Coronavirus has had and will continue to have an impact on the national economy and the practicalities of building new homes. As a result the Government target of delivering 300,000 homes a year in England by the mid-2020s is at risk.

We estimate that this year (2020-21) 171,000 new homes will be built in England, 66 per cent of the number built last year. This is in most part due to the reduction in construction capacity, particularly during lockdown. But there is also the need for confidence in the market to be sufficient for housebuilders to start on new sites to replace those they finish. 

If construction capacity continues to inhibit delivery, we estimate supply could reach 80 per cent of last year’s levels in 2021-22. And assuming the economy bounces back in 2021 then housing delivery could return to 2019-20 levels in 2022-23 following renewed buyer and housebuilder confidence. 

If there are medical advances later this year, sufficient to support a rapid bounce back in economic confidence (the upside scenario), completions could fall by just 31 per cent in 2020 before recovering to their pre-Covid levels in 2021-22. 

However, if the economy is hit harder and takes until 2023 to recover to pre-Covid levels (the downside scenario), delivery this year could be just half 2019-20 levels and take until 2023-24 to recover to last year’s levels with greater reliance on the Build to Rent and grant funded affordable housing sectors.

Future housing supply scenarios

Over the next five years, we estimate that 218,000 fewer homes (15 per cent) would be built in England compared with the number of homes that would have been delivered if the pre-Covid Government target had been met by 2024-25 and Covid-19 had not disrupted the housing market.

In the upside scenario, we estimate 125,000 fewer homes will be built over five years. However, in the downside scenario, 318,000 fewer homes would built over five years.

In each case we assume that once normality has returned to the market, delivery increases towards the 300,000 homes per year pre-Covid Government target scenario. Whether this target is reached will depend on the support for private new build sales, the level of affordable housing delivery and the growth in the Build to Rent sector.

Homes for Social Rent have been primarily delivered through Section 106 planning obligations, which are strongly linked to the number of private sales, declining in a downturn. Although the introduction of the Strategic Partnerships Programme is due to deliver more affordable homes, we estimate that at least 4,600 (14 per cent) fewer homes for Social Rent would be built over the next five years relative to that under the Government target. This could be as few as 2,700, or as many as 7,900 homes under our scenarios.

Number of homes lost under each scenario compared to pre-Covid Government target scenario

For all of the scenarios we make the following assumptions:

• Construction capacity limits delivery for the next two years (for just one year in the upside scenario)
  
  
• In the baseline and upside scenarios, housebuilders have sufficient confidence in the market during the next year, as they see reservations translated into exchanges, to maintain outlet numbers by opening up new sites to replace sites that are built out completely
  
  
• New build sales are proportional to second hand sales except where there is a delay in increasing supply
  
  
• The number of affordable homes delivered through Section 106 is proportional to the number of private new build sales
  
  
• The number of affordable homes delivered through grant funding is proportional to the level of grant funding
  
  
• The timing of delivery of affordable homes through Strategic Partnerships is related to the number of new build sales
  
  
• The affordable tenure mix delivered through each mechanism is constant
  
  

Further information

Contact Savills Research