Dramatic Drop in New Homes as ‘Perfect Storm’ Strikes 

The number of new homes built each year in England could slump to its lowest level since the second world war due to a perfect storm of government policies and higher mortgage rates, the house building industry has warned.

New research predicts that changes by ministers to England’s planning framework and the impact of government environmental rules could result in annual supply falling from 233,000 new properties in 2021-22 to just 111,000 later this decade.

That would be the lowest level in more than 80 years, according to Making a bad situation Worse: The impact on housing supply of proposed changes to the NPPF - the report prepared by Lichfields planning consultancy on behalf of the Land Promoters and Developers Federation (LPDF) and the Home Builders Federation (HBF).

The proposed changes to the framework could reduce supply by 77,000 homes a year in the near term. The research also concluded government environmental rules to guard against, principally, pollution of rivers and waterways could further cut supply by 15,000 - 41,000 homes a year. 

Yet the issue has been created not by housebuilding but by a regulatory framework that has allowed the water industry to under invest in wastewater treatment networks and inadequate incentives for farmers to change practices. Whilst the rules affect the whole housebuilding sector, SME housebuilders are severely impacted as they are less likely to have the resources to manage the delays created in their businesses, especially in terms of cashflow. 

LPDF chairman Paul Brocklehurst said: “There is an acute housing crisis that weakens the economy and impacts on the life chances of young people and families. Yet the proposed changes to planning policy will alone result in around 77,000 fewer new homes per year being built in England, dropping to just half the Government’s 300,000 target, making a bad situation worse. Every report written on the housing market, such as those recently by the Centre for Cities, Centre for Policy Studies or Policy Exchange, highlights the desperate need to build more homes not less.

“Not only will the proposed NPPF changes impact on the economy, housing delivery and affordable housing, shattering the dreams of many young people and families, they do nothing to correct the issues of undersupply in the delivery of land for employment uses, key if we are to compete on the global stage. Rather than concede ground to NIMBYS and so called local patriots perhaps now is the time to deliver meaningful, positive reforms which will embed growth into our economy.”

By 2030, even excluding the impact of the wider environmental rules, compared to what would happen if past trends continued, the cut in supply will lead to:

• £34 billion lost GVA in the economy due to the reduction in size of the housebuilding industry.
• 386,000 fewer jobs directly or indirectly supported by housebuilding.
• £8,700 extra savings needed for a typical deposit by first time buyers.
• £18,400 added to the price buyers pay for the average home.
• 17,500 shortfall in new affordable homes each year, adding to the large backlog.
• 11,500 fall in already declining number of births due to further house price increases. 

The Conservative Party was elected in 2019 on a manifesto aspiration to build 300,000 homes per annum by the middle of this decade.  Yet after 13 years of Conservative led government only 39% of local planning authorities have an up-to-date local plan. The research by LPDF and the HBF has found 47 councils have postponed that local plan process amid recent policy uncertainty with the council in Gove’s own Surrey Heath constituency being one of the latest to announce a delay. All are hoping that the proposed changes will allow them to plan for less rather than more homes. 

Concluding, Mr Brocklehurst said: “The Government still has sufficient time through the consultation process to reconsider its position and move away from changes which in the context of its 300,000 aspiration are frankly irrational, as highlighted by the Lichfields research.  

“At a time when the industry is contending with the impact of higher interest rates on demand, leading to slower sales rates per outlet, the industry is likely to need more planning consents not less to deliver the volumes required by policy makers.  Government should therefore be taking positive, affirmative and immediate action to amend planning policy to ensure that we build the new homes and affordable homes that this country so desperately needs.”