To achieve this the new government will need to use national planning policy and ministerial decision-making to provide a supportive planning environment for unallocated smaller sites. It should also immediately require local planning authorities to proactively grant consent for large numbers of smaller sites across the country.

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This is our second annual report on land supply and sales outlets. It shows that the number of sites gaining planning consent has fallen to its lowest level for at least 15 years, while the number of outlets operated by the major housebuilders has remained close to a 20 year low.

The need for more outlets is accentuated by weaker housing market conditions. As predicted in our previous report, A New Normal for Housebuilding, housebuilder sales rates have remained between 0.5 and 0.6 sales per outlet per week since mid-2022, down from an average of around 0.7 over the previous seven years, supported by Help to Buy.

We expect sales rates to stabilise around 0.6 when interest rates fall and housing market conditions improve. Sales rates above this level are likely to need demand support or bulk sales to Build to Rent investors and affordable housing providers.

Local planning authorities need to recognise the change in market conditions. Housebuilders would like to open more outlets to compensate for lower sales rates and maintain total delivery volumes. But the lack of available sites means that the number of sales outlets remains close to a 20 year low.

The number of new homes gaining planning consent has fallen by one third over the last three years. Hidden within this is the collapse in the number of smaller sites gaining planning consent, with the number of homes consented increasingly focussed on larger sites. This is a clear threat to housing delivery over the next few years.

We need to quickly reverse the decline in smaller sites gaining planning consent. It is a major barrier to growth for housebuilders of all types, but especially for SMEs and new entrants. Smaller sites are less complex and less expensive to deliver. They reach completion quicker, releasing capital for new investment at a faster rate than larger sites.

Over the longer term, changes to the NPPF are needed to ensure the planning system consistently and proactively delivers a diverse profile of consents, for the right number and range of sites as well as the right number of plots. A wider variety of sites, especially smaller sites, would increase overall delivery and cater for a range of developer types, supporting SME housebuilders and new entrants.

Implementing these recommendations will be critical if Labour’s pledge to deliver 1.5 million homes within five years is to be achieved. The announcement of new towns is welcome and will lay a strong foundation for housing supply in the 2030s. But to deliver substantially more homes in the 2020s, a radical increase in the number of smaller sites will be required very early in the next parliament.

Solving the land supply challenge is also essential before any demand-side support could be implemented. Buyer support without a sharp increase in land supply would simply increase sales rates from existing sites and outlets. 

Alongside this, local planning authorities need to adapt to the severely reduced demand for Section 106 affordable homes. A scarcity of buyers has been driven by heightened financial pressure on Housing Associations. Restoring the financial capacity of the Housing Association sector should be a priority for the new Government. More openness to appropriate Section 106 cascade mechanisms would also help to ensure this issue does not have a prolonged impact on wider housebuilding activity.  

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