Construction of 232,820 additional homes in the year to March 2022 suggests a welcome return to nearly pre-pandemic delivery rates. But falling consents, rising build costs, and a challenging year ahead for the residential market could quell any promise of future growth.

Policy-makers would benefit from taking these future headwinds into consideration, and questions over the future of top-down housing targets should be discussed in the context of continued affordability issues which leave the national housing market out of reach for a large share of households.

Growth, growth, growth?

There were 232,820 net additions to dwelling stock in the 12 months to March 2022, equating to an increase of 10 per cent on the previous year. Conversions and change of use continued to contribute to delivery figures, but new build completions remain the core driver of delivery, accounting for 90 per cent of all net additions.

Over the same period, the number of homes gaining full planning consent has fallen by -3 per cent, continuing a trend of gradual decline since the end of 2017. Structural issues with the current planning system, local authority resourcing, and environmental conditions are making it increasingly harder for consents to make their way through the pipeline. At the same time, a lack of clarity around government policy has meant that Local Plans across the country are being put on hold or withdrawn entirely.

Fewer consents will mean less potential to deliver new homes in the coming years. The challenging economic outlook, and the expectation of house prices falling next year, will present further challenges for new build delivery. Against this context, it is imperative that the Government maintains a target of 300,000 homes per annum to motivate new build delivery.

Figure 1 – Net additional dwellings, England

Is the answer affordable?

Of the 210,070 new build completions in the year to March 2022, 28 per cent were affordable. This continues a steady growth in the share of new build completions delivered as affordable homes since 2016. Despite steady growth, the rate of affordable delivery is significantly below levels seen in the years following the Global Financial Crisis (GFC).

With private new home delivery facing challenges and headwinds over the coming years, could affordable housing be the solution to maintaining consistent levels of supply? Research published by the G15 and Savills Research shows that this is a possibility, with the potential for affordable new home building to reach 60,000 homes per year.

However, housing associations face the same challenges as private developers, and increasing build costs, rising inflation, higher borrowing costs, and the need for greater investment into new homes will all drag on capacity for affordable delivery. Long-term grant funding from central government will be key to reaching rates of delivery comparable to those 10 years prior.

Figure 2 – New build completions, England

Mixed results from a test lacking teeth

Over two thirds of local authorities have passed the 2022 Housing Delivery Test, meeting at least 95 per cent of their housing need in the three years to March 2022. More than one in five local authorities failed to deliver at least 75 per cent of housing need over the same period, and will face presumption of sustainable development.

The winners and losers of the Housing Delivery Test remain similar each year, with the least affordable local authorities in areas with heavy land constraints consistently performing worse than the rest of the market. This suggests that the test is working as it should, targeting those areas most at need of attention.

However, the continued presence of these areas towards the lower end of test scores suggests that the sanctions of the test are not delivering their intended outcome. Of the 66 local authorities facing the presumption in favour, 43 (65 per cent) were in the same position last year, and 34 (52 per cent) have been in the position since 2019. The Housing Delivery Test didn’t promise overnight changes, but with four years of the test already past, it may be worth considering how long changes will take.

Figure 3 – Housing delivery test results

Further information

Contact Hamish Simmie