New Homes Week: the benefits and barriers to building more new homes

This week is New Homes Week – an annual celebration of new build homes delivered by the Homes Builders Federation (HBF). This year, the chosen theme of the week is ‘community’ – but as ever, it’s the economy that will dominate discussions of the state of UK housebuilding in early 2025.

We’ve written before about the need for the government to kick-start the construction sector by pumping in funding and creating the conditions for investment. And it was certainly a starting point to see infrastructure investment feature so heavily in the Chancellor’s recent announcements: historically, infrastructure has been a significant driver of growth for the construction industry.

But housebuilding is the bread and butter of the construction sector, whether it’s city centre apartments, family homes, or social housing, and the HBF’s own reports set this out plainly.

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Understanding the benefits

First, some good news: recent reports from experts including Rightmove and property company Hamptons show that there is cause for ‘cautious optimism’ within the UK housing market, partially driven by mortgage rates falling and making house buying more accessible for more people. To state the obvious, an abundance of house buyers drives housebuilding as developers gain confidence that the market exists for their product. This, in turn, kickstarts the government’s target of building 1.5 million new homes within five years.

And it’s not just good news for buyers: building new homes also drives economic growth, as the HBF’s own figures demonstrate. A report titled ‘The Economic Footprint of Home Building in England And Wales’, released in October 2024, shows that in 2023, housebuilding generated more than ￡53 billion in Economic Output, and supported nearly 834,000 jobs. The report predicts that – should the Labour government achieve its goal of building 1.5 million news homes in five years – this would add a further ￡100 billion in economic output across the term of its parliament, and generate an additional 350,000 jobs.

It looks like a no-brainer: so where are the new houses?

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What is holding UK housebuilding back?

Again, the HBF has identified a major stumbling block to the progress of new builds: delays to planning permissions. Shockingly, a recent survey of smaller housebuilders showed that over half of SME developers are waiting more than six months for planning application approvals – a major issue when the government is wanting to build more, and demand for homes may rise as interest rates begin to stabilise and fall.

Estimates show that Local Planning Authorities (LPAs) are understaffed across England and Wales, with the HBF’s own survey revealing that 80 per cent of LPAs are undercapacity, which accounts for the shortfall in planning approvals. The government has already promised to slash red tape and recruit more planning consultants, and the sooner this happens, the better.

New social housing provision is also facing its own slow-down, this time caused by a lack of bids for affordable homes from Registered Providers. The HBF revealed in December that at least 139 sites are delayed due to uncontracted section 106 units. This disproportionately affects smaller builders again, as they are often unable to progress with a development without the funds provided from a Housing Association successfully bidding for section 106 affordable homes on that site.

Equally, for larger providers, planning permissions often require for affordable homes to be delivered by a specified trigger point within the wider development timeframe – meaning that the rest of the homes cannot progress without a Register Provider on board.

The industry needs government support and funds to clear these barriers and get British housebuilding firmly back on track in 2025.