Chancellor Rachel Reeves’s spring statement revealed that there are now expected to be fewer than 1.3 million cumulative net additions to the UK housing stock over the five-year period to March 2030.
In its election-winning manifesto last year, the Labour party promised 1.5 million new homes in England over that period. But even adding in the rest of the UK (which generally builds fewer than 50,000 new homes a year) it is still set to fall short.
Reeves described the gap as “touching distance”.
The official forecast of 1.3 million new homes across the UK comes from the Office for Budget Responsibility’s latest economic and fiscal outlook.
“From a 12-year low in 2025-26, net additions to the UK housing stock are forecast to reach 305,000 a year by the end of the decade,” the OBR said. “From 2025-26 to 2029-30, we project around 1.3 million cumulative net additions to the housing stock.”
However, the OBR credits the government with stimulating what it expects to be substantial growth in house-building by revising the National Planning Policy Framework (NPPF).
“We judge that the planning reforms incorporated in the revised NPPF will increase net additions by 170,000 across the forecast period,” the OBR said. “This is equivalent to a 0.5% increase in the housing stock in 2029-30. This increased house-building over the forecast period is driven mainly by requirements for local authorities to release land to meet development needs as well as the strengthened presumption in favour of sustainable development which, if triggered, requires local authorities to release land for further development unless the adverse impacts of doing so significantly outweigh the benefits. Most of this increase takes place from 2027-28 as it takes time for developers to identify sites, local authorities to bring forward local plans, capacity constraints in the sector to be overcome, and additional houses to be built.”
While the OBR report credits the liberalising impact of planning reform, it should be noted that it appears to make light of the capacity constraints in the house-building supply chain if it assumes they will all be overcome within the next three years.
The OBR recognises that some of its assumptions may be unfounded:
“Our central forecast assumes cumulative net additions to the housing stock in the period to 2029-30 are under 1.3 million. Of this, we estimate 170,000 additions are due to the government’s residential planning reforms and these raise GDP by 0.2% at the forecast horizon. However, there are several significant uncertainties around this estimate. For instance, capacity constraints in the house-building sector could prove more binding than assumed if, for example, growing demands on a limited construction workforce hinder house-builders’ ability to deliver a rapid acceleration in the flow of new houses. Or local opposition to reforms could prevent or delay house-building by more than we have assumed, particularly given much of the additional development in the next five years is assumed to take place on current green belt land. Conversely, growing economies of scale and greater adoption of modular construction methods may enable sustained improvements in the sector’s efficiency and its capacity to build houses,” the report says.
It adds: “To illustrate the possible range of outcomes for housebuilding and potential output, we consider two alternative scenarios:
- In the low scenario, cumulative net additions are 1.2 million over the forecast period, a 0.1 million decrease relative to our central forecast. This results in a 0.1% increase to GDP in 2029-30, as a smaller increase in investment leads to less of a pickup in construction sector productivity and, as the stock of houses is smaller, so are the housing services it generates.
- In the high scenario, cumulative net additions are over 1.3 million over the forecast period, a 0.1 million increase relative to our central forecast. The symmetric impacts result in a 0.3% increase in GDP in 2029-30, primarily from the higher investment and associated increase in construction sector productivity, but also from the increased flow of services from a larger housing stock.”
