House building set to slump in England, warns trade body

The house building industry has warned that the number of new properties completed each year in England could slump to its lowest level since the second world war due to a “perfect storm” of government policies and higher mortgage rates.

The Home Builders Federation estimates that changes by ministers to England’s planning framework and the impact of government environmental rules could result in annual supply falling from 233,000 new properties in 2021-22 to just 111,000 later this decade.

That would be the lowest level in more than 80 years. Stewart Baseley, executive chair of the Home Builders Federation, said the government’s “capitulation” to the “not in my back yard lobby”, and its mishandling of environmental policies, could unleash a plunge in house building and threaten hundreds of thousands of jobs.

Baseley said “short-term political decisions to appease” backbench Conservative MPs concerned about development were threatening confidence in the housing market just as Britain headed into a likely recession with tighter mortgage availability.

Higher interest rates have pushed up the cost of mortgages, and lenders increased the price of their products further last year after the disastrous “mini” Budget of the then prime minister Liz Truss.

Since then, the cost of some fixed term mortgages has fallen, but they are still more expensive than before the Bank of England began raising interest rates to curb inflation.

Housing secretary Michael Gove last year watered down the government’s target to build 300,000 homes each year in England in order to head off a rebellion by Tory MPs worried about construction in their constituencies.

In December Gove wrote to MPs saying the goal, despite having been in the Conservative party’s 2019 general election manifesto, would only be “advisory” rather than a firm target.

At the same time the government also launched a review of the national planning policy framework for England.

Gove announced councils would no longer have to plan for a “buffer” of 20 per cent more new homes than they needed, and said they could reduce the amount of land they were required to identify for house building.

Local authorities had previously been ordered by ministers to draw up “local plans” with specific house building targets.

But research by the Home Builders Federation and the Land Promoters and Developers Federation has found 47 councils have postponed that process amid recent policy uncertainty.

The council in Gove’s Surrey Heath constituency is the latest local authority to delay its local house building plan.

Surrey Heath borough council had been aiming to produce a draft of its plan by February, but it said on its website it was rethinking the announcement as a result of the changes to the national planning policy framework.

In research for the Home Builders Federation, planning consultancy Lichfields predicted the changes to the framework could reduce supply by 77,000 properties a year in the near term.

The research also concluded government environmental rules to guard against pollution of rivers and waterways could further cut supply by 41,000 homes a year.

Guidance on so-called nutrient neutrality from Natural England, a government agency, requires scores of councils to limit the pollution caused by residential developments by restricting house building.

Construction could also be stymied by Natural England’s limits on new housing in “recreational impact zones” near national parks.

The Department for Levelling Up, Housing and Communities said it “did not accept” the Home Builders Federation’s analysis, adding it was committed to delivering 300,000 new homes each year.

“The proposed changes to the planning system are designed to support areas to get more local plans in place and therefore deliver more housing,” it said.