This is Home Front with Vicky Spratt, a subscriber-only newsletter from i. If you’d like to get this direct to your inbox, every single week, you can sign up here.
Good afternoon and welcome to this week’s Home Front, coming to you a day earlier than usual because Britain has a newly elected Labour government.
Let’s dive right in. During the election campaign, Labour’s pitch to Britain was that it would be a government of “builders, not blockers”. Over the party’s next five years in power, it wants to overhaul the planning system to build 1.5 million homes and boost homeownership.
Given that the Conservatives not only failed to achieve their own target of 300,000 new homes per year before it was scrapped by former prime minister Liz Truss but also had to abandon their own flagship programme of planning reform, how likely are Labour’s promises to become a reality?
The answer is not simple. Labour’s answer to the housing crisis, a seemingly intractable problem, is as serious as it is technical.
Will Labour’s planning reforms actually work?
Newly appointed Secretary of State for Levelling Up, Housing and Communities Angela Rayner will be working alongside her new Housing Minister Matthew Pennycook to deliver planning reform to unlock Britain’s sclerotic planning system in the coming days.
Today, Rachel Reeves has announced a return to compulsory housebuilding targets in her first speech as Chancellor. This is something that Mr Pennycook had confirmed to i in an exclusive interview before the election.
Housebuilding targets are good. They give investors confidence that there is long-term demand and a return on their money. They also help local authorities to plan ahead.
However, as expert housing consultant and former special adviser to Theresa May, Toby Lloyd, explains, such targets are just one piece of the puzzle. Delivery is key.
Labour has also said that it will embark on a new towns building programme which will be delivered, at least in part, by development corporations which can work across constituency boundaries.
This, Mr Lloyd explains “is a mechanism that we know works because it’s been tried and tested”.
The last time that 300,000 homes a year were built in Britain was 1977. This was a period when new towns were being developed with oversight from development corporations and funded by a mixture of public and private investment. This is very similar to what the new Labour government is proposing to do. Mr Lloyd believes “there’s no reason why it couldn’t work” and be “a major housebuilding driver”.
Another crucial element will be Labour’s plan to reform compulsory purchase order (CPO) rules. Labour’s CPO reforms, when they come in, will enable public bodies – such as local authorities or development corporations – to buy land for development at a “fair” price, instead of having to pay overinflated private market values.
This reform would work well alongside a new towns building programme to meet housing targets. Labour has also pledged to compel local authorities to prioritise brownfield sites for development and promised that low-value parts of the green belt can be reclassified as “grey belt” so that they can be built on too. Ms Reeves confirmed all of this in her speech today.
Speaking to i before the election, Mr Pennycook said that new CPO powers for public bodies would combat “unscrupulous speculators” who “stop development coming forward and drive down the amount of public gain” from land.
There will also be a “shot in the arm” of funding for 300 new planning officers who, Labour hopes, can restore confidence in the planning system and speed up the delivery of new towns, housing and infrastructure. Given that many planning applications fall down, not just because of opposition for its own sake, but a lack of expertise and confidence in the system, this is also a wise move.
Mr Pennycook’s approach is a 360° one which aims to reform the land market as well as housing delivery. It has been welcomed by experts across the housing and planning sectors from major builders to the Royal Institute of British Architects (Riba).
But will these reforms actually help young people buy homes?
There is broad consensus that Labour’s approach is the right one. However, whether it will actually help young adults who are currently priced out of homeownership is a harder question to answer.
As expert housing market analyst Neal Hudson told i Labour has inherited a “very difficult housing market.”
That is a housing market where house prices remain at near-historic highs, making it difficult for would-be first-time buyers to save enough for a deposit. This, Mr Hudson explains, has been compounded by “high interest rates”.
“As a result, housing delivery has fallen off, rents have gone up and house prices are still high,” he says.
The brutal truth is that some elements of this situation are, as Mr Hudson puts it, “out of Labour’s hands”.
High house prices are the result of unfettered asset price inflation which took place over the past two decades. This trend has been seen across much of the West and, short of stepping in to control house prices (which Labour has no appetite for doing), there isn’t much that can be done about them.
Indeed, as Mr Hudson notes, high interest rates which also hinder affordability for homebuyers are the result of inflation, which is a trend seen “in the global economic environment”.
Labour’s approach to this very real problem is partly reflected in its return to planning targets. The new Government’s hope appears to be that if it can persuade investors that it is stable and sensible and there is a solid plan for growth – housebuilding grows economies – then borrowing rates may come back down over time because Britain’s economy will become a more attractive place for investors. This is something that the Chancellor was keen to stress today too.
“We can’t build overnight but that’s why we have set out today the initial steps that we are going to take to unlock private sector investments to build homes,” Ms Reeves said in her first official address since taking up the job.
It’s worth noting that there have already been positive ripple effects since Labour won the election.
Following confirmation of the party’s election victory, FTSE 100 housebuilders like Vistry, Persimmon, Barratt and Taylor Wimpey all saw their share prices climb by between 2 and 3 per cent in just one day. More broadly, the UK stock market experienced a lift which signals confidence and optimism. Contrast that with France – where a hung-parliament caused the French stock index to slide and the cost of government-borrowing to rise.
Labour has got a plan to help first-time buyers. Its new “Freedom to Buy” scheme will extend the previous government’s mortgage guarantee scheme for first-time buyers. Labour hopes this will support more than 80,000 young people to buy homes of their own over five years. If 80,000 sounds like a conservative number given that there are currently nearly five million households who rent privately, it is.
There can be no doubt that there are, as Mr Hudson puts it “limits to what Labour can do” about the price of homes for private sale because “nobody expects mortgage rates to be back at one or 2 per cent again any time soon.
It’s crucial to note, however, that Labour’s “Freedom to Buy” scheme can only help would-be buyers meet high house prices. It cannot make homes more affordable. The party’s cautious pledge suggests it knows this.
If Labour is serious about housebuilding, it needs to focus less on homes for private sale and more – as the post-war governments did – on building affordable social housing in order to meet its numbers. We don’t yet know how many of the party’s 1.5 million new homes will be social homes.
Mr Lloyd says that building truly affordable homes is “obviously necessary” because they are urgently needed to reduce waiting lists and homelessness. But, more than that, he says that building affordable housing “is absolutely critical and vital for increasing the supply of housing”.
“The only time in history when we’ve ever built 300,000 homes a year is when a very large proportion of them and, for many years the majority of new homes, were social housing,” Mr Lloyd says.
“Without a non-market element of supply, they can’t meet these targets,” he adds. “Private sales rates will always be relatively low because developers don’t let the price of homes fall.” This stalls the market when house prices are high, which is what we are currently experiencing in Britain.
So, for Labour, the only way out of the current housing crisis and up towards its target is to build affordable social (or non-market) homes.
Another key problem Labour faces is that more young adults now rent privately because they cannot afford to buy. High rents make it difficult to save for a deposit.
Mr Hudson added that making private renting more “affordable and secure” will enable private renters who are currently “just out of reach” of homeownership to save towards a deposit. Labour plans to ban Section 21 “no-fault” evictions immediately and has signalled it would consider steps to regulate rents at a local level in the future.
How quickly can Labour ramp up house building?
The clock is now ticking on Labour’s five-year term in government. The truth is that building good-quality new homes takes time. Planning reform takes time.
“These changes will take their time to work their way through the system,” Mr Hudson concluded. “You’re looking at seeing the effects of Labour’s plans in terms of an uplift to the number of new homes and new homeowners towards the end of that period.”
Britain’s new Government knows this. That’s why it has pledged 1.5 million homes over five years and not, as previous governments did, opted for an annual target. Labour’s success depends on the backing of all of its MPs – even those with constituencies where people may not want new developments – plus support from investors and, crucially, on interest rates remaining stable. There are challenges ahead for Britian’s new Government. The world is currently a volatile place.
Key housing
It’s a new government special this week. So, please do check out my column about why mortgage rates are going to be a problem for Labour. Rumour has it that Rishi Sunak was pushed to call an early snap election because his team were worried about the impact of the 1.5 million people, who will come off low fixed rates of around 2.7 per cent this year to find their mortgage interest has nearly doubled. This isn’t Labour’s fault, but it will still get the blame. That’s what happens when you’re in government.
Ask me anything
This week’s question comes via a reader on Instagram.
“Hi Vicky. I’m buying my first home and the estate agent selling it to me is trying to push me to use the mortgage broker they recommend. This feels weird, do I have to do it?”
This is something I hear happening more and more. However, you are under no obligation whatsoever to use a mortgage broker being pushed on you by an estate agent. There are lots of brilliant independent brokers out there and you can also talk directly to your bank.
Please keep your questions coming: @Victoria_Spratt, on X, formerly Twitter, @vicky.spratt on Instagram or via email vicky.spratt@inews.co.uk.
This is Home Front with Vicky Spratt, a subscriber-only newsletter from i. If you’d like to get this direct to your inbox, every single week, you can sign up here.