Breaking the Deadlock, The Future of UK Housebuilding

The latest housing pipeline report form the House Builders Federation (HBF) using data from Glenigan, highlights a major drop in planning approvals for new homes. In 2024, approvals hit their lowest level in ten years, raising concerns whether the UK can meet its housing target and tackle the affordability crisis.

A System Stuck in Place, The Planning Problem

Only 242,610 new homes received planning permission in 2024, a 26% drop from the peak in 2019. This means 85,000 fewer homes are being approved each year. Even worse, the number of approved building sites has fallen to 9,776, the lowest since records began in 2006. To meet the government's goal of 370,000 homes per year, planning approvals need to increase by 53%.

The decline isn't just due to slow decision-making. A mix of problems, including underfunded local planning offices, outdated regulations, and rising costs for developers has created a major bottleneck. While the government is trying to improve the system, fixing these deep-rooted issues will take more than small policy changes.

Falling Demand, A Crisis in Affordability

Homebuilders can’t build if people can’t buy. With mortgages harder to access, especially for first-time buyers, demand for new homes has dropped. For the first time in 60 years, there’s no government-backed scheme to help people get on the property ladder. This has made it harder for small and medium-sized developers to stay in business, further limiting the number of new homes being built.

Building Costs, Taxes and Market Challenges 

Building homes has become more expensive due to increasing taxes and levies. The upcoming Building Safety Levy, expected to cost between £3,000 and £5,000 per home, along with other environmental and affordability-related costs, is making development less viable. These financial pressures hit smaller builders the hardest, reducing competition and slowing down supply.

At the same time, housing associations are struggling to take on new developments. This has created a backlog, stalled private projects and worsened the affordable housing crisis.

Local Planning Delays, A System Under Strain

Local Planning Authorities (LPAs) are facing staff shortages and budget cuts, leading to long delays. In some cases, it takes years for projects to move from approval to construction. These delays add extra costs and uncertainty, discouraging investment. Another issue is the ongoing nutrient neutrality regulation, which has frozen construction in 74 local areas, blocking 160,000 homes, despite new builds having minimal environmental impact.

Signs of Change, Positive Shifts in the Market

Despite these issues, there are some signs of progress. In late 2024, planning approvals for new homes increased by 15%, hinting at a possible rebound. However, other indicators, such as declining planning consents and reduced brick production, suggest that a full recovery is still far off.

The government’s updates to the National Planning Policy Framework (NPPF) and its efforts to push slow developers to build faster are steps in the right direction. But unless broader issues like financing, planning reform, and market confidence are addressed, these changes may not be enough to solve the housing deadlock.

While affordability challenges remain a concern, there are encouraging signs for homebuyers, with the proposed changes to lender loan-to-income (LTI) caps.

One of the biggest positives is the growing number of lenders offering 95% LTV mortgages on new builds. There are now circa 27 lenders in this space, with that number soon increasing to 28… For those looking to buy flats, options are also expanding, currently 9 lenders offer 95% LTV on new-build flats, which is soon to be 10…

This is a major boost for first-time buyers and those struggling with deposit constraints, as it means more choice, increased competition, and better access to homeownership. With developers also looking to restart stalled projects, this could help unlock more housing supply, further improving opportunities for buyers.

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