first time buyers. Previous governments for the past 25 years have assisted first time buyers with equity loans or shared equity mortgage support, and for more than 60 years, governments have supported home ownership in other ways.
- Address the long-term problems in the Section 106 Affordable Housing market, which sees tens of thousands of new homes designated for Social and Affordable Rents going unacquired by Housing Associations.
- Resolve the ongoing delays and uncertainty caused by the failure of the Building Safety Regulator to meet its service requirements. The new Regulator has been unable to deal with its workload, leading to investment in new apartment blocks collapsing because of the uncertainty.
- Speed up the planning process. While the planning framework changes delivered by the Government have helped to create a more progressive planning system, the day to day operation of planning services at a local level continues to frustrate.
- Recognise the impact that a suite of new taxes, levies and policy costs is having on the viability and deliverability of new housing. Since 2020, builders have seen costs of government interventions balloon with a new industry specific Residential Property Developers Tax, Biodiversity Net Gain, Nutrient Neutrality charges and multiple regulatory changes. The government recently confirmed the introduction next year of a new levy on house building, and launched a consultation on a new Build Out Tax, empowering councils to impose additional costs on builders if construction rates decline due to market slowdowns.
A new way of working
An example of a different approach to development, which is already paying off, is being delivered by Edaroth in its work with social landlords like Raven Housing Trust in Surrey and Bristol City Council, where previously unviable parcels of land are being transformed into high quality, sustainable homes. Many of the sites had previously been overlooked by the private sector due to their complexity, size or location.
Their approach brings land, planning, design, manufacturing and construction together into a single, coordinated development service. It is proving adept at unlocking publicly-owned land through delivering homes that are ready for long-term public ownership. As production increases, costs should come down as they have in other sectors such as automotive and consumer electronics.
By using an offsite manufacturing model, they have been able to deliver precision-built homes (in half the time of traditional construction methods) that exceed national space standards and achieve net-zero performance in use, along with 100-year structural warranties.
The approach not only increased delivery speed and quality, but also dramatically reduced whole life maintenance and operational costs, critical for social landlords managing long term assets. Central to the success of this model is offsite manufacturing. By designing homes in a digital environment and manufacturing them in controlled factory settings, they can achieve greater consistency, precision and speed.
If more companies and social landlords are able to adopt similar approaches, then there is hope they can play a significant part in bridging the gap to the Government’s target for new homes.
In response to the Chancellor’s Spending Review, Kate Henderson, chief executive of the National Housing Federation, said: “This is a transformational package for social housing and will deliver the right conditions for a decade of renewal and growth. It is the most ambitious Affordable Homes Programme we’ve seen in decades, and alongside the long-term certainty on rents, will kickstart a generational boost in the delivery of new social homes.
“This package demonstrates the Government understands the foundational difference a secure and affordable home makes to people’s lives. Housing associations look forward to working in partnership with the Government and with the Deputy Prime Minister, who has tirelessly championed social housing.”