"Underlying demand for homes remains strong, but transactions are weak. Many chains are stuck because first-time buyers are locked out"
- Tim Foreman - LRG
The appointment of a new Secretary of State for Housing offers a much-needed chance to reset the agenda. Steve Reed has wasted little time in issuing a “call to arms” to developers, urging them to “build, baby, build”. His ambition to double down on housebuilding is welcome, but ambition alone will not shift the numbers.
Housebuilding is stalling. Planning approvals are down, completions are down, and confidence across the market is subdued. While the government remains committed to 1.5 million homes this Parliament, we are well off track. At the same time, developers are wrestling with a ‘perfect storm’ of more demanding regulations, rising costs, slower planning and constrained demand. It is not a lack of will to deliver that is holding the sector back, but a system that is increasingly misaligned with reality.
If ministers are serious about delivery, they must respond to calls for reform from those of us in the sector who see these problems day in, day out. They must help first-time buyers back into the market, strip away unnecessary red tape and give local authorities the resources to make the planning system work. And importantly, they must restore confidence in the broader economy – the essential ingredient without which no market can function.
The state of the market
Unfortunately, the figures don’t support a likely increase of 1.5 million homes this Parliament. S&P Global Construction Purchasing Managers’ Index shows the steepest drop in activity since the early months of the pandemic. Housing starts have lagged completions for six successive quarters. The OBR forecasts completions falling to 192,000 in 2026 – far below the 300,000 per year target.
Underlying demand for homes remains strong, but transactions are weak. Many chains are stuck because first-time buyers are locked out. The average first-time buyer property now costs ten times average net salary, while the average age of first-time buyers has risen steadily from 31 in 2003 to 34 today. With wages lagging, deposits unaffordable and mortgage costs higher than expected, the next generation of homeowners is being priced out.
This is why housebuilders cannot accelerate delivery. Even with planning reform, developers will not build unless they can sell.
A perfect storm of regulation
At the same time, the cost of building has risen sharply. Successive new requirements – for as much as 50% affordable housing, 10% biodiversity net gain, new building safety costs (both now and in the future), funding for SANG and CIL costs – have combined to make many sites unviable.
For land bought before these obligations were introduced, the maths simply does not add up. Developers face higher build costs, reduced sales values and, in many cases, financing costs on dormant sites that remain unresolved. Affordable housing providers are also buying fewer Section 106 units, further reducing viability.
None of these regulations is unwelcome in isolation – they reflect worthy goals. But their combined effect impacts delivery, precisely at a moment when the government needs supplies to accelerate.
What government can change directly
There are immediate steps that the new Secretary of State could take. First, he must restore demand from first-time buyers. While we don’t advocate an exact return of Help to Buy, it is clear that it supported nearly 40% of all sales for some housebuilders and benefited thousands of first-time buyers. An improved equity loan scheme could give young buyers a realistic route into ownership, unlock chains, and generate wider economic benefits.
The mortgage guarantee scheme has been made permanent, but take-up is limited and awareness is low. A more ambitious scheme, better promoted, could achieve much more.
In the realm of new builds, tax reform is overdue. While new builds themselves are zero-rated for VAT, many associated costs still attract VAT. Reducing this burden could make marginal sites viable again.
Furthermore, the government must invest in skills. The HBF estimates 239,000 new recruits will be needed in the next five years, yet the government’s support for the CITB remains insufficient. Without trained labour, the industry cannot deliver.
Finally, planning must be faster and more predictable. Section 106 and CIL negotiations drag on for months, draining resources and delaying delivery. Dedicated housing delivery vehicles, clearer timelines, and greater flexibility in applying affordable housing and environmental requirements would help.
What government can change indirectly
Beyond direct intervention, the government has an equally important role in shaping sentiment. Consumer confidence is fragile. Talk of new property taxes, or of shifting stamp duty liability onto vendors, risks depressing the market further. Such ideas may grab headlines, but they create uncertainty and deter buyers.
Equally, a focus on reviving the wider economy – tackling the cost of living, stabilising interest rates, and supporting wages – will help restore the conditions under which people feel confident to buy. A thriving housing market is inseparable from a thriving economy.
A balanced approach
What is needed now is balance. The government cannot expect developers to deliver more while steadily increasing obligations. Nor can it rely on planning reform alone, without addressing the demand-side barriers that prevent sales.
A package of measures – easing regulatory pressure, incentivising first-time buyers, investing in skills, streamlining planning, and supporting the wider economy – would set the conditions for delivery. Combined, these could help the sector meet the 1.5 million homes target, not as a political aspiration but as a practical reality.
With a new Secretary of State, with an industry ready to deliver and with public support for more homes in principle, the foundations are in place. What is needed now is decisive action.
Get the conditions right, and the sector will deliver. Fail to do so, and this Parliament risks being remembered not for solving the housing crisis, but for allowing it to deepen.
