How Labour plans to solve Britain’s housing crisis

After years basking in the sun of low interest rates and supportive government policies, a perfect storm has hit Britain’s housebuilding sector.

Surging interest rates, the end of Help to Buy and strict new planning regulation mean the number of homes built in Britain is expected to slump to a five-year low of 225,000 this year, according to Savills.

The House Building Federation has warned that annual completions could soon drop below an all-time low of 120,000 if current trends continue.

Bogged down by so-called nutrient neutrality rules – which have kiboshed development across entire regions of England – and changes under the Conservative government that have made building harder, developers say reaching the targeted 300,000 homes per year is approaching the realms of fantasy.

As Rishi Sunak and Michael Gove, the Levelling Up Secretary, struggle to unite Tory MPs behind a coherent housing policy, Sir Keir Starmer and Labour have spied an opportunity to own the issue and woo families who want to get on the property ladder.

Speaking at conferences over the summer, both Starmer and Lisa Nandy, Gove’s shadow cabinet opposite, have vowed to back “the builders, not the blockers” if they win power.

“There’s nothing that reeks more of decline than the idea that this country no longer knows how to build things,” Starmer told the British Chamber of Commerce’s annual gathering in May.

Should Labour win power at the next election – and polls currently suggest the party is on course to do just that – Starmer and Nandy will need more than strong words to get Britain building again.

Labour’s policies are a mix of their own ideas and Tory ones, drawing inspiration from proposals championed by the former deputy prime ministers Lord Prescott and Lord Heseltine.

A key pillar will be a string of new and powerful “development corporations”, public-private quangos that will be responsible for driving forward house building across certain economic areas.

These are expected to combine the best aspects of the regional development agencies (RDAs) set up by Prescott in the New Labour years – since abolished – and the development corporations used by Heseltine to successfully rejuvenate dilapidated parts of London, Liverpool and Manchester in the 1980s and 90s.

Details are still being worked through but the idea would be for corporations to be created by the Government in consultation with local areas. They would be focused on long-term housing plans that go beyond a single electoral cycle to prevent them becoming political footballs.

They may also play a role in getting the biggest housing sites ready for development, for example cleaning them up, building key infrastructure and then parcelling up the land into plots that developers could buy and build homes on.

At the same time, Starmer and Nandy have said they will controversially allow more building on Green Belt land, although they insist this will only apply to “poor-quality ex-industrial land and dilapidated, neglected scrubland” that currently enjoys protection.

Industry figures who have met with Nandy’s team say Labour is most interested in changes that can be implemented quickly and have the biggest impact on housing numbers.

Much of this will simply involve unpicking changes made or promised by Gove, including his vow to release councils from the obligation of meeting national housing targets. That change has been blamed for prompting at least 50 local authorities to effectively shelve work on plans to set aside land for housing.

On nutrient neutrality, Labour has little to say yet but insists it is determined to “unblock” development if the Government cannot resolve the issue in the next year.

“Our impression is that it is all about evolution, not revolution,” says one senior industry source who has met with Labour officials multiple times.

A Labour source adds: “In the last 13 years we’ve had three major overhauls of the planning system and where’s it got us? We’re stuck in an acute housing crisis.

“So we’re going to be pragmatic. There’s no solution to the housing crisis or our wider economic crisis that doesn’t involve building more homes, so we’re focused on bold but deliverable reforms that can get Britain building as soon as possible.”

One source at a FTSE 100 developer says this position would be widely supported by builders – and one that could certainly help to boost private sector house building back to levels reached under the Cameron and May governments.

“We would rather they just bring in a revised [planning regime] that is more along the lines of the Coalition era, which was not actually that different to the current one,” the source explains.

“Going back to that would also not be that difficult, whereas wholesale reform takes time and creates delay.”

There is widespread anger at policies proposed and implemented under Gove, who is seen as a hostile figure by most of the house building industry.

In December last year, Gove sent shockwaves through the housing industry when he caved to a rebellion of Tory backbenchers who were demanding that councils be granted exemptions from local house building targets.

Although the changes have yet to be implemented – and have since been delayed until at least this autumn – the uncertainty has prompted 58 local authorities to delay their house building plans, including Gove’s own constituency Surrey Heath, according to the Home Builders Federation.

Tory by-election campaign leaflets criticising the Government’s own 300,000 home target, and comments from Rishi Sunak that councils should not be forced to build, have rung further alarm bells within industry.

Natural England, the environmental watchdog, has meanwhile been accused of stalling home construction, holding up around 145,000 homes with demands that new developments be “nutrient neutral”.

Whether Labour can get to grips with these knotty issues quickly will determine how successful Starmer is in hitting his target of 70pc home ownership.

Yet as ever, his party’s preference for state-led solutions may end up causing unexpected problems.

The source at a major developer points out that adding new regional development corporations into the mix may ultimately hinder, rather than help the drive to build.

“I can see the appeal, but a potential problem is going to be that you are just adding yet another layer of bureaucracy where failures can happen.”