2023: The economy and housebuilding
The Chancellor’s Autumn Statement offered some comfort for the year ahead. There was little in it for the housing sector specifically but it set out a plan for managing the economic and cost of living challenges that we will all face in 2023 and reaffirmed a commitment to planned infrastructure spending which should support growth.
It’s too simplistic to blame one single factor for the economic challenges we face now and into 2023. Few could have predicted a pandemic, or war in Ukraine, or perhaps even the reaction of the markets to the mini-budget.
There is little doubt that 2023 will see a recession and that this may impact on the housing market as people delay purchasing their first home and resist moving up (or down) the housing ladder, potentially resulting in a slowdown in house sales.
All efforts should be focused on managing inflation to restabilise the economy, to enable us to return to a period of sustainable economic growth as quickly as possible.
The announcement on 5 December that the requirement for mandatory housing targets is being removed from the Levelling Up and Regeneration Bill has inevitably created further, considerable, concern within the development industry. Although housing targets were of course never mandatory, but were expected to be met unless good reasons existed to avoid doing so.
Currently, the standard method (the formula, based on projected household growth and historic under-supply, which is used to identify the minimum number of homes to be planned for in each local planning authority) provides a starting point for the housing requirements of Local Plans. This then determines the number of homes built and the extent to which demand is met. The proposed removal of housing targets is a very disappointing decision as it will inevitably result in under-delivery, at a time when annual housing delivery has declined to its lowest level for five years. It will undoubtedly do nothing to address the housing crisis and support economic growth.
Ultimately, if local authorities do not need to meet housing requirement figures, many will choose not to identify sites for new housing. In addition to this impacting housing availability now, it is likely have impacts on the number of homes available and therefore house prices, for generations to come.
Further impacts may include a deepening of the recession, as construction represents around 7% of UK GDP and with it, an increase in unemployment - as construction remains a labour-intensive industry and much of what remains of UK manufacturing-base is linked to construction. This, again, could affect house prices.
2023 was always going to be difficult. It required a clear plan for, and investment in, sustainable housing growth. The recent politically-motivated and ill-considered decision to scrap housing targets unfortunately outweighs any benefits brought about by the Autumn Statement.