Bye-bye, Help to Buy

One reason could be that housebuilders were preparing for a drop in demand as the Government introduced tighter restrictions on the Help to Buy (HtB) scheme in April 2021. Through 2019, Savills land agency colleagues reported growing demand for smaller sites that could be completed before the HtB restrictions came into place. With the scheme due to end entirely in 2023, housebuilders may be more hesitant to commit to larger sites.

Another reason for falling starts may be that we don’t have enough land with planning permission in the right places. Our analysis shows the average planning permission is getting bigger, which means sites gaining consent now will take longer to deliver. It also shows permissions are skewed to areas with lower housing demand, with land availability stubbornly low in the markets where affordability pressures are greatest. 

The withdrawal of government support and the challenge of building out homes on larger sites mean we expect affordable housing and BtR to make up a greater share of housing delivery over the next five years.

Diversity of tenure

The 2021-26 Affordable Homes Programme commits £12 billion in funding to deliver 180,000 homes over the next five years. We also have growing demand from investors through for-profit social housing providers, greater development capacity from local authorities, and commitment from housing associations to keep investing in new homes.

While we expect fewer affordable homes from developer contributions over the next five years, we still expect an average of 60,000 new affordable homes to complete each year until 2026.

We also expect large institutional investors to back the delivery of more homes for private rent. The number of homes built specifically for the private rental market doubled between 2016/17 and 2019/20, from around 7,000 to 14,000 completions. With rising investor demand for homes in suburban and town locations, we believe delivery could more than double again to 30,000 annual BtR completions by 2025/26.

Reaching new heights?

Developers are also facing the possibility of significant shifts in housebuilding policy. In recent years, the Government has given the housebuilding industry a clear target of building 300,000 homes a year, and focused interventions on ensuring that the planning system is responding to the market to deliver into high-demand areas. Housing affordability has been used as a key indicator for places that need higher volumes of new homes.

However, the appointment of Michael Gove as Secretary of State for Levelling Up, Housing and Communities appears to be signalling a shift in government thinking. At the Conservative Party Conference, Gove mentioned that “focus [for housebuilding] shouldn’t necessarily be geographically where it’s been before”, instead focusing on the Midlands and North of England as part of the wider levelling-up agenda.

While the Government so far remains committed to the 300,000 homes target, it is unclear how this level of development can be achieved if planning policy is not aligned with market signals.