As reiterated in the Spring Statement, the central plank of the government's housing policy and one of the key routes to economic growth is its pledge to deliver 1.5 million new homes by 2029.
To meet this objective, 300,000 homes would have to be built each year. But to achieve such an outcome, it is clear that the government needs to implement measures to boost housebuilders' output, and to provide a helping hand to buyers. In order to meet these targets, measures would need to be put in place sooner rather than later.
Our study of current home construction rates across individual local authorities of England and Wales illustrates why action is necessary now.
We calculate that each of these authorities has to add about 1.3% to its existing housing stock every year if the government is to hit the annual 300,000 home target. But, in 2024, the average increase in housing stock was 0.8%.
Indeed, during the year, only 39 of local authorities in England and Wales built homes at the pace that would allow the government's objective to be met.
Uttlesford, the local authority in Essex that takes in Stansted Airport and covers the towns of Great Dunmow, Saffron Waldon and their surrounding villages, topped the home building league. If every authority put up homes at the Uttlesford rate, as many as 511,000 new dwellings would be added each year in England and Wales.
Barking & Dagenham and Milton Keyes took second and third places in the ranking. If other local authorities followed their example, 510,000 and 489,000 homes respectively would rise up every year in England and Wales.
At the bottom of the league were Portsmouth, Richmond upon Thames and Luton. If new homes arrived at the rate of construction of these locations, a mere 27,000, 28,000 or 37,000 homes respectively would be completed annually.
The key reasons why authorities differ in their level of home delivery are a shortage of suitable sites, engrained anti-development attitudes, and a lack of demand for new housing due to affordability constraints. These problems are compounded by the length of time between the purchase of land, getting shovels in the ground and the final snagging of homes before they are ready to sell or let out.
"Only 39 local authorities in England and Wales built homes at the pace that would meet the government's target."
Mortgage rates are still prohibitively high for some would-be buyers. Even though rates have been declining this year, loan deals with rates of 5%-plus are a particular barrier for first-time buyers with smaller deposits.
This presents a problem since, over the past decade, first-time buyers have been one of the strongest forces in the new homes market, despite the obstacles that most face when climbing onto the ladder.
These factors mean that the government needs to take advantage of a narrow window of opportunity to support activity.
First and foremost, it is crucial to ensure that housebuilders have confidence that there will be buyers for their new homes before they start building. The Help to Buy scheme, which was withdrawn in March 2024, had its critics. But it contributed to record private development output.
The government's reliance on private developers for the bulk of the new homes target suggests it may take a reincarnation of Help to Buy, or a similar initiative, to return to the rate of housebuilding that became routine in the era when the scheme was in operation. Under Help to Buy, a 20% equity loan was available, interest free for five years. In London, a 40% loan was on offer. The impact of an interest free loan would be amplified now that mortgage rates are higher.
Without some type of Help to Buy arrangement, which would be used by frozen-out first-time buyers, the government may end up delivering fewer homes during this parliament than the number built by the previous government.
The current level of interest rates is suppressing the demand for homes. A Help to Buy-type scheme would soften the blow for first-time buyers.
At the time when the Help to Buy scheme was being withdrawn, it reduced the mortgage payments on a £500,000 home by about £600 a month - a saving equivalent to putting down an extra 5% deposit.
Under the current higher level of interest rates, this saving would be about £850-a-month. In London, thanks to the 40% equity loan, it could be worth as much as £1,450-a-month.
While proactive planning departments can accelerate the pace at which new homes first come to the market, it’s the level of local demand, underpinned by buying power, that determines how quickly housebuilders can move onto subsequent phases and, ultimately, start on new developments.
