This is the first of three posts delving into the new government’s 1.5m housing target, its definition and measurement, its phasing and prospects of achievement, and its relationship to existing public and private delivery systems.
The second will focus on the ensuing implications for both public and private delivery system reform.
The third will relate delivery of the target to the future definition and implementation of Labour’s fiscal rules.
1 Introduction, definitional and measurement issues.
Both the Conservative and Labour parties during the 2024 general election committed to deliver at least 1.5 million new homes in England during the lifetime of the next parliament – equivalent to 300,000 new homes each calendar year, 2025-29 inclusive.
Such a target in practice will need to be measured by the most comprehensive and accurate series available covering new build completions and total new supply – the Ministry of Housing, Communities and Local Government (MHCLG) net new supply series and its live Table 120.
This reports financial year (1 April to 31 March) outcomes more than 18 months in arrears, meaning that practically the period to be measured will be April 2024 to March 2029.
Let us put the vaunted ambition into perspective. According to that series between April 2021 to March 2023 about 212,000 new builds were completed each year during that most recent reported period (see Table One below).
Total annual net new supply (which includes dwelling gains from net conversions and change of use, minus demolitions, plus new builds) hovered just above 234,000 dwellings across both years.
Whether the new Labour’s government target concerns new build or new supply outcomes is unclear. For example, the first paragraph of the new government’s policy statement on New Towns confirmed that it is “determined to build 1.5 million new homes over the next parliament”.
Suffice to note that annual new build completions and total new supply will need to increase, respectively, by about 42% and 28% from the latest 2021-23 achieved annual levels to reach 300,000 dwellings.
Taking a longer and more pertinent view traversing economic and housing cycles, Table 1, instructively, reports that the annual average total supply across the entire 2006-23 period was c195,000 dwellings: c64% or less than two thirds of the proclaimed target.
Is the delivery of 1.5 million homes an ambition, a target, or a commitment?
The first is clearly aspirational, a target can always be missed and when applied generally loses its value as a measure, while a commitment suggests that all necessary and possible steps will and are taken to achieve it, come what way.
This post will refer to it as a target for consistency. It also assumes that the delivery of 1.5m additional dwellings refers to new supply provided or completed, rather than just newly built properties built (about 90% of new supply), although it notes and concludes for that to have any realistic chance achievement that it will need to be treated as a priority commitment.
Its realisation will prove tricky to both track and measure. The more accurate MHCLG table 120 new supply (net additions) table does not cover starts and therefore is not a forward indicator.
As it reports for the financial year ending 18 months prior to its November publication date, it is also a lagged one. The 2028-29 new supply outcome will not be officially published until November 2030, meaning that definitive measurement of the target will be delayed beyond the next election, although forward indicators such as EPC certificates, discussed below, could provide a relatively reliable forward indicator.
Although another MHCLG table 213 does report new housebuilding starts and completion data on a timely quarterly and annual basis, that suffers from systemic undercounting (delineated in the next section).
More seriously, because of construction lags and the overlapping impact of previous policies and conditions straddling successive governments (2024-26 supply outcomes will largely be outside the policy control of the new government as they largely depend on 2022-24 start activity), a total production or supply target based on completions over the lifetime of a parliament didn’t and doesn’t make much sense, other than as a statement of political intent (hopefully) or of spun aspiration (more usually).
The new Labour government has made the target central to its overarching economic growth ‘mission’ and within a month of its election announced robust planning reforms consistent with its achievement, indicating a seriousness of political intent.
But planning reform is one of several necessary but not sufficient changes to the policy framework that the remainder of the post will show as collectively necessary for the target to be approached.
In that light, the next section examines more systematically what it will mean in practice to achieve or approach the 1.5m target by the 2029 end of this parliament, given certain under delivery over 2024-26.
2 Projecting future 2024-27 new build activity and new supply
Section Five of the MHCLG’s latest new indicators of housing supply release advised that its data on Energy Performance Certificates (EPS) lodged for new dwellings provide a very close estimate or proxy to net additions or new supply.
At time of writing, however, such available EPC data is relevant to the immediate past 2023-24 financial year to be reported in November 2024 – that is until sufficient EPC data is reported to allow an initial view on the expected 2024-25 net supply outturn to be taken, the first year that will be relevant to the measurement of the new government’s 1.5m delivery target.
Table 5 (table numbers are out of sequence as they have been reproduced form Making Sense of the English Housing Statistics) compares the numberof EPC certificates lodged for new domestic properties (new build, conversions and change of use to domestic) with MHCLG Table 120 net new additions (new supply) outturns across the most recent 2018-23 period.
It indicates on an annual average basis that net supply was 0.98 below the reported number of EPCs granted on average across that period (although, that result was after a retrospective census adjustment was made for the 2018-21 new supply figures; the new supply figures also exclude demolitions).
Applying that 0.98 coefficient to the reported 232,473 new dwelling EPCs reported lodged during 2023-24, suggests a 2023-24 new net supply figure of about 227,000 dwellings, continuing a recent downward trend undoubtedly related to the recent housing market downturn amid wider economic uncertainty.
Given that the new government was elected in July 2024, its target will need to be measured against 2024-29 financial year outcomes. We won’t have access – as was explained above – to accurate official new build completion and new supply outcome data, starting with 2024-25, until November 2026.
What can be predicted, however, as generally accepted both within and without government, is that annual new supply outcomes will seriously undershoot 300,000 dwellings until at least April 2027, resulting in an accumulating shortfall backlog against the total 1.5m delivery target.
The projections reported below are based on MHCLG Table 213 housing starts data rolled forward two years to predict completions.
MHCLG new housebuilding and other indicator of new supply series source data, as customised in Tables 5A and 5B, strongly suggests that the recent downward new supply trend reported above will not be reversed during the early 2024-26 period of the Starmer government.
Using that MHCLG data, Table 5A reports that 481,240 new build dwellings were started between 2021-24, an annual average of 160,400.
The key shortcoming of the MHCLG new housebuilding series is that it undercounts housing start and completion activity (primarily because of incomplete and fragmented building control source data)
The average difference between Table 213 reported completion totals and the later reported Table 120 net new supply across the 2018-23 period was 24%, as Annex Table Seven shows.
To compensate for that undercount bias, an adjustment multiplier of 1.24 was applied to the raw starts and completion data reported in Tables 5A and 5B to produce start and completion figures adjusted accordingly.
An adjustment coefficient of 1.415 was also applied on the raw Table 213 start and completion data, taking account of the average 41.5% annual 2018-23 disparity that Annex Table Seven reports between table 213 completions and table 120 new supply.
The final column of Table 5B reports projected future new net supply figures for 2024-26, adjusted accordingly.
Such rule of thumb projections are inherently tentative and indicative. Although yesterday starts are tomorrow’s completions, starts data provide a forward but imperfect indicator of future completions: they are subject to cyclical fluctuation related to the external economic and market environment and to funding programme profiles and associated delays.
In short, although there is no way of knowing precisely when reported starts will be converted into conversions, previous start levels provide a future indication of future completions around two years ahead, notwithstanding uncertainty over their precise phasing into particular financial years.
On that basis, Table 5B projects a 2024-25 and 2025-26 net new supply outturn of about 244,000 and 191,000 dwellings, respectively: a net new supply total of about 435,000 dwellings: an annual average approaching 220,000.
If so, this would generate a cumulative delivery shortfall by April 2026 of about 160,000 dwellings relative to the 300,000 annual target (2 *300,000) – (2*220,000) and the 1.5m delivery target.
Future 2024-26 private start prospects
The preceding sub-section projected total public and private 2024-26 (financial year) new build completions and new supply using adjusted MHCLG Table 213 new housebuilding start 2022-24 data.
We now turn to consider the prospects for unreported 2024-26 private starts activity that could then be expected to translate into post 2026 completions.
Future private speculative supply can be expected to prove sensitive to future market prospects as interpreted by housebuilder suppliers. These, in turn, are likely to be moulded by wider economic conditions and expectations, including interest rate movements.
Given the subdued nature of the private housing market in 2024 and the expected continuing impact of high (albeit hopefully their further softening after the July 2024 0.25% base rate cut) interest rates, few strong current grounds exist from a micro-economic standpoint that 2024-2026 start totals will materially increase from recent 2022-24 levels.
Recent omens have been unpromising. Barratt, example, in July 2024 announced a seven per cut in planned starts for the coming year into 2025 that can be expected to translate into future 2026 and 2027 completions.
Research conducted earlier in the year by Savills included a chart that indicated – assuming no increase in government housing support (or other changes in policy and economic environment) – that annual (not adjusted as above) new build completions would not break through 160,000 throughout the remainder of this decade, which could mean that annual net new supply would undershoot 200,000, let alone reach 300,000 dwellings (less than 1m rather than 1.5m across the 2024-29 period).
Since then, however, the July 2024 election of the new Labour government committed to “build rather than block” has altered the planning policy environment.
The planning reforms announced by Angela Rayner – the incoming Housing and Communities Secretary – to parliament on the 30 July demonstrated the new government’s intent to remove blockages connected to local Nimbyism and other planning-related obstacles to new housebuilding and economically needed infrastructure and their linkage to its overarching growth agenda.
Nevertheless, the delivery shortfall projected to accumulate during 2024-26 means that for the 1.5m target to be achieved, new supply would have to substantially exceed 300,000 during the 2027-30 period.
And planning reform by itself, while necessary, will not be sufficient by itself to cause the current speculative private market-led system to deliver future housing volumes on the scale required.
Setting local delivery targets consistent with an annual supply level of 370,000 is not the same as securing their actual delivery on the ground.
Achieving such an unprecedented and sustained level requires not only sufficient planning permissions but crucially their implementation by profit-maximising private developers. It is they, not councils or housing associations, that primarily build dwellings at scale.
Their current business model, as the Letwin reports commissioned and published by the previous government so clearly showed, requires them to rather build and release dwellings for sale in step with that imperative, not government targets. Planning reform, as proposed, will not change that.
Another necessary condition, therefore, for the attainment of the 1.5m delivery target is reform of the current speculative private housing model in combination with supportive public policy changes.
Labour hitherto, however, has been quiet on the need for such reform and seems rather to treat private housebuilders as allied stakeholders and to rely on them to deliver increased supply at levels and timescales consistent with its 1.5m target.
The associated implication is that the new government is banking on or hoping for a house price recovery – led by falling interest rates amid recovered confidence that an era of prosperity and growth is round the corner – will induce private developers to build on such scale into a rising market.
Such a prospect on current indications to say the least seems optimistic on macro-economic grounds.
The Office of Budget Responsibility (OBR) in its March 2024 Economic and Fiscal Outlook (table 1.17: detailed forecast tables: economy) forecast that UK annual net additions on back of an in-house econometric model (predicated on assumed relationships between construction activity, past housing starts rolled forward on a two year moving average as completions, housing market turnover rates, and expected interest rate movements) would annually stagnate in the 235,100 to 244,800 range between April 2024 and March 2028, which would suggest annual net additions in England falling somewhere in the 211,000 to 225,000 dwelling range throughout that period.
That forecast no doubt will be revised this autumn to reflect the changed policy environment after the July election, but the UKs economic fundamentals taken a whole have not changed materially since save for the interest rate that month, which, however, was largely anticipated.
Planning reform will take time to work through and to overcome the opposition and reluctance of some local councils. Even if an increased volume of planning permissions did come on stream, macro-economic conditions and housebuilder profit prospects would have to be rosy enough to persuade developers to translate such permissions into starts on the ground on the promise that they could be sold speculatively in line with their expected 20% or thereabouts profit margins.
Even then, an uplift to 180,000 to 200,000 private speculative starts for completion by 2029 – exceeding levels fleetingly achieved (under 180,000) during the Lawson late eighties boom and at a lower level during the late New Labour period (around 165,000) before the Great Financial Crash – would seem a more realistic but still stretching and unlikely optimistic scenario as such a level has not been achieved since the late sixties.
Previous housing booms were accompanied by worsening affordability and access problems for potential first-time buyers, tightening further the English Housing Double Bind.
The recent downturn resulted in the haemorrhage of skilled labour from the construction industry presaging in the event of a future upturn future labour and material bottlenecks with consequent impacts on supply delivery, build costs and house prices, as well as possibly on general inflation, of a magnitude that could nip any such recovery in the bud, or, even reverse it.
A Bartlett professor and expert in this area, Noble Francis, has cautioned, in that light, that “skills shortages will be the biggest constraint to government’s ambitions of 1.5 million homes in this five-year parliament, the £700-775 billion infrastructure pipeline and the Net Zero transition (both the decarbonisation of the energy network and the energy-efficient retrofitting of the existing housing and non-housing stock)”.
Indeed, back in 2018, the final Letwin Report concluded (para 1.11) “ that the only realistic method of filling the gap in the number of bricklayers required to raise annual production of new homes from about 220,000 to about 300,000 in the near[1]term, was for the Government and major house builders to work together on a five year “flash” programme of on-the-job training”. As Francis and other have pointed out the problem has worsened since then and there has been no concerted efforts to address it.
Another necessary but not sufficient condition for the 1.5m delivery target to be met thus therefore would be for the government in partnership with the industry to build up construction industry and its domestic skill base as a key component of its economic ‘mission’, which may also need to be supplemented by skilled worker migrant visa schemes.
Future 2024-26 public start prospects
Angela Rayner in her 31 July parliamentary statement also indicated “a once in a generation boost” to affordable, especially social rent housing.
That also won’t translate into delivery outcomes any time soon. On the contrary, a downtick in new affordable supply annual starts over the 2023-25 financial year period to an average 50,000 dwellings or less can be expected, translating into a similar level of affordable completions during 2025-27.
Affordable starts for the April 2018-23 period by sub-tenure (when known) reported in MHCLG Table 1011S, provide an indication of future short-term gross affordable completion levels.
Although about 71,800 affordable starts were recorded in 2022-23, the most recent data on affordable starts and completed funded by Homes England and the GLA, summarised in Table 3B, shows that in total such starts fell from around 55,000 dwellings in 2022-23 to about 31,000 in 2023-24. In London they plummeted even more dramatically by about 90% to about 2,300.
The precise reasons for this sudden and apparently calamitous drop are not totally clear or, at least, accepted by competing stakeholders, but programme profile and approval issues, market conditions and costs, and the impact of post Grenfell and other regulatory requirements on housing association capacity not only to build new affordable dwellings but to purchase such dwellings subject to Section 106 affordable housing agreements, all seem to have played a part.
Projecting such start activity into future completions, the 55,100 affordable starts reported by Homes England and the GLA for 2022-23 accounted for about three quarters of the 71,800 total affordable that the MHCLG later reported in Table 1011S.
Conducting another rough rule of thumb exercise, replicating that relationship would suggest about 42,000 affordable starts in 2023-24 based on the above reported Homes England and GLA data. The outcome figure that the MHCLG will report in December 2024 could be lower or higher than that, but the omens overall are to the downside.
Such a level in practice would require affordable starts to increase to about 58,000 in 2024-25 to get to an 2023-25 annual average of 50,000 dwellings, projecting a similar completions level into 2026-28.
Future affordable supply prospects beyond that are uncertain given its dependence on private cross-subsidy (less is available in a subdued private market), the future impact direction of building and labour costs, and the future ability of Private Registered Providers (housing associations) to use their reserves to finance new building or even to purchase S106 properties.
In such an environment, substantially increased grant funding would need to be made available to secure a future step change in affordable supply.
But Angela’s Rayner’s 30th July parliamentary statement on that score was vague, in terms of whether the forthcoming Comprehensive Spending Review (CSR) housing settlement would involve substantial additional resources in contrast a refocus of resources towards Social Rent (SR) provision, direct recycling of Right-to-Buy receipts into council direct provision, better targeting of available resources to high need areas, and efficiencies such as longer-term and more certain funding and rent settlements.
Increased ADP resourcing before it translated into new build completions would generally involve a time lag of least two years, although increased funding for acquisitions could have a quicker effect.
In short, therefore, any real upward step change in affordable housing supply will be contingent on both increases in public housing investment and, as discussed above, a resurgence in economic and private housing market conditions sufficient to secure increased private speculative supply (to provide increased cross subsidy).
3 Concluding comments
A 2024-27 cumulative new supply total of 750,000 (annual average 250,000) dwelling, on the evidence of the preceding section, is unlikely: if the preceding section’s 450,000 dwelling supply total projection proved reasonably accurate, new supply would need to increase to 300,000 by 2026-27.
Housing start activity would then have had to gear up to that level in calendar year 2025. That, in turn, presupposes a rapid and substantive economic and housing market turnaround next year impacting upon private start and completion levels following a generous autumn 2024 CSR housing public expenditure settlement that translated into a quick substantive step up in public start activity – all quite heroic assumptions.
More likely is a 2024-27 new supply total hovering around 700,000 dwellings. Even that would require net supply to recover to 250,000 dwellings during 2026-27, which on the evidence reported in in the preceding section also appears on the optimistic side although possible.
That would mean during the last two years of this parliament that annual new supply would need to exceed 375,000 dwellings – the level required if new supply reached 300,000 in 2026-27: an unprecedented post war level.
New build completions exceeded 350,000 dwellings in 1968, but because of accompanying large scale slum clearance demolition and redevelopment activity then, net supply was lower rather than higher than new build totals, as it was for much of post war period until the eighties.
Starmer and Labour’s target seemed to presuppose that several New Towns and urban extensions, at least in substantial part, are planned, land acquired, prepared, approved, funded and delivering dwellings by 2029, amid and alongside a wider step increase in both private speculative market and public affordable provision.
Most informed commentators, rule out the New Towns Programme delivering completions this parliament and caution that most existing identified new town/urban extensions/garden communities are at an early planning stage and that historically such settlements have been prone to a slow annual delivery rate not much better than the average for speculative private developments, as was deplored by Letwin in his .
That ‘spades in the ground’ from such sources cannot be expected on any scale during this parliament has been recently recognised by the incoming housing minister.
The relationship between the revised annual aggregated 370,000 local planning dwelling target and the future contribution to be made by such existing schemes and the proposed New Towns is therefore unclear, which is likely to add to uncertainty and associated local opposition.
Achieving, therefore, the delivery of more than 350,000 dwellings from 2027 onwards, on the face of it, seems unrealistic, if not fanciful, pure and simple, at least in the absence of wider reform and integration of public and private delivery systems.
A focused, co-ordinated, streamlined and effective public-private partnership approach to housing delivery on lines suggested by the 2017 Letwin reports, yet going further, in line with an overarching and primary political commitment to achieve a step change in housing, especially affordable, delivery accounting for a much larger than the current 27% share of total delivery is a clear necessary overarching condition. This the second post of this series will concentrate on.
To be met, it would also require sustained political overarching focus and institutional coordination and drive of a nature unprecedented and unexperienced for decades.
Public pump-priming infrastructure investment mid-decade rather than end-decade, enabled by a firm but flexible, rather than ironclad, interpretation of fiscal rules, focused on sustainable growth and best use of public resources over the medium term rather than mechanical and rigid calculations of future debt levels, would also provide another necessary but not sufficient condition.
In the absence of such reform, the most likely but uncertain and still optimistic scenario is that a muted macro-economic recovery and changes to the government funded Approved Development Programme involving greater long-term funding certainty and a refocus towards Social Rent will be associated with new supply levels reaching the 250,000 to 300,000 range by 2027-29.