The future of new housing developments in England is looking grim as forecasts suggest that the number of new homes could plummet to nearly half of the government’s official target. This comes at a critical time as the nation approaches a general election where housing is poised to be a central issue.
For the past five years, England has seen an average annual completion of about 210,000 new homes. However, according to property experts at Savills, this number is expected to drop to just 160,000 in the coming year. This steep decline is largely due to the increasing costs of debt affecting both construction and home sales.
The Role of Government Support
Savills has highlighted the necessity of governmental intervention, suggesting that without significant policy and financial backing, building rates are unlikely to recover before 2030. This situation poses a significant challenge for both the Conservative government and the opposition Labour party, which have each promised to reach an annual target of 300,000 new homes.
Factors Driving the Decline
Emily William, director of Savills residential research, points to several factors contributing to the downturn in homebuilding. Among these are uncertainties in the planning system, soaring inflation in building costs, and a weakening sales market driven by higher mortgage rates. These challenges are exacerbated by a lack of adequate policy support from the government.
The Impact on Housing Associations and Developers
The construction sector’s downturn is evident across the board, with large commercial housebuilders like Taylor Wimpey and Persimmon reducing their outputs by about 25%. These developers do not foresee a recovery in their production levels until at least 2025. Additionally, housing associations have found their development plans increasingly unfeasible due to the rising costs of private sector debt.
A Call for Increased Funding
Kate Henderson, chief executive of the National Housing Federation, has urged the government to increase funding to support the construction of 120,000 to 140,000 new affordable homes each year. According to Henderson, this is crucial not only for addressing the housing shortage but also for helping the construction industry recover from its current slump.
Government and Industry Responses
In response to these challenges, the Home Builders Federation has called for government assistance to improve mortgage availability and address issues in planning and environmental regulation. Meanwhile, a spokesperson from the Department for Levelling Up, Housing and Communities has defended the government’s record, citing an investment of £11.5 billion in affordable homes and claiming that the highest rates of housing supply in the past 30 years have occurred since 2018.