06 DEC 2024
As housing supply falls, will the Housing Minister's 'Plan-Led Approach' succeed in boosting housebuilding?
The Housing Minister, Matthew Pennycook MP, recently appeared before the Housing, Communities and Local Government Select Committee. Under its new chair, Florence Eshalomi MP, the session provided important information about the new Government's approach to housing delivery this Parliament. There were four key take-aways:
(1) No Annual Housing Targets:
The Minister confirmed the overall housing target of 1.5 million homes this Parliament but said that there would be no annual or interim targets. Delivery will be back-ended over the course of this Parliament and the full five years is needed to meet the target. He confirmed that 'net additional dwellings' is the measure being applied, rather than housebuilding. This is the measurement that has been used by recent governments in relation to housing targets.
(2) Housing Minister plans to increase developer section 106 contributions:
The Minister intends to end the net outflow of socially rented stock. He said the ambition for the numbers of social and affordable housing will depend on the public finance allocations, which he expects to be set out in the Spring Budget.
The Minister also wants to increase the developer contributions to social and affordable housing through the section 106 process. He told the committee that Section 106 currently accounts for about half of the social and affordable homes delivered.
(3) New Towns additional to local plan allocations:
New Towns locations will be chosen by Ministers from a shortlist prepared by the New Towns Taskforce and imposed over and above any Local Plan allocations.
The Minister confirmed that development "that will come forward through the new towns programme will be separate to and in addition to LHN [Local Housing Need] as defined in the revised standard method." They would not be taken into account in local housing numbers as they meet a separate national need. The new towns will be a minimum of 10,000 homes and may be urban extensions as well as traditional stand-alone green field sites.
(4) The Government's Housing Delivery Plan:
The Minister's housing delivery approach is 'plan-led'. That involves creating a 'oversupply' (in the Minister's words) of 370,000 planning allocations a year in order to encourage more market activity. The Minister seeks to achieve 'oversupply' by enforcing the requirement for a Local Plan (so-called comprehensive coverage) combined with higher compulsory housing targets.
He is also seeking to increase planning capacity. In addition, measures to unlock stalled developments are said to have "unlocked" 4700 homes. A new Housing and Infrastructure bill is planned next year and will aim to speed up infrastructure delivery.
Diagram: The Government's plan for the 1.5 million homes target
Housing Delivery Snapshot - August 2024
• The Bank of England cut interest rates to 5% in a move expected to begin to boost confidence. The close 5-4 vote of the MPC came with a cautionary message that the Bank was not going to cut “too quickly or by too much”.
• Mortgage lender Nationwide released its latest UK house price index report, with an annual growth in house prices of 2.1% in July, its fastest pace since December 2022.
• The latest NHBC housing pipeline figures for Quarter 2 2024 show the scale of the current housebuilding slump with a 23% fall in new registrations compared to the same quarter in the previous year.
• Latest MHCLG data reported a significant fall in residential Planning Permissions over 30%, another key housing pipeline indicator.
• Following the General Election, the new Government confirmed its 1.5 million new homes target for this Parliament.
• The Housing Secretary took immediate action to impose compulsory housebuilding targets on councils, with a warning of direct intervention if housing targets are not met.
• The Housing Minister confirmed on BBC Radio 4’s Today programme on 31 July that the Government’s New Towns programme is not expected to deliver any completed homes this Parliament.
HFI Housing Delivery Newsletter - August 2024
The Bank of England’s rate cut was a ray of light, but the housing pipeline remains a cause for concern. At the Housing & Finance Institute, we look at the latest news and developments in housing since the election, including in the Housing Spotlight and Delivery Snapshot.
Rate Cut Boost
Amid a challenging year for housebuilding and mortgages, there was a ray of light on 1 August, with the Bank of England announcing a long-awaited interest rate cut to 5%. The close 5-4 vote of the Monetary Policy Committee came with a cautionary message that the Bank was not going to cut “too quickly or by too much”.Ahead of the rate rise, the mortgage lender Nationwide released its latest UK house price index report, with an annual growth in house prices of 2.1% in July, its fastest pace since December 2022.
The latest Bank of England announcements will provide a little relief for some current mortgage holders and those needing to refinance. However, many first-time buyers are facing a continuing double challenge of finding money for a deposit while meeting stringent affordability criteria. So while generally mortgage market confidence may begin to rise off the back of the Bank of England interest rate cut, access to home ownership remains difficult for many, given the affordability and home deposit challenges.Housing Pipeline Concern
However, housing pipeline figures remain a cause for concern with the latest NHBC housing pipeline figures showing the scale of the current housebuilding slump. Latest MHCLG data reported a significant fall in residential Planning Permissions, another key housing pipeline indicator.Housing Policy Interventions
Following the General Election, the new Government has confirmed its 1.5 million new homes target for this Parliament. Immediate action has been taken by the Housing Secretary to impose compulsory housebuilding targets on councils, with a warning of direct intervention if housing targets are not met. However, the Government’s New Towns programmes is now not expected to deliver any completed homes this Parliament, the Housing Minister told Radio 4’s Today programme. This raises questions as to how the 1.5 million new homes target will be delivered, without these major new developments coming forward at pace.
Further Government intervention on the demand side to support new buyers and home deposit savers is likely to be necessary over the next period to reverse the current housebuilding slump, together with far-reaching interventions for skills and building materials to meet a housing target that hasn’t been met since mankind first landed on the moon over 50 years ago. The HFI’s purpose is to support increased housing supply, back councils and businesses working together to build more homes and promote new ways to finance housebuilding.
Do get in touch if you would like to share ideas and suggestions on building the homes our country needs.
Best regards
Natalie Elphicke Ross
Head of Housing Delivery
natalie@hfi.org.uk
December 2024
