Planning consents fall below 300k government target

Full consent was granted for 292,000 new homes in the year to Q2 2022, according to figures from Glenigan and HBF. That marks the first time since 2016 (not counting the depths of the pandemic in mid-2020) that the number of homes gaining planning consent over a twelve month period has fallen below the government target of 300,000 new homes per annum. This is critical as more than 300,000 consents are needed per year to ensure the delivery target is hit, due to attrition during development.

Pipeline of new homes holds steady

A fall in planning consents will not be immediately felt, however. For now, the number of homes being started on site remains largely stable, with starts edging higher than completions for the first time since 2018.

The most recent data on housing delivery tells a similar story, with annualised completions steady at 243,000 homes in the year to Q2 2022, according to Energy Performance Certificate (EPC) data. That’s almost exactly in line with average delivery since 2018, which (excluding the three quarters most affected by the pandemic) was 245,000. 

Help to Buy enters final phase

Buyers now have until October 31st 2022 to register a property before the Help to Buy (HtB) scheme closes for good in March 2023. Eligibility changes and regional value caps introduced in April 2021 has seen loan issuance fall: the number of loans in Q4 2021 was nearly 30% lower than the 2017-19 average, according to the most recent DLUHC data. But the scheme still supported nearly 9,000 sales in Q4 2022, while in London, where restrictions had a smaller impact, uptake remained strong. Loans issued for London homes made up a record 16% of all HtB loans in 2021.

Regional markets drive BtR growth

What will replace Help to Buy in supporting the supply of new homes remains an open question. One option for plugging the gap is Build to Rent (BtR). The sector continues to grow off the back of regional development: starts outside of London are 113% greater than in the capital. An expanding pipeline and strong investor interest will likely drive further growth in the sector.

South East delivery under threat

The supply of new homes in the South East looks set to contract considerably. Completions are already down compared to last year and the number of homes gaining planning consent is even lower. The South East is home to highest number of local authorities affected by recently-introduced nutrient neutrality rules, which limit sites available for development and thus block housing delivery.

Looking across England, were the Housing Delivery Test run for the three years to Q2 2022, we would expect 66% of local authorities to pass, down 1% from last quarter. 64 local authorities – over a fifth – would face the toughest planning sanction: presumption in favour.

Figure 1 Where is delivery meeting targets?

243,200 new homes were built in the year to Q2 2022, according to Energy Performance Certificate (EPC) data, the first increase in annualised delivery for three quarters. New home completions are now 4% behind their recent post-Covid peak last June. 

Around 290,000 new homes gained full consent in the year to Q2 2022, per figures from HBF and Glenigan. That marked the fourth consecutive quarter of falling consents, with consented homes now estimated to have fallen below the Government target of 300,000 new homes a year.  

The supply of new homes remains largely stable, with slightly more homes being started than completed, according to DLUHC figures. On an annualised basis starts and completions declined very slightly in Q1 2022, by 1% and 2% respectively. Completions are now below the level of starts for the first time since Q4 2018, though both remain high compared to historical trends.

Early data from Glenigan shows starts holding up into Q2 2022. The falling number of homes gaining planning consent, as well as build cost inflation and economic uncertainty, may see starts fall back later in the year, however. 

Annualised housing delivery showed improvement in the year to Q2 2022. The number of regions meeting their housing need targets rose to four, one more than last quarter. 

In the South East, however, housing completions are seeing a dramatic fall. Delivery is already down on a year-on-year basis, with even fewer homes gaining consent. As a result the South East may see up to 20% fewer new homes being completed compared to 2019/20. The West Midlands also faces the same problem, though to a much lesser extent. On the other hand, London has seen recent consented homes come closer to housing need than present delivery. 

Issuance of Help to Buy (HTB) loans fell by 22% in the year to Q4 2021, with 42,463 loans being taken out. This comes after two quarters with new restrictions such as regional value caps. Quarterly data, however, recorded a 22% rise between Q3 and Q4, suggesting the impact of these changes was quickly absorbed by the market. In London (where value caps did not change) loan issuance fell less than England overall, and the share of loans issued for London homes reached an all-time high of 16%. 

Buyers have until October 31st 2022 to register a property before the scheme closes for good in March 2023, which means loan issuance will likely remain steady before a sudden rush to meet the deadline. 

The Build to Rent (BtR) sector saw annualised starts and completions diverge in Q2 2022, with starts largely stable while completions continued to fall. 

Regional (i.e non-London) BtR has become the dominant segment of the sector over recent quarters. On an annualised basis, regional BtR homes accounted for half of all completions and 71% of starts since 2021. In the year to Q2 2022, regional starts were 113% higher than in London, suggesting the share of the sector made up by regional schemes will continue to grow strongly. 

Delivery of affordable homes fell by 15% in 2020/21 but is set to recover strongly in 2021/22, according to the latest leading indicators. 

Social rented homes are expected to see the strongest recovery, with 56% more homes set to be delivered than in 2020/21 and the highest overall number of completions since 2014-15, according to NHF data. 

Affordable rent and affordable home ownership will see more modest upswings, with delivery likely to rise by around 12% and 13% respectively compared to 2020/21.