Delivery the key as UK aims to ‘get Britain building again’
The new Labour government has pledged to “get Britain building again” by reforming planning procedures and accelerating housebuilding across the country, as outlined in the traditional King’s Speech, delivered by Charles III on Wednesday. But there are several challenges to overcome if a homebuilding boom is to materialise, experts warned.
The new government needs to “avoid any changes that might backfire”, according to a new report from Bloomberg Intelligence. UK planning reform may help the big developers like Barratt, Taylor Wimpey, Persimmon, Bellway and Berkeley boost completions, but “a diverse range of builders is key to delivery”. Rising activity could lift costs, especially as there are labour shortages in the sector, and high affordable homes targets may not be viable.
“Homebuilders with large land banks and cash piles, like Barratt, Taylor Wimpey and Persimmon, might be better positioned to reap rewards of the simpler planning process,”said Iwona Hovenko, senior real estate analyst, Bloomberg Intelligence. “Rising completions could boost operating leverage and margin, which halved versus pre-pandemic levels, as sales plummeted. Given the government’s ambitious plans for construction across all segments, the higher activity could lift cost, especially for labour.”
Planning reform is long overdue and the re-introduction of compulsory housing targets by the government will boost completions, especially if interest rates start to decline, lifting demand, But any volume ramp-up could take time, the BI report says.
“The prioritisation of brownfield and the new greybelt land will help unlock large swathes of land for development, including former carparks and commercial units,” said Craig Carson, managing director, Barratt London. “This will be particularly beneficial in the outer boroughs of the capital, ensuring developers can accelerate building programmes and deliver much-needed sustainable homes.”
In London, for the first time in 15 years, a Labour government will work hand-in-hand with the Labour Mayor and with developers to overhaul the planning system and build more homes.
“The government also can’t solely rely on profit-driven developers to deliver its target of 1.5 million homes over five years, given the cyclical nature of the industry, which aligns build rates to demand,” said Hovenko. “Moreover, attracting smaller builders back into the market, after many exited amid hefty regulation and high capital requirements that left only the largest companies able to cope, should be a key pillar of diversifying housing supply.”
Affordable housing targets of 40-50% for some residential projects could prove difficult for homebuilders and hinder delivery, unless land values decline or subsidies are introduced.
The same message was delivered by Paul Rickard, managing director of Pocket Living, a developer of affordable homes.
“In order to deliver this welcome and ambitious agenda we not only need planning reform and measures to get the builders building again, including encouraging new entrants to the housebuilding sector, especially amongst our depleted ranks of SME developers who have dwindled over the last 30 years,” said Rickard. “We also need to see a transformational change in how the government releases public sector land, invests in measures to unlock difficult brownfield sites, and promotes new forms of public/private partnership models.”