Can Labour deliver 1.5m new homes?

No one doubts the need or importance of delivering more new build homes in the UK. The population of the UK has risen by nearly five million people in the last decade, and net migration to the UK for the year ending June 2024 was 728,000 people, having reached an unprecedented peak of 906,000 people in the previous year. Population increases at these levels obviously create challenges for the UK housing market, as well as infrastructure and public services more generally. To put that in further context, the average number of persons per dwelling in the UK is circa 2.3, so if your population is increasing by 0.75m per annum, you would need to build 326,000 new dwellings just to accommodate that net migration growth (based on current UK occupancy trends).

So, it was no surprise that Labour’s 2024 manifesto pledged to “get Britain building again”, with an ambitious target of building 1.5m new homes in their first five year parliament. Figures for 2021-22 and 2022-23 showed annual housebuilding rates of around 235,000 units per year – far short of the 300,000 new builds that would be required annually to deliver Labour’s new ambitious target.

Figures look set to drop further - to some 190,000 new homes - in 2024/25. Given that any changes being implemented will take time to come into effect and be felt in practice, current delivery numbers will need to increase drastically in the later years of this parliamentary term for Labour to stand any chance of reaching the 1.5m figure.

Whilst the Government's commitment to this ambitious target is certainly a positive signal to the housebuilder part of the construction sector, in reality, almost everyone in the sector can see that it is not going to be hit. Indeed, in the recent “spring statement” the Chancellor Rachel Reeves tacitly accepted that reality.

So overall confidence is very low that the target numbers are remotely feasible. To reach the target would require a very significant increase in new build construction levels back ended to the parliamentary term. The combination of various industry specific constraints, new regulations, and wider powerful economic headwinds make that acceleration very difficult to achieve in practice.

Before turning to those challenges, it is worth acknowledging some positive changes for the housebuilding industry, in the National Planning Policy Framework (NPPF) changes announced by Labour, including:

• the reintroduction of mandatory housebuilding targets for local authorities (with new methodology for calculating those targets); and
• material changes to planning rules, including the influence and operation of planning committees and local authority officers.

Both these changes are generally seen to be steps in the right direction. Particularly impactful developments include the switch to a brownfield-first approach, with new “grey belt” rules for previously-defined green belt land which is not considered to sufficiently contribute to the specifically allowed green belt purposes. New affordable housing rules, whilst welcomed by many, do impact on the viability of projects depending on funding agreements, so – as ever – the overall policy balance will need to be watched carefully.

A recent postponement of the Building Safety Levy by one year (to Autumn 2026) is also helpful for housebuilders who will have been concerned about the viability of new developments being compromised.

Despite being constrained by strict fiscal rules, the Chancellor has also announced various funding schemes for the industry - including £2 billion in grant funding for affordable housing development (purportedly equating to 18,000 new homes) through the Affordable Homes Programme and £600m in skills training to train up to 60,000 new construction professionals. There have also been indications that the 11 June 2025 spending review will include details of a longer-term grant funding scheme for new homes. Details remain to be seen.

An OBR forecast published alongside the Chancellor's Spring Statement noted that changes to the NPPF would result in a total of 1.3 million homes constructed over the course of this Parliament, with additional sums for the Affordable Homes Programme not included and “expected to add further numbers”.

So, against this background, and the political ambition to deliver, what are the headwinds that Labour will face in seeking to deliver their 1.5m number?

A shortage of skilled construction workers

A critical barrier to meeting the housing target is the lack of skilled workers in the construction industry. Brexit has led to a reduction in the number of European Union nationals working in the UK construction sector, exacerbating existing skill shortages. As of 2024, nearly 100,000 fewer construction workers were employed compared to five years earlier.

Additionally, a significant portion of the current construction workforce is nearing retirement age, with many tradespeople over 50. The Home Builders Federation (HBF) warns that the UK lacks a sufficient talent pipeline to meet the Government's ambitious housing goals.

Declining planning approvals

The number of planning permissions granted for new homes has declined significantly, posing a substantial hurdle to the housing target.

In 2024, planning approvals fell to their lowest level in a decade, with only 242,610 homes receiving approval, a 25% decrease from the 2019 peak. This decline is attributed to factors such as high-interest rates, changes in planning policies, and increased caution among local authorities. The Government's target of 370,000 annual planning approvals requires a 53% increase from current levels, a feat that many consider unachievable without more substantial reforms.

Financial constraints on housing providers

Housing associations and local councils, which are pivotal in delivering affordable homes, face significant financial challenges. In 2023–24, housing associations started just over 32,000 homes, a 30% decrease from the previous year. These providers cite issues such as capped rental incomes, rising construction costs, and a £2.2 billion funding shortfall by 2028 as major constraints. Without an emergency cash injection and a sustainable financial model, many affordable housing projects are being delayed or cancelled, undermining the Government's housing objectives.

Resistance from local councils

Local councils, including those governed by Labour, have expressed concerns about the feasibility of the 1.5 million homes target. Councils argue that the centralised approach to housing targets does not account for local needs and capacities. For instance, Broxtowe Borough Council described the targets as "impossible," while South Tyneside Borough Council labelled them "wholly unrealistic". These objections highlight the tension between national ambitions and local realities, with councils emphasizing the need for more flexibility and local input in housing planning.

The need for more radical planning reform?

Many experts, including the Centre for Cities think tank, argue that the Government's current planning reforms are insufficient to meet their housing target. The Centre for Cities suggests that more radical changes, such as implementing zoning laws, are necessary to streamline the planning process and facilitate higher housing delivery. However, such reforms are politically contentious and have not been fully embraced by the Government, limiting their potential impact on housing number delivery.

The existing post-Grenfell new Building Control regime?

As Noble Francis, Economics Director at the Construction Products Association, has pointed out, planning is not the only constraint for housebuilding.

Rising mortgages are affecting consumer demand, while housebuilder’s costs are still rising due to new laws introduced in previous years – from sustainability regimes on Biodiversity Net Gain and water and nutrient neutrality.

However, it is also the new building safety rules with revised Building Regulations and the Building Safety Levy, plus the new three stage gateway building control system introduced by the Building Safety Act 2022 for Higher Risk Buildings (18m, 7 stories or above etc). The Building Safety Regulator is nowhere near hitting target processing times for either Gateway 2 (pre-construction start) or Gateway 3 (completion) applications.

Some blame the under-resourced new Building Safety Regulator, whilst they themselves point to the poor quality of many Gateway 2 and Gateway 3 applications. Either way, the overall effect has been that developers are having to factor in very meaningful delays, which are also disrupting economic models for investors in key sectors, including those around affordable homes / BTR etc.

Teething issues with new regulatory regimes are always to be expected. However, whilst developers, contractors and consultants may be starting to adapt to the new requirements and risk allocations involved, pleas for greater transparency over projects proceeding through the gateway process, the introduction of a pre-application process for meaningful engagement with the Building Safety Regulator and suggestions of using AI to speed up the validation checks on applications need to be given due consideration by the Building Safety Regulator if the industry is to deliver on the Government’s aspirations. Whilst many projects have yet to get to Gateway 3 - so there is limited data on this particular Gateway stage - there will be concerns that projects reaching Gateway 3 will encounter similar delay issues to Gateway 2 experience to date, at least in the short term, with investors frustrated by the impact that this will be having on their portfolios.

Further changes to Building Control following the publication of the Grenfell Phase 2 Public Inquiry

The Government appears committed to seeing through implementation of all 58 recommendations of the Grenfell Phase 2 Public Inquiry Report, as published last autumn. The political difficulty of not doing so is easy to understand, but many construction industry experts are doubtful about whether some of the recommendations will significantly enhance building safety.

Either way, what is clear is that the construction industry itself wants a period of consolidation around the existing legal and regulatory changes that have already been introduced.

Conclusion

Labour’s commitment to addressing the UK’s housing challenges is commendable. But the 1.5m new homes target already appears completely unattainable given the scale of those challenges. The shortage of skilled construction workers, declining planning approvals, financial constraints on housing providers, resistance from local councils, the need for more radical planning reforms, and the new building control regime (which could materially change further) all compound together to collectively impede the actual progress required to meet this always ambitious goal.

Achieving the target would require an unprecedented comprehensive and coordinated effort across all levels of Government and the private sector, with a focus on addressing all these systemic issues both simultaneously and urgently. There is no point solving one delaying constraint – say through planning reform – if you simply add another equivalent or worse delaying constraint – say the new Building Control regime for Higher Risk Buildings – at the other end of the residential development pipeline. The challenge is therefore to simultaneously strip out layers of concurrent critical path and capacity challenges to housing delivery. As Labour approach the one-year anniversary of their historic majority general election win, there are few who consider these challenges are going to be overcome anytime soon.