Labour's first year in government and the impact on the UK economy and the housing market

Parents of private schoolchildren, farmers, businesses and pensioners. During its initial 12 months in power, the Labour government has introduced a series of fiscal measures that have impacted a broad cross-section of society. The combination of National Insurance increases and rising living costs contributed to what many defined as a turbulent beginning to the year, with ‘Awful April’ marked by amplified financial pressures on households and employers alike.

Despite a rocky start, the economic outlook has improved. The UK narrowly avoided a technical recession; business investment rebounded in Q1 and there are signs of increasing optimism. Attention has now shifted to growth, and housing is seen as one of the primary levers. Nevertheless, the success of this growth strategy is inextricably linked to the effectiveness of the planning system, and current macroeconomic actions have far-reaching consequences for housing delivery.

Housing as an economic engine. But can we deliver?

At UK Real Estate Investment & Infrastructure Forum (UKREiiF), Angela Rayner described Labour’s target to deliver 1.5 million new homes as ‘stretching’ and ‘quite simply momentous’. As noted by Sunday Times Economics Editor, David Smith, during our panel session at the event, the UK has not delivered 300,000 new homes  – the implied annual quota of that pledge – in a single year since the 1970s. This underlines the sheer magnitude of the task ahead.

In the recent Spending Review, Labour announced a £39bn investment in the affordable housing sector. A figure widely welcomed, this move presents a major prospect to enable new residential development and support both affordable and open-market housing. That said, money alone is not a silver bullet. Unless local planning authorities (LPAs) are adequately equipped to determine applications swiftly and efficiently, the new homes this increased funding is intended to deliver may never materialise.

The Government’s grand ambitions need to be matched by capability and resourcing at local planning authority as the prospects of getting anywhere close to meeting the pledge to deliver 1.5m new homes hinges on the planning system functioning well. Without sufficient capacity and skills in place, even with generous funding for new homes the Government will fall short.

Another persistent issue confronting LPAs is underfunding. Typically, this leaves them without the resources needed to deliver a functional planning service, leading to substantial delays in determining applications. This, in turn, undermines confidence in the sector, with investors and developers hesitant to commit to submitting applications, even where these would be supported due to the significant time and costs involved.

Planning reform: a tipping point for delivery?

Budget constraints, lack of resourcing and mounting caseloads have created what the Planning Advisory Service (PAS) describes as ‘unprecedented’ pressure on planning departments. According to the Homebuilders Federation ‘Planning on Empty’ report (updated February 2025), over half of councils are operating at 90% or less of their normal staffing capacity, with nearly a quarter at 80% or below.

In response, Labour pledged funding to recruit 300 new graduate and apprentice planners. However, with shortages estimated at up to 7,500 full-time equivalent planning officers (Planning on Empty report), this accounts for only a fraction of the resources that are required. Crucially, it is not just more local authority planners that are required to determine applications in a timely manner. An operationally sound planning process relies heavily on input from conservation officers, ecologists, highways professionals and the like – none of which can be overlooked.

While the Government’s attempts to increase the number of local authority planners is certainly a small step in the right direction, without deeper, systemic investment, the threat remains high: planning backlogs will persist and the Government’s bold ambitions for housing and infrastructure delivery will be unfulfilled.

One practical reform, raised during our UKREiiF panel, 'Labour's First Year in Government and the Impact on the UK Economy and the Housing Market', came from Christian Balshen, Director of Agency Partnerships at Rightmove. Christian proposed that planning applications be triaged, separating smaller household projects from large-scale strategic developments. Grouping both in a single queue limits the ability of LPAs to prioritise and resource applications effectively. A triage model may allow LPAs to optimise workloads, free up officer time and channel effort where it matters most.

Technology is starting to play a more prominent role in easing planning pressures. Yet, it presents both an opportunity and a challenge. While government-backed AI is being trialled to help speed up decisions and unlock new housing, the same tools are increasingly being used by residents to generate planning objections at scale. This adds a new layer of complexity and further work for already overstretched departments.

Social vs private: joined-up thinking or policy silos?

The constraints facing planning are not solely operational; they are strategic. How we plan, where we build and the types of homes we deliver are all shaped by joined-up thinking across tenures. Right now, that cohesion is under serious strain.

Due to the interdependency between private and affordable housing delivery, private housing cannot be delivered without affordable housing and vice versa.   The delivery of new homes, either private or affordable, are contingent on the other.   If either can’t be delivered – for a number of reasons including increased building safety regulations, BNG requirements and build costs impacting on viability – neither affordable housing or open market housing will be delivered.

As Kate Faulkner OBE, Chair of the Home Buying & Selling Group, highlighted in our UKREiiF discussion, that spillover is already visible. A lack of social housing is placing increased demand on the private rented sector (PRS), which, in turn, is narrowing options for first-time buyers.

While those challenges are well recognised, structural barriers are emerging, too. Momentum behind plan-making is being disrupted by ongoing local government reorganisation, which is introducing ambiguity into long-term delivery pipelines – particularly for affordable and rental-led developments that rely on clarity in local strategy.

Renter’s Reform Bill

Considered one of Labour’s most significant housing reforms in its first year, the Renter’s Reform Bill is planned to come into effect later in 2025. Naturally, it has generated tension between enhanced tenant rights and PRS investor confidence.

While not a planning matter per se, the Bill has important implications. Changes to tenancy structures and landlord obligations could affect the financial viability of Build to Rent schemes, which form a growing segment of many local housing programmes. Should investor faith falter, fewer rental-led projects are likely to come forward, making it harder for planners to balance tenure mixes and meet local delivery goals. In this context, shifts within the PRS risk creating uncertainty not just for landlords and tenants, but for forward-looking planning strategies and housing fulfilment alike.

Conclusion: where planning must now lead

Labour’s first year in government has laid the groundwork for change. Yet delivery – not ambition – will be the true measure of success. The Planning and Infrastructure Bill, though not yet in sharp public focus, is a key test of the government’s commitment to meaningful reform. If executed effectively, it offers real potential to streamline decision-making, reduce unnecessary delays and provide the transparency LPAs so urgently need.

Planners must also play a central role in shaping how national housing targets are delivered locally. But that can only happen through a well-resourced, strategically aligned system with enduring political support.

Ultimately, housing delivery doesn’t just depend on funding or policy headlines. It relies on clarity, confidence and joined-up thinking from every corner of the system – from ministers and local authorities to developers, infrastructure providers and planning consultants like us.