Labour has fallen into the same trap as many Conservative governments before them, putting Rachel Reeves and Angela Rayner — Secretary of State for Housing — in danger of being cast out onto a wasteland strewn with failed housing policy and former housing ministers.
In her Spring Statement yesterday, the Chancellor revealed a worrying reliance on an already broken housing market as a silver bullet which will propel a sluggish UK economy in a low growth environment.
She even put a number on it. Relying heavily on the findings of the Office of Budget Responsibility (OBR) she claimed that reform of planning — holding councils to account over mandatory housebuilding targets, boosting the number of trained construction workers, making it easier to build on greenbelt with low ecological value, and releasing more land for affordable housing projects – will take Britain to a 40-year housebuilding high.
This will deliver 1.3 million homes by the end of the 2020s, putting Labour "in touching distance" of its national 1.5 million target, and in turn boosting the economy by £6.8 billion.
Of course, Labour approached this in a different way to the Tories who focussed on buying but not building, creating quite the imbalance over the past 15 years.
During the pandemic then-Chancellor Rishi Sunak introduced an emergency stamp duty (SDLT) holiday, which prompted vast numbers of buyers to get on the ladder, upsize or relocate all at once. In the short term this stimulated economic activity (minus the SDLT), in the longer term it pumped up house prices just before interest rates soared.
Following the Global Financial Crisis (GFC) George Osborne introduced Help to Buy, a shared equity scheme helping first-time buyers (FTBs). Again, this was criticised for boosting house prices and eventually scrapped.
While Labour has veered away from demand-side stimulus that inflates house prices due to a chronic lack of supply, they have still only done half a job when it comes to tackling the housing affordability crisis in London and regional hotspots. In fact, yesterday's Spring Statement revealed a one-eyed focus on build but not buy.
Developers are a profit-making business and they need to know there are buyers out there
"We have been shouting for so long that the planning process has become tortuously slow but the reality is that the Government is relying on the private housebuilders to deliver this huge increase in homes," says Marcus Dixon, head of residential research for JLL.
"Developers are a profit-making business and they need to know there are buyers out there. That key bit is missing," he says.
New analysis from JLL shows that there are 3,598 homes completed in London but unsold (as of the end of 2024), 22,304 unfinished and unsold and 13,798 with planning permission. Of course, the annual target for London is 80,000 new homes a year.
"Even if you speed up planning, build rate follows sales rate, and a developer will only build as fast as they think they can sell," Dixon adds. His analysis suggests that in a more active market the sales rate is 50 to 100 homes per year on a medium-sized site, this is down at 30 to 40 at the moment.
In a slow growth environment, in which wage growth will also dawdle, and interest rates remain sticky, affordability for both buying a home, renting one and servicing a mortgage will stay stretched. In fact, after April 1 they will worsen as the stamp duty thresholds lower for first-time buyers. Therefore, developers will not be confident that they will easily sell the homes they are expected to build.
There are other issues too hampering the prospective build rate. Funds and resources of Housing Associations and councils are tied up improving current council homes deemed substandard following the Grenfell inquiry. Without more London-specific grants, they don't have the money to buy new stock.
There are more homeless households living in temporary accommodation than there are households in the city of Oxford
A proportion of the £2bn investment into social housing promised by Reeves for the whole of the UK, will not touch the sides in London, says Rob Anderson, director at the Centre for London.
He welcomes planning reform and the funding but says Government will need to go further in the capital where there are more homeless households living in temporary accommodation than there are households in the city of Oxford.
"Yesterday's statement does not provide reassurance that the Government is willing to grip the crisis facing the capital.
“The Government needs to work urgently with London's leaders to tackle the acute crisis facing the capital, allocating a significant proportion of the £2bn here, expediting their upcoming national strategy of homelessness, and uprating the Local Housing Allowance to protect London's three million private renters from spiralling rents," he tells Homes & Property.
Dixon would like to see tax incentives for housebuilders to deliver more appropriately priced homes in areas where housing need is highest, although he concedes this is difficult for a Labour government that is making welfare cuts. "It requires bolder decisions – which I hope to see in June's Spending Review," he adds.
We need spades in the ground now for Reeve's to achieve her "40-year housebuilding high". This calls for an overall and bespoke regional plan, that considers London's pricing levels, density and building restrictions.
Simultaneously, we need gentle and responsible demand side stimulus, such as an extension to stamp duty for first time buyers or higher loan-to-value local authority mortgages, while overhauling the inept planning system, ramping up housebuilding and repurposing London's empty dwellings.
This is not a crisis that can be tackled in silos, or it will take another 40 years to get London building.
