The ramifications of the 2024 general election have prompted dialogue among investors, potential homebuyers, and financial analysts of the future of the UK housing market, given the seismic realignment in UK politics with the Labour Party achieving a 174-seat majority and ending 14 years of Conservative rule. Chief among the topics discussed during the campaign season was housing, a source of tension among parties competing for electoral support over which policies would produce the best conditions for market stability and growth.
Now that Labour is in power with a strong public mandate, it is important to unpack the policies that will guide the housing market over the next parliamentary term. In doing so, it will illuminate the key policy areas that the incumbent government is committed to enact.
Housing Development
Central to Labour’s plan is the commitment to build 1.5 million new homes within the next five years, aiming for 300,000 newly built homes per year. If this target is met, this will deliver 50 per cent more housing than the previous government achieved during the same time frame, albeit falling short of the 340,000 new homes per year that Heriot-Watt University estimated is required in order to meet present supply demand.
Evoking the spirit of Clement Attlee government’s vast housing programme between 1945 and 1951, Labour has pledged in their manifesto that they ‘will deliver the biggest increase in social and affordable housebuilding in a generation.’ Such a bold, assertive pledge sets the tone for the Labour Party’s ambitious housing agenda. Already plans are in motion to construct new towns, extend urban development, and expand regeneration efforts.
A primary example is the recently announced new town project for Northstowe in order to construct 3,000 new homes, along with up to 50,000 square metres of commercial floor space for community amenities, retail, and work areas. Tim Wray, Keepmoat Group Development Director, describes this opportunity as an ‘incredibly exciting time’, adding that ‘we know this collaboration will deliver transformational change at Northstowe, building on the significant infrastructure Homes England has delivered to date.’
Development Strategy
In order to achieve these projections in a timely manner, Prime Minister Kier Starmer has articulated the precept that his government will be ‘builders, not blockers.’ This principle is reflected in the most recent parliamentary speech delivered by King Charles to ‘get Britain building through major planning reform as they seek to accelerate delivery of high-quality infrastructure and housing.’
The first area this will be achieved is streamlining the planning process, making it less burdensome to receive planning approval for construction projects. The recently announced Planning and Infrastructure Bill is intended to ‘turbocharge [the] building of houses and infrastructure’ by reducing bureaucratic obstacles. Neil Jefferson, Chief Executive of the Home Builders Federation, argues that ‘planning has been the biggest constraint on housebuilding in recent years and the measures proposed will address the main areas of concern by bringing more land forward for development more quickly.’
The second aspect of the Labour strategy is to use land for construction more effectively. In addition to developing housing on brownfield land and setting council housing quotas, the government has created a new band called the ‘grey belt’ – areas considered poor-quality land within green belt designations that could be used for housing and infrastructure development. According to Knight Frank, freeing up this additional land for construction could be used to build up to 200,000 more homes. This would play an important role in meeting the government targets for housing construction.
Property Acquisition Incentives
Driving these policies is the objective to stabilise the housing market, as it will set the conditions conducive towards increased investment and greater consumer activity. Increasing supply forms the central plank upon which Labour seeks to enhance market stability, yet the government has also other complementary policies to tackle affordability and opportunity.
In keeping with Starmer’s pledge to ‘create wealth for people up and down the country’, the government has committed to reducing mortgage rates. Barclays and Halifax have already started lowering mortgage rates in the run-up to the long-awaited reduction of interest rates of 5.25 per cent by the end of summer.
Alongside these broader economic developments is the pledge to help first-time buyers by introducing the Freedom to Buy, a mortgage guarantee scheme to help buyers with smaller deposits acquire property. Further to this scheme is the commitment to support up to 80,000 young British nationals to get on the housing ladder within five years. David Sturrock, Senior Research Economist at the Institute for Fiscal Studies, observes that ‘[those] who are looking to buy outside of London and the south east are more likely to be able to take advantage of this scheme.’
The Main Takeaways
What ties these policies together is the motivation to increase property supply, stabilise housing prices, and open up more opportunities for landlords and homebuyers to obtain property. These will be the parameters in which Labour will proceed with their housing agenda.
It remains to be seen whether Labour will hit their targets and, if so, how effective they will be in addressing the aforementioned objectives. Yet these policies on the whole offer a positive sign of Labour’s commitment to focus on housing as a key policy area during their parliamentary term.
