Unlock Editor’s Digest for free
FT editor Roula Khalaf selects her favourite stories in this weekly newsletter.
Official figures show that the number of new homes being built in the UK fell sharply last year, underscoring the enormous challenge the new Labour government faces in meeting its target of building 1.5 million new homes within five years.
According to the Office for National Statistics, the number of new homes completed in the year to March fell 13 percent to 183,610, similar to the number built in the first year of the Covid-19 lockdown.
The decline in housing starts was even more pronounced, falling by about a fifth to 162,340 – the lowest level since 2014 – suggesting that the supply of new housing will continue to decline.
“Housing starts are an important indicator of what will actually be built in the coming year,” says Lucian Cook, head of residential property research at Savills. “They show the magnitude of the challenges we face in terms of housing provision.”
Commercial homebuilders, which produce the bulk of the new supply, have drastically reduced their production because high mortgage rates have made it difficult for buyers to purchase a home in recent years.
Housing associations and municipalities are also struggling to construct new buildings due to financial pressures resulting from maintenance and borrowing costs.
The housing crisis has led to a sharp rise in homelessness, with new figures on Thursday showing that local councils spent £2.3 billion on temporary accommodation for homeless people in England in the year to March. According to the charity Shelter, these costs have almost doubled in five years and are putting a strain on local budgets.
The new Labour government wants to increase housing supply and aims to build 1.5 million new homes in England during its five-year term.
In July, Deputy Prime Minister Angela Rayner unveiled plans to reverse a series of planning policy changes made by the previous government, which critics said had made it easier for anti-development local governments to stop housing construction.
The current decline in supply means that more than 300,000 homes will need to be built in the later years of the legislature – a level not seen since the 1970s.
On Thursday, Rayner set up a new expert group of officials to focus on restarting stalled construction projects. The government estimates there are 200 major stalled construction projects that already have planning permission.
She said the new team would “quickly identify blockages, resolve issues and support local authorities and developers to take the first steps”.
Developers welcome the change in planning policy, but some say more measures are needed to achieve such a high level of supply.
“It will take some time for the planning changes to be implemented and benefit the industry,” said Aynsley Lammin, analyst at Investec.
While falling mortgage rates are likely to help boost demand, some in the industry believe the government needs new measures to stimulate the market, such as a successor to the Conservatives’ Help to Buy loan scheme.
Other executives point out that the collapse in the number of smaller housebuilders needs to be stopped. “What we really need is a renaissance of SME housebuilders to get the sector back to the levels of delivery we last saw in the 1980s when we had 12,500 SME housebuilders compared to 2,500 today,” said Paul Rickard, managing director of property developer Pocket Living.