The new Labour government has launched an ambitious narrative focused on addressing the housing crisis through significant investment in social housing.
Central to this strategy is the commitment to build 1.5 million new homes over the next five years. This target – reminiscent of post-war housing initiatives – aligns with the previous government’s objectives. But what does Labour plan to do in order to achieve this goal?
In this article, we’ll review Labour’s proposals and examine the vital question – how will this all be funded?
Labour’s Housing Policy: What We Know So Far
Here are several proposed changes the government has announced.
An Overhaul of the Planning System
A key aspect of Labour’s housing policy involves revising planning regulations to facilitate construction. Here are several anticipated changes:
- Mandatory housebuilding targets: These targets will be reinstated for all councils in England.
- Review of green belt land: Councils will need to assess their green belt land to identify and prioritise grey belt areas. Grey belt land has been defined as areas that do not contribute to the green belt. They include areas on the periphery of existing settlements, and previously developed sites such as old petrol stations and car parks. Housing developers may also be able to propose developments on areas they believe to be grey belt.
- Golden rules: Land released from the green belt will be subject to the government’s ‘golden rules,’ which mandate that 50% of new developments must be affordable homes. These developments must also enhance access to green spaces and ensure the necessary infrastructure, such as schools and healthcare facilities, is in place.
- Brownfield development priority: The default response to proposals for brownfield development will be “yes”.
- Local housing plans: A new system will ensure that every area has a local housing plan, which will provide a framework for sustainable development.
- Proportional development: The new method for calculating targets will ensure that housing developments are proportionate to the size of existing communities, promoting balanced growth.
- Increased urban density: The policy will promote building at greater densities in urban centres to maximise land use efficiency.
- Streamlining planning: Changes will be made to the work of planning committees to make it more streamlined. They will also have to give priority to large-scale projects, with officials being responsible for smaller ones.
In addition to these proposed changes, Rachel Reeves has said that several large planning applications for Worcestershire Parkway, Liverpool, Cambridgeshire and Sutton Coldfield will be fast-tracked. Therea are also plans to hire 300 new planning officers.
The New Towns Taskforce
The government is also establishing a New Towns Taskforce which will be led by Sir Michael Lyons. The idea is to create new communities with at least 10,000 homes in each, with some being ‘significantly larger’. Their locations are to be established within the first 12 months.
The so-called New Towns Code will set out rules for developers to meet. These include ensuring the towns are “well-connected, well-designed, sustainable, and attractive, with all the required infrastructure and public services. Affordable housing will make up 40% of the new homes, and there will be a focus on ‘genuinely affordable’ social rented homes.
As well as establishing new towns, the taskforce will work on some urban extension and regeneration projects.
Reforming Right to Buy
Labour is also considering changes to the Right to Buy scheme. Andy Burnham has expressed concernsthat continuing to allow Right to Buy while building new council homes is akin to “filling a bath with the plug out.”
Proposed changes include a reassessment of the scale of discounts offered to buyers under the scheme. Also, potential changes to the planning and infrastructure bill could limit eligibility.
Challenges and Criticisms
From funding to labour shortages, here are several challenges that need to be overcome in order for Labour to meet its housing development targets.
Funding
Significant public funding will be crucial for building new housing at the proposed scale. However, council budgets continue to wear thin and new build projects are already being delayed and cancelled due to financial pressures and uncertainty.
There has been an unprecedented number of Section 114 notices in recent years. These notices indicate that upcoming spending will be unlawful under the Local Government Finance Act 1988. The main reason for expenses to be unlawful is if they exceed the Local Authority’s income for the financial year.
After a Section 114 notice is issued, the situation is usually remedied through spending cuts, budget reallocation, council tax increases, or intervention from central government. Previously, one in five council leaders said they may need to issue them by 2025.
Rental income is 15% lower than in 2015, in real terms. The number of new homes that Housing Associations in England have started has dropped by 30% and is expected to further decrease this year. What’s more, only 7,179 homes for social rent were started in 2022-2023.
In a letter to Angela Rayner, the National Housing Federation (NHF), the Chartered Institute of Housing (CIH), and the Local Government Association (LGA) urged for underfunding to be addressed.
The NHF also released the Social Housing Renewal Plan, which details its demands from the new government. This includes the request for the Affordable Homes Programme (AHP) be extended for five years at £4.6 billion per year, and for the Social Housing Decarbonisation Fund to be extended and receive further funding. They also requested that £1.6 billion per year be allocated for supported housing.
How Does Labour Plan to Fund Housebuilding?
Starmer has said that the autumn budget will be ‘painful’ and that those with the ‘broadest shoulders should bear the heavier burden’.
Among Labour’s proposed changes include removing winter fuel payments for 10 million pensioners that are not on pension credit, and scrapping a planned cap on social care payments. They have also not ruled out raising capital gains tax, inheritance tax, and fuel duty.
Other plans include:
- Increasing Stamp Duty: Labour intends to increase Stamp Duty from 2% to 3% for non-residents purchasing property in the UK. This revenue would fund the 300 new planning officers.
- Planning application costs: There is a suggestion to double the cost of planning applications for householders, which could impact local authority budgets.
- Flexibility in the AHP: The government plans to introduce more flexibility in the Programme, although specifics are yet to be detailed.
Council Tax Reforms
It’s been suggested that council tax reforms are necessary. Wealthier individuals pay proportionately less council tax while poorer councils raise less as a result of residents qualifying for reductions.
As such, it’s been suggested that council tax bands be reviewed so that wealthier homeowners start contributing amounts that better align with their property values.
Another proposed option is to get rid of council tax exemptions for empty and second homes.
Will the Rent Formula Change?
Labour’s Rachel Reeves has proposed to maintain the current rent formula which allows for rent increases based on the Consumer Price Index plus an additional 1%.
Critics, including Martin Wicks from the Labour Campaign for Council Housing, argue that this formula should be abandoned to prevent above-inflation rent increases.
These increases would be difficult for council tenants that are not on housing benefit or whose housing benefit only partially covers their rent, and would drive up the housing benefit bill. The amount that would be raised wouldn’t make much of an impact either, in the grand scheme of things.
Maintenance Needs
An estimated £12 billion is required for the maintenance of existing homes to keep them in line with the Decent Homes Standard, according to 20 councils in the “Securing the Future of Council Housing” report.
The report warns that if nothing is done about this soon, most RPs will be unable to maintain their homes adequately. They will also see greater demands to improve them due to their deteriorating condition – which will, of course, come at a higher cost. Building new homes will not be feasible if this situation is not remedied.
Defining Grey Belt Land
There are concerns about the definition of ‘grey belt’ land. Critics argue that it should be limited to nationally strategic sites to prevent unchecked urban sprawl.
SME Exclusion
SME housebuilders, which each typically deliver up to 250 homes a year and train the majority of construction apprentices, have not been mentioned in the plans.
Workforce Shortages
A critical issue not adequately addressed is the shortage of skilled labour. The average annual number of completed homes over the last eight years was only 161,475, despite planning permission being approved for 301,000 homes per year.
Yes, the planning system has been a significant cause of delays, but there is no denying the impact of worker shortages. The UK needs an additional 251,000 workers by 2028 to meet current housing demands (while other estimates significantly exceed this figure).
Conclusion
The government’s ambitious housing strategy aims to tackle the pressing housing crisis through significant policy reforms. While the proposals for mandatory housebuilding targets, planning system overhauls, and a focus on affordable housing are promising, the success of these initiatives will depend on effective funding and addressing workforce shortages.
The ongoing consultation period (which ends on the 24th of September) and upcoming spending review and will be critical in determining whether this housing revolution can become a reality.
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