Seven graphs to explain Labour's housing inheritance
It is just days after Labour’s landslide win, but it has made bold pledges to boost housebuilding from the get-go.
3 minutes to read
So, what does the UK’s current residential development landscape look like?
In this Knight Frank analysis, we look at seven graphs that show how the sector is performing and some of the challenges Labour faces in its mission to ‘get Britain building again’ from increased planning timescales to elevated build costs.
1. Land availability is limited
Our latest survey of over 50 volume and SME housebuilders and developers, who collectively build over 70,000 homes per year across England, paints a picture of tight land supply. Only 11% said that land supply was ‘adequate’ in the second quarter of 2024, with nearly 90% saying it was either limited or very limited. Currently, only 1.3% of all land in England is occupied by residential development, with over 60% being used for agricultural purposes, official data shows.
2. Build costs are still rising
Build cost hikes have slowed, but are still rising, according to the BCIS. Materials costs jumped nearly 20% in 2022. Data from the ONS points to even faster rates of inflation during this period for individual building materials, particularly those that are energy-intensive, or in high demand. Last year, build cost hikes eased off but they are expected to continue growing, albeit at a much slower pace, all the way out to 2027, largely driven by labour cost increases.
3. Planning takes longer
The number of major decisions decided within a 13-week timeframe continues to hover at around 20%, down from over 50% 10 years ago.
4. It’s too expensive
The ratio of house price to earnings remains historically elevated in England. Full-time employees can expect to spend, on average, over eight times their earnings on purchasing a home. At the same time, it is also more expensive to borrow, with the Bank of England holding the base rate for now at 5.25%. GDP growth under the Conservatives has also been slower at 20% during 2010 up to 2023, versus Labour’s 30% between 1997 and 2010.
5. Permissions have collapsed
Planning permissions for new homes across England dropped to their lowest level for almost a decade over the 12 months to Q1, according to the latest figures from the Home Builders Federation. Just 236,644 units were granted consent, far below what will be needed to meet Labour’s annual target of 300,000 homes, especially given a portion of these consents will never be built out.
6. Overall delivery is below target
In total, 234,397 net additional dwellings were added to England’s housing stock in the year to March 2023, well below the 300,000 annual target and under the pre-Covid peak of 249,000.
The proportion of affordable housing has picked up slightly since 2015 but still represents only a quarter of total delivery. While Homes England’s latest figures show completions are stable on year, it only has two more years of the April 2021-2026 programme. At current delivery levels, it is on course to deliver about 122,000 homes across the programme – the original target was 180,000.
7. Developers have retreated
The number of planning applications in England is at an all-time low. On a positive note, the graph shows that 'application approvals' at 88% is at its highest rate since 2012. For residential developers, it could be an opportune moment to drive new applications forward whilst application volumes remain low but approval rates are high.