Can Labour actually construct 1.5million properties in 5 years?

If Labour’s election campaign claims are to be believed, building more homes is at the heart of the new Government’s plan to drive growth in the economy. 

Keir Starmer promised that Labour will back house building from ‘day one’ to meet its ambitious target of 1.5 million homes over the next five years.

That means 300,000 homes will need to be built each year – more than double the amount built in 2022-23. 

Labour says it will do this by cutting planning application delays, helping first-time buyers and building on ‘ugly’ green belt. Is it a realistic pledge?

Why don’t we build enough homes? 

Since the 1980s, the number of homes built and paid for by the public sector has fallen dramatically.

Meanwhile, private housebuilders do not want to build too many homes, or too quickly, as flooding the market could reduce the price buyers will pay. 

The number of new homes built in any given year will rise or fall in line with people’s appetite to buy or sell their homes.

Housing transactions fell by 19 per cent during 2023 to just over 1.02million, according to HMRC figures, largely due to increased mortgage rates. Therefore, housebuilders have been cutting back. 

The number of new homes planned fell 44 per cent last year, according to the National House Building Council (NHBC), the UK’s largest provider of new home warranties and insurance.

Can Labour build 1.5m homes by 2029?

It will be a difficult target to meet, according to some housing market experts. 

First and foremost, that is because most decisions on whether homes get built are in the hands of private sector housebuilders, and not the Government.  

‘Politicians hold no trowels. Private completions are key,’ says the property author and commentator Peter Bill, pointing out that only 143,000 homes were completed in 2023-24.

David Crosthwaite, chief economist at Building Cost Information Service, which provides cost and price data for the UK construction industry, also thinks Labour is unlikely to fulfil its housebuilding goal.

‘It is a lofty ambition and nothing else,’ says Crosthwaite. ‘Flooding the market with new homes would not be in the best interest of the property developers. 

‘The only way the Government could influence supply would be to build themselves, which they used to do when local authorities employed direct labour to build social housing. But this option seems unlikely given the current state of the public finances.’

The pace of change will also be slow, according to David Fell, lead analyst at property firm, Hamptons, because the Labour Government will be starting on the back foot. 

‘The policy levers they can pull are unlikely to deliver a housebuilding boom quickly,’ says Fell.

‘Higher interest rates will limit the number of homes that bigger developers can build and sell.

‘With most reporting sales numbers 25 per cent to 35 per cent down on the long-term average, Labour will inherit a housebuilding deficit on day one which is at much higher levels than the Conservatives faced during the last 14 years.’

However, others are more optimistic on Labour’s prospects of meeting this target. 

‘Of all the manifestos we have reviewed, we believe Labour’s policies do the most to boost housing supply,’ says Anthony Codling, head of European housing and building materials for investment bank RBC Capital Markets. 

‘The Labour victory is likely in our view to lead to a significant increase in housing supply over the coming five years.’ 

Labour’s planning system revamp 

To help it build more homes, the new Government first wants to shake up the planning system.

It has promised to immediately update the National Policy Planning Framework to undo Conservative changes, including restoring mandatory housing targets.

These targets were scrapped under Rishi Sunak’s premiership in late 2022. At that time the target had been 300,000 homes per year, but that number was not being achieved. 

Labour also says it will ensure councils have up-to-date local plans and give them cash to hire more planning officers, funded by a further stamp duty surcharge on overseas buyers.

Planning departments have been affected by local government budget cuts in recent years, creating a planning application backlog which some say is hampering investment in new housing.

However, progress in this area is again likely to be slow, according to Crosthwaite.

‘Unblocking some of the planning backlog is a priority for the Labour Party [which it will do] by increasing the numbers of planning officers and streamlining the approvals process,’ he says. 

‘Again, this is unlikely to be a quick fix as it will take time to source and recruit planners into the public sector, years rather than months, assuming that the skillsets are actually available.’

This means the five-year target to build 1.5million homes could be a challenge to meet, according to Hamptons’ David Fell – and we may not start seeing results until further down the line. 

‘Policy changes introduced during the first year of the new parliament are only really likely to be felt towards the end of it,’ he says. 

What are Labour’s plans for the green belt?

The Labour party says it will prioritise building on brownfield sites rather than across the countryside. 

Brownfield means bits of land that have already been built on, for example a warehouse being knocked down and replaced with houses. 

However, the use of brownfield sites will not be enough to meet its targets alone – so Labour also plans to target lower-quality, ‘ugly’ green belt land, known as ‘grey belt’ land, for development.

Brian Berry, chief executive of the Federation of Master Builders says: ‘The current housing crisis won’t be solved unless radical proposals to reform the planning system are put in place.

‘Labour’s ‘grey belt’ proposals offer real hope for seeing small sites for new homes unlocked.’

The new Government has a set of ‘golden rules’ for building on this type of land, including needing to have a target of 50 per cent affordable housing. 

Will Labour help first-time buyers?

Alongside building more homes, Labour also wants to get more properties into the hands of first-time buyers.

Although saving a deposit is still a big challenge, home ownership is actually already on the rise among young people.  

Homeownership among 25-34 year olds has risen to a level not seen since 2010, according to a recent study by the Institute for Fiscal Studies (IFS).

It revealed in 2022/23, 39 per cent of 25 to 34-year-olds owned their home, which is up 6 percentage points from 33 per cent in 2015.

To try and increase tat figure further, the new Government plans to introduce a new and improved Help to Buy scheme, which it is calling the Freedom to Buy scheme to help them secure a mortgage.

Full details of the scheme have not been announced, but it will be partly funded by housebuilders. 

Peter Bill, the property author and commentator is cynical of the proposed scheme. 

He says: ‘There is a general wariness of these schemes. Attractive as they are to buyers, they have been proven to increase prices.’

Labour will also introduce a permanent, mortgage guarantee scheme, designed to encourage banks to lend to people with only a small deposit. 

However, this may only help a small proportion of first-time buyers. The average deposit put down by a first-time homeowner last year was around 25 per cent, according to UK Finance.  

According to David Hollingworth, associate director at L&C, fewer than 10 per cent of homebuyers opt to buy with a 10 per cent deposit or less. 

Ultimately, many first-time buyers are not only priced out of the property market because of the deposit required, but because of how much they are able to borrow and afford under the strain of higher interest rates.

Labour is also planning to give first dibs to local people on new developments, ending what it calls ‘the farce of entire developments sold off to international investors’ before local people get a look in. 

While developers of high-end flats in city centres may rely on foreign buyers to purchase off-plan, Bill says it isn’t a problem for the bulk of housing estates built by across the country.

He says: ‘This first dibs to local buyers was tried with little success in London years ago when foreign buyers were flooding the market. 

‘It seems unlikely that foreign buyers will scoop up whole estates. Politically attractive, but has more loopholes than a fishing net.’

Compulsory purchase changes

Labour wants to reform compulsory purchase compensation rules, to help public bodies such as councils buy land for homes more cheaply. 

Compulsory purchase is when a public body is able to force a landowner to sell, to allow new housing to be built. 

However, at the moment some landowners are able to charge huge sums, based on the value that the land will eventually have when it has planning permission and is converted into homes. 

Agricultural land is worth an average of £25,000 per hectare in the UK whereas development land with planning approval is worth an average of £1.95million – about 80 times more, according to analysis by Capital Economics. 

Under Labour’s plan, landowners will be ‘awarded fair compensation’ rather than ‘inflated prices’ based on the prospect of planning permission.

Andrew Wishart a senior economist at Capital Economics says: ‘If more of this increase in value were captured by the state, the proceeds could be used to fund public housebuilding or attractive contracts for private housebuilders that insist on higher levels of new home delivery.